[G.R. No. 120482. January 27, 1997.

]
REFORMIST UNION OF R. B. LINER, INC., HEVER DETROS, ET AL., Petitioners, v. NATIONAL
LABOR RELATIONS COMMISSION, Respondents.
SYLLABUS
1. LABOR LAW AND SOCIAL LEGISLATION; LABOR RELATIONS; STRIKE; QUESTION OF LEGALITY
WAIVED WHEN PARTIES ENTERED INTO AN AGREEMENT THROUGH COMPULSORY ARBITRATION.
The private respondents can no longer contest the legality of the strike held by the petitioners as the private
respondents themselves sought compulsory arbitration in order to resolve that very issue. The dispute or
strike was settled when the company and the union entered into an agreement where the private respondents
agreed to accept all employees who, by then, had not yet returned to work. By acceding to the peaceful
settlement brokered by the NLRC, the private respondents waived the issue of the illegality of the strike. The
very nature of compulsory arbitration makes the settlement binding upon the private respondents, for
compulsory arbitration has been defined both as "the process of settlement of labor disputes by a government
agency which has the authority to investigate and to make an award which is binding on all the parties," and
as a mode of arbitration where the parties are "compelled to accept the resolution of their dispute through
arbitration by a third party." Clearly then, the legality of the strike had already been resolved. The case
certified by the Labor Secretary to the NLRC was dismissed after the union and the company drew up the
agreement. This conclusively disposed of the strike issue.
2. ID.; COMPULSORY ARBITRATION; FINAL DECISION THEREIN; FURTHER REVIEW AND DECISION TO
THE CONTRARY, IN GRAVE ABUSE OF DISCRETION. The Labor Code provides that the decision is
compulsory arbitration proceedings "shall be final and executory ten (10) calendar days after receipt thereof
by the parties." The parties were informed of the dismissal of the case in a letter dated 14 February 1990, and
while nothing in the record indicates when the said letter was received by the parties, it is reasonable to infer
that more than ten days elapsed hence, the NLRC decision had already become final and executory
before the private respondents filed their complaint with the Labor Arbiter on 13 July 1990. A final judgment is
no longer susceptible to change, revision, amendment, or reversal. Neither the Labor Arbiter nor the NLRC,
therefore, could review the same issue passed upon in NLRC Certified Case No. 0542, and their decisions to
the contrary have been rendered in grave abuse of discretion amounting to excess of jurisdiction.
3. ID.; ID.; AGREEMENT THEREIN WAS IN THE NATURE OF A COMPROMISE AGREEMENT, HAS THE
EFFECT OF RES JUDICATA. The agreement entered into by the company and the union, was in the
nature of a compromise agreement, i.e., "an agreement between two or more persons, who, for preventing or
putting an end to a lawsuit, adjust their difficulties by mutual consent in the manner which they agree on, and
which everyone of them prefers to the hope of gaining, balanced by the danger of losing." Thus, in the
agreement, each party made concessions in favor of the other to avoid a protracted litigation. While we do not
abandon the rule that "unfair labor practice acts are beyond and outside the sphere of compromises," the
agreement herein was voluntarily entered into and represents a reasonable settlement, thus it binds the
parties. On this score, the Labor Code bestows finality to unvitiated compromise agreements. The private
respondents cause likewise fails in light of Article 2037 of the Civil Code, which gives compromise
agreements "the effect and authority of res judicata" upon the parties to the same, even when effected without
judicial approval. The Labor Arbiter and the NLRC therefore erroneously reviewed an issue which had already
been laid to rest by the parties themselves and which, applying the principle of res judicata, they could no
longer relitigate.
4. ID.; ILLEGAL DISMISSAL; DEFIANCE OF RETURN TO WORK ORDER, UNFOUNDED. The only
barrier then to the petitioners- employees reinstatement is their defiance of the Labor Secretarys return-towork order, which the private respondents claim as one reason to validly dismiss the petitioner-employees. It
is upon the private respondents to substantiate the aforesaid defiance, as the burden of proving just and valid

cause for dismissing employees from employment rests on the employer, and the latters failure to do so
results in a finding that the dismissal was unfounded. The private respondents fell short of discharging this
burden. The Labor Arbiters and the MLRCs contrary finding is not anchored on substantial evidence. Grave
abuse of discretion was thus committed once more.
5. ID.; ID.; REINSTATEMENT; SEPARATION PAY AS ALTERNATIVE; COMPUTATION. The possibility of
reinstatement is a question of fact, and where a factual determination is indispensable to the complete
resolution of the case, this Court usually remands the case to the NLRC. In view, however, of both parties
assertion that reinstatement has become impossible, there is no need to remand this case to the NLRC. Due
to the infeasibility of reinstatement, the petitioners prayer for separation pay must be granted. Separation pay,
equivalent to one months salary for every year of service, is awarded as an alternative to reinstatement when
the latter is no longer an option, and is computed from the commencement of employment up to the time of
termination, including the period of imputed service for which the employee is entitled to back wages. The
salary rate prevailing at the end of the period of putative service should be the basis for computation.
6. ID.; ID.; BACKWAGES; COMPUTATION. The petitioners are also entitled to back wages. The payment
of back wages is a form of relief that restores the income that was lost by reason of unlawful dismissal." The
petitioners dismissal being unwarranted as aforestated, with the employees dismissed after R.A. No. 6715
took effect, then, pursuant to the said law and the latest rule on the matter laid down in the Resolution of 28
November 1996 of this Court, sitting en banc, in Bustamante v. National Labor Relations Commission, the
petitioners-employees are entitled to payment of full back wages from the date of their dismissal up to the time
when reinstatement was still possible, i.e., in this instance, up to the expiration of the franchise of R.B. Liner,
Inc.
DECISION
This is a special civil action for certiorari under Rule 65 of the Rules of Court seeking to set aside the decision
1 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 004115 92, which affirmed the
decision 2 of the Labor Arbiter in the consolidated cases NLRC NCR Case Nos. 00-03-01392-90 and 00-0402088-90, and the resolution of the former denying the motion for the reconsideration of its decision. 3
Petitioner Reformist Union of R.B. Liner, Inc. (hereinafter Reformist) with Hever Detros as its president, is
composed of drivers, conductors, and mechanics of private respondent R.B. Liner, Inc. Private respondents
Bernita, Felipe, Rodelio, Ana Teresa, and Rodelio Ryan, all surnamed Dejero, are the incorporators of R.B.
Liner, Inc.
From the record and the pleadings filed by the parties, we cull the following material facts in this
case:chanrob1es virtual 1aw library
Petitioner union was organized in May 1989 "by affiliating itself with Lakas Manggagawa sa Pilipinas
(hereinafter Lakas)." 4 Lakas filed a notice of strike on 13 November 1989 because of alleged acts of unfair
labor practice committed by the private respondents. 5 Despite conciliation hearings held on 4 and 6
December 1989, the parties failed to reach an agreement. Later, another act of unfair labor practice allegedly
committed by the private respondents impelled Reformist, with the authorization of Lakas, to go on strike on
13 December 1989 even as conciliation proceedings continued. 6
On 21 December 1989, R.B. Liner, Inc. petitioned then Secretary Franklin Drilon of the Department of Labor
and Employment (DOLE) to assume jurisdiction over the ongoing dispute or certify it to the NLRC. 7 Secretary
Drilon determined that "[t]he ongoing work stoppage in the company . . . adversely affects an industry
indispensable to the national interest;" thus on 28 December 1989, he certified the dispute to the NLRC for
compulsory arbitration and issued a return-to-work order. 8

The certified case (NLRC Certified case No. 0542, entitled In Re: Labor Dispute at RB Liner, Inc.) was
dismissed on 13 February 1990 9 after the union and the company reached all agreement 10 on 19 January
1990 providing, among other matters, for the holding of a certification election.
On 31 January 1990, a certification election was held where Lakas won as the collective bargaining agent of
the rank-and-file employees. 11 On 13 February 1990, Lakas presented a proposal for a collective bargaining
agreement to Bernita and Rodelia Dejero, 12 but they refused to bargain. 13 Meanwhile, as admitted by
private respondents witness Arcile Tanjuatco, Jr., eight R.B. Liner buses were "converted" to Sultran Lines,
one "became MCL," and another "became SST Liner." 14
The petitioners filed NLRC NCR Case No. NCR 00-03-01392-90 charging the private respondents with unfair
labor practice, i.e., illegal lock out. The private respondents countered with NLRC Case No. NCR-00-0402088-90, which sought to declare as illegal the unions 13 December 1989 strike, as well as other "work
stoppages/boycotts" staged by the petitioners. The two cases were consolidated and simultaneously tried. 15
In his decision of 27 October 1992, Labor Arbiter Ricardo Nora ruled that the evidence, e.g., the private
respondents proof of payment of percentage taxes for 1990 and Conductors/Inspectors Daily Reports,
"indicate[d] against an illegal lockout," while finding that Reformist staged an illegal strike for the following
reasons: virtual 1aw library
1. The Reformist failed to show that they observed the legal requirements of a legal strike, like the
following:chanrob1es virtual 1aw library
First, the Reformist failed to show and present evidence that the approval of majority vote of its members
were obtained by secret ballot before the strike; Second, they failed to show that they submitted the strike
vote to the department of Labor at least seven (7) days prior to the intended strike; and Third, all members of
the Reformist Union struck even before the certification election? when there was no definitive bargaining unit
duly recognized and while the conciliation process was still on-going and in progress. Exh. 7-D is clear which
states the following: "The Union object[s] with [sic] the position of Management for the reason that considering
that they are on strike such election is moot and academic. All employees as per union allegation
participate[d] in that concerted action." library
2. The Reformist engaged in illegal, prohibited activities by obstructing the free ingress and egress to and
from the R.B. Liners garage premises where the trucks were Parked; (Exhs. "8", "8-A" to "8-D").
3. The Reformist failed to present clear evidence . . . rebutting respondents claim that the Reformist, blatantly
defied the Secretarys return-to-work Order dated December 28, 1989. The evidence adduced particularly
Exhibit "12" (the minutes of the conference on January 19, 1990 in Office of the NLRC Commissioner Diokno)
includes the following: "That the Union assured to cause the return within five (5) days on January 24, of all
employees who have not reported for work and management agreed to accept them." This clearly indicates
an admission by the Reformist that its members did not comply with the Return-to-work order of the Secretary
of Labor. It may be noted though that some members complied with the Order as per testimony of
respondents witness, however, the same workers had earlier participated in prohibited and illegal activities
like illegal picketing that characterized all illegal strike. 16
The Labor Arbiter then disposed as follows:
IN VIEW OF THE FOREGOING, judgment is hereby rendered: 1aw library
1. Dismissing the complaint of Reformist in NLRC-NCR-Case No. 00-03-01392-90 for Unfair Labor Practice
(Illegal Lockout) for lack of merit;
2. Declaring the December 13, 1989 Strike by the Reformist as ILLEGAL in NLRC-NCR-Case No. 00-0402088-90;

3. Declaring all the Officers and Members of the Reformist to have lost their employment status for
participating in an Illegal Strike. They are named as follows: 1aw library
x

All other issues are Dismissed for lack of merit. 17

On appeal, the NLRC affirmed the Labor Arbiters finding that Reformist held an illegal strike, reasoning as
follows: 1aw library
It [Reformist] disputes the holding that an illegal strike was staged on December 13, 1989 on the ground that
previous thereto, conciliation and mediation conferences were conducted and which thus constituted . . .
evidence that there was a notice of strike filed consequent to a strike vote had among the members of the
union. This, assuming for the sake of argument is true, did not outrightly put a stamp of validity for such
concerted action as the fact remains that no certification election was conducted previous to the strike. Hence,
the union could not have validly claimed that it was the exclusive bargaining agent of the workers in
petitioners premises when it staged the subject strike. Nevertheless, such flaw, as correctly assumed by the
appellants, could have been corrected by the Return to Work Order of then Secretary of Labor Franklin Drilon.
The finding that this Order was defied is contested by the appellants alleging that the logbook which contains
an entry of all those who reported for work was never presented by management, this constituting
suppression of evidence. This could have been true had the said logbook constituted as the sole evidence in
support of petitioners assertion as to appellants failure to comply with the return to work order. However, the
minutes of the January 19, 1990 conference before then Commissioner Diokno establishes such fact on the
strength of the Unions admission when it undertook to assure "the return within five (5) days or January 24 of
all employees who have not reported for work . . ." 18 Further it was also established that the strikers were
guilty of committing illegal activities, particularly the obstruction of free ingress and egress to and from the
Liners garage premises as shown by the pictures taken thereat. All told, the foregoing established
circumstances yield no other conclusion except to declare the strike staged by the union as illegal. 19
Anent the illegal lockout, the NLRC deemed R.B. Liner, Inc.s conversion of some of its buses into those of
other bus companies as sufficient reason for the petitioners to believe, in good faith, that the private
respondents were committing an act of unfair labor practice. The NLRC ruled that this
circumstance:chanrob1es virtual 1aw library
[M]itigate[d] the liability of the striking union as well as its members not only in considering the propriety of
administering the avowed principle of equity in labor case[s] but likewise on the strength of the
pronouncements of the Supreme Court in a line of cases where it was held that a strike undertaken on
account of what the workers perceived to be unfair labor practices Acts on the part of the employer should not
be outrightly taken as illegal even if the allegations of unfair labor practice acts are subsequently found to be
untrue. 20
Thus, the NLRC affirmed the decision of the Labor Arbiter but allowed reinstatement of the dismissed
employees:chanrob1es virtual 1aw library
Accordingly, as a measure of social justice, resumption of employment relations between the parties shall be
decreed without however granting any monetary relief considering that both parties had, to a certain extent,
engaged in the commission of acts which rendered them undeserving of their prayer for damages and other
concomitant reliefs akin to their causes of action. 21
Reformist and its members moved to reconsider the NLRC decision, which was, however, denied on 31
March 1995. 22 The petitioners then came to us with this special civil action for certiorari, citing the following
in support thereof: virtual 1aw library

1. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION

IN FAILING TO GIVE WEIGHT TO THE OVERWHELMING EVIDENCE OF THE PETITIONERS SHOWING
[AN] ILLEGAL LOCKOUT COMMITTED BY THE RESPONDENTS.
2. RESPONDENT NLRC DENIED SUBSTANTIAL JUSTICE TO THE PETITIONERS BY NOT AWARDING
THEM THE MONETARY RELIEFS PRAYED FOR.
3. RESPONDENT NLRC ERRONEOUSLY INTERPRETED THE LAW ENUNCIATED BY THE HON.
SUPREME COURT GIVING SEPARATION PAY PLUS BACKWAGES TO EMPLOYEES WHOSE
REINSTATEMENT TO THEIR FORMER POSITIONS HAVE BEEN RENDERED IMPOSSIBLE BY THE
RESPONDENTS.
The private respondents insist that the petitioners-employees were validly dismissed for serious misconduct
and violations of labor laws and lawful orders of the Labor Secretary, hence not entitled to reinstatement nor
separation pay in lieu of reinstatement.
This petition must be granted, albeit not on the grounds advocated by the petitioners.
The private respondents can no longer contest the legality of the strike held by the petitioners on 13
December 1989, as the private respondents themselves sought compulsory arbitration in order to resolve that
very issue, hence their letter to the Labor Secretary read, in part: virtual 1aw library
This is to request your good office to certify for compulsory arbitration or to assume jurisdiction over the labor
dispute (strike continuing) between R.B. Liner Inc . . . . and the Lakas Manggagawa sa Pilipinas . . .
The current strike by Lakas which started on December 13, 1989 even before Certification Election could be
held could not be resolved by the NCR Conciliation-Mediation Division after six meetings/conferences
between the parties. 23
The dispute or strike was settled when the company and the union entered into an agreement on 19 January
1990 where the private respondents agreed to accept all employees who by then, had not yet returned to
work. By acceding to the peaceful settlement brokered by the NLRC, the private respondents waived the
issue of the illegality of the strike.
The very nature of compulsory arbitration makes the settlement binding upon the private respondents, for
compulsory arbitration has been defined both as "the process of settlement of labor disputes by a government
agency which has the authority to investigate and to make an award which is binding on all the parties," 24
and as a mode of arbitration where the parties are "compelled to accept the resolution of their dispute through
arbitration by a third party." 25 Clearly then, the legality of the strike could no longer be reviewed by the Labor
Arbiter, much less by the NLRC, as this had already been resolved. It was the sole issue submitted for
compulsory arbitration by the private respondents, as is obvious from the portion of their letter quoted above.
The case certified by the Labor Secretary to the NLRC was dismissed after the union and the company drew
up the agreement mentioned earlier. This conclusively disposed of the strike issue. cd
The Labor Code provides that the decision in compulsory arbitration proceedings "shall be final and executory
ten (10) calendar days after receipt thereof by the parties." 26 The parties were informed of the dismissal of
the case in a letter dated 14 February 1990, and while nothing in the record indicates when the said letter was
received by the parties, it is reasonable to infer that more than ten days elapsed hence, the NLRC decision
had already become final and executory before the private respondents filed their complaint with the Labor
Arbiter on 13 July 1990. 27 A final judgment is no longer susceptible to change, revision, amendment, or
reversal. 28 Neither the Labor Arbiter nor the NLRC, therefore, could review the same issue passed upon in
NLRC Certified Case No. 0542, and their decisions to the contrary have been rendered in grave abuse of
discretion amounting to excess of jurisdiction.

The agreement entered into by the company and the union, moreover, was in the nature of a compromise
agreement, i.e., "an agreement between two or more persons, who for preventing or putting an end to a
lawsuit, adjust their difficulties by mutual consent in the manner which they agree on, and which everyone of
them prefers to the hope of gaining, balanced by the danger of losing." 29 Thus, in the agreement, each party
made concessions in favor of the other to avoid a protracted litigation. While we do not abandon the rule that
"unfair labor practice acts are beyond and outside the sphere of compromises," 30 the agreement herein was
voluntarily entered into and represents a reasonable settlement, thus it binds the parties. 31 On this score, the
Labor Code bestows finality to unvitiated compromise agreements: 1aw library
Art. 227. Compromise agreements. Any compromise settlement, including those involving labor standard
laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the
Department of Labor, shall be final and binding upon the parties. The National Labor Relations Commission or
any court shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof
or if there is prima facie evidence that the settlement was obtained through fraud, misrepresentation or
coercion.
The agreement in this case complies with the above requisites, forged as it was under authority of the Labor
Secretary, with representatives from both the union and the company signing the handwritten agreement to
signify their consent thereto. The private respondents never alleged in their answer 32 to the petitioners
complaint before the Labor Arbiter, nor in their complaint, 33 that the petitioners did not comply with the
agreement. The binding effect of the agreement on the private respondents is thus unimpaired.
The private respondents cause likewise fails in light of Article 7037 of the Civil Code, which gives compromise
agreements "the effect and authority of res judicata" upon the parties to the same, even when effected without
judicial approval. 34 The Labor Arbiter and the NLRC therefore erroneously reviewed an issue which had
already been laid to rest by the parties themselves and which, applying the principle of res judicata they could
no longer re-litigate. 35
The only barrier then to the petitioners employees reinstatement is their defiance of the Labor Secretarys
.return to work order, which the private respondents claim as one reason to validly dismiss the petitioners
employees. We disagree, however, with the finding that Lakas Reformist violated the said order.
It is upon the private respondents to substantiate the aforesaid defiance, as the burden of proving just and
valid cause for dismissing employees from employment rests on the employer, and the latters failure to do so
results in a finding that the dismissal was unfounded. 36 The private respondents fell short of discharging this
burden.
Contrary to the Labor Arbiters and the NLRCs view, the unions undertaking to cause absentee employees to
return to work was not an admission that its members defied the Labor Secretarys order. Those who did not
report for work after the issuance of the Labor Secretarys order may not have been informed of such order, or
they may have been too few so as to conclude that they deliberately defied the order. The private respondents
failed to eliminate these probabilities.
The most conclusive piece of evidence that the union members did not report for work would be the
companys logbook which records the employees attendance. 37 The private respondents own witness,
Administrative Manager Rita Erni, admitted that the logbook would show who among the employees reported
for work. 38 The logbook was supposed to be marked as Exhibit "14" for the private respondents, but was
withdrawn, 39 then the private respondents counsel, Atty. Godofredo Q. Asuncion, later intimated that the said
logbook was "stolen or lost." 40
We are not prepared to conclude that the private respondents willfully suppressed this particular piece of
evidence, in which case the same would be presumed adverse to them if produced. 41 However, other
evidence indicate that the petitioners-employees complied with the Labor Secretarys return to work order,

namely, the private respondents Exhibits "11" to "11-E." 42 These are Conductors/Inspectors Daily Reports
which detail the bus trips made by a particular conductor-driver tandem, as well as the numbers of the bus
tickets used during each trip, and these reports are all dated 30 December 1989 merely two days after
Secretary Drilon issued his order indicating that a number of employees did report for work in compliance
with the Secretarys order. Moreover, the said exhibits were executed by some of the employees ordered
dismissed by the Labor Arbiter. 43
The private respondents intended the exhibits to prove that only a handful of employees reported for work
following the issuance of the Labor Secretarys order, but they never established that these exhibits were the
only reports filed on 30 December 1989, thus, there may have been employees other than those named in the
said exhibits who reported for work in obeisance to the Labor Secretary. Certainly, the Daily Reports
accomplished by drivers and conductors would not reflect the attendance of mechanics. Besides, it was not
shown by the private respondents that their employees were required to file the Conductors/Inspectors Daily
Reports such that those who did not file would be instantly deemed absent.
The private respondents thus failed to satisfactorily establish any violation of the Labor Secretarys return-towork order, and consequently, the Labor Arbiters and the NLRCs contrary finding is not anchored on
substantial evidence. Grave abuse of discretion was thus committed once more.
As regards the illegal lockout alleged by the petitioners, we agree with the NLRCs finding that the petitioners
had sufficient basis to believe in good faith that the private respondents were culpable. The NLRC found this
circumstance to justify the petitioners-employees reinstatement; we add that since there was, in fact, no
defiance of the Labor Secretarys return-to-work order, and no cause to decree the petitioners employees
dismissal in the first instance, reinstatement of the dismissed employees can be the only outcome in this case.
The possibility of reinstatement is a question of fact, and where a factual determination is indispensable to the
complete resolution of the case, this Court usually remands the case to the NLRC. 44 In view, however, of
both parties assertion that reinstatement has become impossible because, as claimed by the petitioners, "the
buses were already disposed of"; or as claimed by the private respondents, R.B. Liner, Inc., had "ceased
operations" because "its Certificate of Public Convenience had expired and was denied renewal," and further,
of "closure of the company" due to "lack of operational trucks and buses and high costs of units, " 45 there is
no need to remand this case to the NLRC. Due to the infeasibility of reinstatement, the petitioners prayer for
separation pay must be granted. Separation pay, equivalent to one months salary for every year of service, is
awarded as an alternative to reinstatement when the latter is no longer an option, 46 and is computed from
the commencement of employment up to the time of termination, including the period of imputed service for
which the employee is entitled to back wages. The salary rate prevailing at the end of the period of putative
service should be the basis for computation. 47
The petitioners are also entitled to back wages. The payment of back wages "is a form of relief that restores
the income that was lost by reason of unlawful dismissal." 48 The petitioners dismissal being unwarranted as
aforestated, with the employees dismissed after R.A. No. 6715 49 took effect, then, pursuant to the said law
and the latest rule on the matter laid down in the Resolution of 28 November 1996 of this Court, sitting en
banc, in Bustamante v. National Labor Relations Commission, 50 the petitioners-employees are entitled to
payment of full back wages from the date of their dismissed up to the time when reinstatement was still
possible, i.e., in this instance, up to the expiration of the franchise of R.B. Liner, Inc.

[G.R. No. 79762. January 24, 1991.]

FORTUNE CEMENT CORPORATION, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION
(First Division) Respondents.

This is a petition for certiorari with prayer to annul the resolution dated May 29, 1987 of respondent National
Labor Relations Commission (NLRC) reversing the order dated December 3, 1985 of the Labor Arbiter which
dismissed private respondent Antonio M. Lagdameos (Lagdameo for brevity) complaint for Illegal Dismissal
(NLRC NCR Case No. 1-228-85) against petitioner Fortune Cement Corporation (FCC for brevity) for lack of
jurisdiction.
Lagdameo is a registered stockholder of FCC.
On October 14, 1975, at the FCC Board of Directors regular monthly meeting, he was elected Executive VicePresident of FCC effective November 1, 1975 (p. 3, Rollo).
Some eight (8) years later, or on February 10, 1983, during a regular meeting, the FCC Board resolved that all
of its incumbent corporate officers, including Lagdameo, would be "deemed" retained in their respective
positions without necessity of yearly reappointments, unless they resigned or were terminated by the Board
(p. 4, Rollo).
At subsequent regular meetings held on June 14 and 21, 1983, the FCC Board approved and adopted a
resolution dismissing Lagdameo as Executive Vice-President of the company, effective immediately, for loss
of trust and confidence (p. 4, Rollo).
On June 21, 1983, Lagdameo filed with the National Labor Relations Commission (NLRC), National Capital
Region, a complaint for illegal dismissal against FCC (NLRC-NCR Case No. 1-228-85) alleging that his
dismissal was done without a formal hearing and investigation and, therefore, without due process (p. 63,
Rollo).
On August 5, 1985, FCC moved to dismiss Lagdameos complaint on the ground that his dismissal as a
corporate officer is a purely intra-corporate controversy over which the Securities and Exchange Commission
(SEC) has original and exclusive jurisdiction. law library
The labor Arbiter granted the motion to dismiss (p. 22, Rollo). On appeal, however, the NLRC set aside the
Labor Arbiters order and remanded the case to the Arbitration Branch "for appropriate proceedings" (NLRC
Resolution dated April 30, 1987). The NLRC denied FCCs motion for reconsideration (p. 5, Rollo).
Dissatisfied, FCC filed this petition for certiorari.
We find merit in the petition.

WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations
Commission in NLRC NCR CA No. 004115-92, as well as that of the Labor Arbiter in the consolidated cases
of NLRC NCR Case Nos. 00-03-01392-90 and 00-04-02088-90 are SET ASIDE. Petitioners-employees are
hereby awarded full back wages and separation pay to be determined by the Labor Arbiter as prescribed
above within thirty (30) days from notice of this judgment.

The sole issue to be resolved is whether or not the NLRC has jurisdiction over a complaint filed by a corporate
executive vice-president for illegal dismissal, resulting from a board resolution dismissing him as such officer.

SO ORDERED.

"Section 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange

Section 5 of Presidential Decree No. 902-A vests in the SEC original and exclusive jurisdiction over this
controversy:

Commission over corporations, partnerships and other forms of associations registered with it as expressly
granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide
cases involving:

speaking, the relationship of a person to a corporation, whether as officer or as agent or employee is not
determined by the nature of the services performed, but by the incidents of the relationship as they actually
exist." library

"a) Devices and schemes employed by or any acts, of the board of directors, business associates, its officers
or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public
and/or stockholders, partners, members of associations or organization registered with the Commission;

Lagdameo claims that his dismissal was wrongful, illegal, and arbitrary, because the "irregularities" charged
against him were not investigated (p. 85, Rollo); that the case of PSBA v. Leao (supra) cited by the Labor
Arbiter finds no application to his case because it is not a matter of corporate office having been declared
vacant but one where a corporate officer was dismissed without legal and factual basis and without due
process; that the power of dismissal should not be confused with the manner of exercising the same; that
even a corporate officer enjoys security of tenure regardless of his rank (p. 97, Rollo); and that the SEC is
without power to grant the reliefs prayed for in his complaint (p. 106, Rollo).

"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;
"c) Controversies in the election or appointments of directors, trustees, officers or managers of such
corporations, partnership or associations." (Section 5, P.D. 902-A; Emphasis supplied.)
In reversing the decision of Labor Arbiter Porfirio E. Villanueva, respondent NLRC held:
". . . It is not disputed that complainant Lagdameo was an employee of respondent Fortune Cement
Corporation, being then the Executive Vice-President. For having been dismissed for alleged loss of trust and
confidence, complainant questioned his dismissal on such ground and the manner in which he was dismissed,
claiming that no investigation was conducted, hence, there was and is denial of due process. Predicated on
the above facts, it is clear to Us that a labor dispute had arisen between the appellant and the respondent
corporation, a dispute which falls within the original and exclusive jurisdiction of the NLRC. A labor dispute as
defined in the Labor Code includes controversy or matter concerning terms or conditions of employment or
the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the
terms and conditions of employment regardless of whether or not the disputants stand in the proximate
relations of employers and employees." (pp. 16-17, Rollo).
The Solicitor General, declining to defend public respondent in its pleading entitled "Manifestation in Lieu of
Comment," aptly observed:

The issue of the SECs power or jurisdiction is decisive and renders unnecessary a consideration of the other
questions raised by Lagdameo. Thus did this Court rule in the case of Dy v. National Labor Relations
Commission (145 SCRA 211) which involved a similar situation:
"It is of no moment that Vailoces, in his amended complaint, seeks other reliefs which would seemingly fall
under the jurisdiction of the Labor Arbiter, because a closer look at these underpayment of salary and nonpayment of living allowance shows that they are actually part of the perquisites of his elective position,
hence, intimately linked with his relations with the corporation. The question of remuneration, involving as it
does, a person who is not a mere employee but a stockholder and officer, an integral part, it might be said, of
the corporation, is not a simple labor problem but a matter that comes within the area of corporate affairs and
management, and is in fact a corporate controversy in contemplation of the Corporation Code." (Emphasis
ours.)
WHEREFORE, the questioned Resolution of the NLRC reversing the decision of the Labor Arbiter, having
been rendered without jurisdiction, is hereby reversed and set aside. The decision of the Labor Arbiter dated
December 3, 1985 dismissing NLRC-NCR Case No. 1-228-85 is affirmed, without prejudice to private
respondent Antonio M. Lagdameos seeking recourse in the appropriate forum. No costs.
SO ORDERED.
x

"The position of Executive Vice-President, from which private respondent Lagdameo claims to have been
illegally dismissed, is an elective corporate office, He himself acquired that position through election by the
corporations Board of Directors, although he also lost the same as a consequence of the latters resolution.
"Indeed the election, appointment and/or removal of an executive vice-president is a prerogative vested upon
a corporate board.
"And it must be, not only because it is a practice observed in petitioner Fortune Cement Corporation, but more
so, because of an express mandate of law." (p. 65, Rollo.)
The Solicitor General pointed out that "a corporate officers dismissal is always a corporate act and/or intracorporate controversy and that nature is not altered by the reason or wisdom which the Board of Directors
may have in taking such action." The dispute between petitioner and Lagdameo is of the class described in
Section 5, par. (c) of Presidential Decree No. 902-A, hence, within the original and exclusive jurisdiction of the
SEC. The Solicitor General recommended that the petition be granted and NLRC-NCR Case No. 1-228-85 be
dismissed by respondent NLRC for lack of jurisdiction (p. 95, Rollo).
In PSBA v. Leao (127 SCRA 778), this Court, confronted with a similar controversy, ruled that the SEC, not
the NLRC, has jurisdiction:
"This is not a case of dismissal. The situation is that of a corporate office having been declared vacant, and of
Tans not having been elected thereafter. The matter of whom to elect is a prerogative that belongs to the

[G.R. No. 84484. November 15, 1989.]

INSULAR LIFE ASSURANCE CO., LTD., Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION and MELECIO BASIAO, Respondents.

On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T.
Basiao entered into a contract 1 by which: 1aw library
1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in
accordance with the existing rules and regulations" of the Company;
2. he would receive "compensation, in the form of commissions . . . as provided in the Schedule of
Commissions" of the contract to "constitute a part of the consideration of . . . (said) agreement;" and
3. the "rules in . . . (the Companys) Rate Book and its Agents Manual, as well as all its circulars . . . and
those which may from time to time be promulgated by it, . . ." were made part of said contract.
The contract also contained, among others, provisions governing the relations of the parties, the duties of the

Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.: law library
"RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place
and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the
relationship of employee and employer between the Agent and the Company. However, the Agent shall
observe and conform to all rules and regulations which the Company may from time to time prescribe.
"ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in
any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts
prohibited in the Agents Manual and in circulars of the Office of the Insurance Commissioner.
"TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent,
for or on account of . . . (explicitly specified causes) . . .
Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become
ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued
or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not
have any right to any commission on renewal of premiums that may be paid after the termination of this
agreement for any cause whatsoever, except when the termination is due to disability or death in line of
service. As to commission corresponding to any balance of the first years premiums remaining unpaid at the
termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid,
less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal
liability or breach of trust.
"ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall
be valid without the prior consent in writing of the Company . . ." library
Some four years later, in April 1972, the parties entered into another contract - an Agency Managers Contract
and to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao
and Associates, while concurrently fulfilling his commitments under the first contract with the Company. 2
In May, 1979, the Company terminated the Agency Managers Contract. After vainly seeking a
reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter
to terminate also his engagement under the first contract and to stop payment of his commissions starting
April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president.
Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly
unpaid thereunder, plus attorneys fees. The respondents disputed the Ministrys jurisdiction over Basiaos
claim, asserting that he was not the Companys employee, but an independent contractor and that the
Company had no obligation to him for unpaid commissions under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement
had established an employer-employee relationship between him and the Company, and this conferred
jurisdiction on the Ministry of Labor to adjudicate his claim. Said officials decision directed payment of his
unpaid commissions." . . equivalent to the balance of the first years premium remaining unpaid, at the time of
his termination, of all the insurance policies solicited by . . . (him) in favor of the respondent company . . ." plus
10% attorneys fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7
Hence, the present petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Companys
employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within

Code, 8 or, contrarily, as the Company would have it, that under said contract Basiaos status was that of an
independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the
regular courts in an ordinary civil action.
The Companys thesis, that no employer-employee relation in the legal and generally accepted sense existed
between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly
or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment
the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on
the basis of results obtained. He was not bound to observe any schedule of working hours or report to any
regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free
to adopt the selling methods he deemed most effective.
Without denying that the above were indeed the expressed or implicit conditions of Basiaos contract with the
Company, the respondents contend that they do not constitute the decisive determinant of the nature of his
engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee
from that of an independent contractor is control, that is, whether or not the party who engages the services of
another has the power to control the latters conduct in rendering such services. Pursuing the argument, the
respondents draw attention to the provisions of Basiaos contract obliging him to." . . observe and conform to
all rules and regulations which the Company may from time to time prescribe . . .," as well as to the fact that
the Company prescribed the qualifications of applicants for insurance, processed their applications and
determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in
legal contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of
Viana v. Alejo Al-Lagadan: 10
". . . In determining the existence of employer-employee relationship, the following elements are generally
considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct - although the latter is the most
important element (35 Am. Jur. 445). . .,"
has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test
of the character of a contract or agreement to render service. It should, however, be obvious that not every
form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the
services rendered may be accorded the effect of establishing an employer-employee relationship between
them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction
between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare
contract of service that gives untrammelled freedom to the party hired and eschews any intervention
whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of
the mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. The distinction acquires particular relevance in the
case of an enterprise affected with public interest, as is the business of insurance, and is on that account
subject to regulation by the State with respect, not only to the relations between insurer and insured but also
to the internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the
business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore,
usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in
selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character
are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications
to processing and approval by the Company, and also reserve to the Company the determination of the

premiums to be paid and the schedules of payment. None of these really invades the agents contractual
prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence
cannot justifiably be said to establish an employer-employee relationship between him and the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent
contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation v.
Ople, 13 the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the
latter, but with the right to employ his own workers, sell according to his own methods subject only to
prearranged routes, observing no working hours fixed by the other party and obliged to secure his own
licenses and defray his own selling expenses, all in consideration of a peddlers discount given by the other
party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor.
In Investment Planning Corporation of the Philippines v. Social Security System, 14 a case almost on all fours
with the present one, this Court held that there was no employer-employee relationship between a
commission agent and an investment company, but that the former was an independent contractor where said
agent and others similarly placed were: (a) paid compensation in the form of commissions based on
percentages of their sales, any balance of commissions earned being payable to their legal representatives in
the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and
regulations governing the performance of their duties under the agreement with the company and termination
of their services for certain causes; (d) not required to report for work at any time, nor to devote their time
exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered
their own selling and transportation expenses.
More recently, in Sara v. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell
rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work
at his own pleasure without any supervision or control on the part of his principal and relied on his own
resources in the performance of his work, was a plain commission agent, an independent contractor and not
an employee.
The respondents limit themselves to pointing out that Basiaos contract with the Company bound him to
observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing
has been made that any such rules or regulations were in fact promulgated, much less that any rules existed
or were issued which effectively controlled or restricted his choice of methods - or the methods themselves of
selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were
imposed on the express provision of the contract leaving Basiao." . . free to exercise his own judgment as to
the time, place and means of soliciting insurance." virtua1aw library
The Labor Arbiters decision makes reference to Basiaos claim of having been connected with the Company
for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is
Basiaos status under the contract of July 2, 1968, not the length of his relationship with the Company.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the
petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should
have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and
adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the
Arbiters decision. This conclusion renders it unnecessary and premature to consider Basiaos claim for
commissions on its merits.
WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that
complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No
pronouncement as to costs.
x

[G.R. Nos. 81852-53. March 5, 1993.]

ILAW AT BUKLOD NG MANGGAGAWA (IBM), Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION, Respondents.

SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; BUREAU OF LABOR RELATIONS; HAS JURISDICTION OVER
INTRA-UNION DISPUTE; CASE AT BAR. It is fundamental that jurisdiction over the subject matter is
conferred by law (Tijan v. Sibonghanoy, 23 SCRA 29 [1968]) and is determined by the allegations of the
complaint, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims
asserted therein (Serrano v. Munoz (Hi) Motors, Inc., 21 SCRA 1085 [1967]). A perusal of the complaint
clearly shows that the subject-matter concerns: (a) the assessment and deduction of 10% from private
respondents CBA differential pay which were denounced by private respondents as illegal and exorbitant and
made against their will, and (b) private respondents expulsion from the union. The assessment and deduction
of 10% from each employees differential pay were imposed by petitioner through Resolusyon Blg. 265 and
the expulsion was adopted by petitioner through Resolusyon Blg. 15, dated January 6, 1987, both of which
were denounced by private respondents as illegal and violative of their rights as union members. Clearly this
is an intra-union dispute a dispute between a labor union and its members. "Internal Union Dispute"
includes all disputes or grievances arising from any violation of or disagreement over any provision of the
constitution and by-laws of a union, including any violation of the rights and conditions of union membership
provided for in the Code (Book V, Rule I, Section 1(a), Omnibus Rules Implementing The Labor Code). Article
226 of the Labor Code of the Philippines vests on the Bureau of Labor Relations and the Labor Relations
Divisions jurisdiction to act on all inter-union or intra-union conflicts.
DECISION
Before us is a petition for certiorari seeking the annulment of the order dated February 4, 1987, of respondent
Labor Arbiter, the decision dated May 29, 1987 rendered by said respondent, and the resolutions dated
October 12, 1987, and January 11, 1988, of the respondent National Labor Relations Commission.
The relevant facts as established by the record are as follows: 1aw library
Petitioner, a duly-registered labor union, is the sole and exclusive bargaining representative of all daily-paid
workers of the Metro Manila plants of San Miguel Corporation, hereinafter referred to as SMC.
On December 3, 1986, petitioner and SMB entered into a Memorandum of Agreement on Collective
Bargaining Agreement (CBA). The National Council of petitioner called a general meeting on December 7,
1986 for the ratification of the CBA. On the morning of December 7, 1986, the National Council held a special
meeting wherein the members present unanimously passed "Resolusyon Blg. 265, Serye 1956" (Annex G,
Petition, p. 52, Rollo). It was agreed at said meeting to submit the resolution to the general membership for
approval.
Two thousand two hundred forty three (2,243) members attended the general meeting. Said Resolusyon Blg.
265 was submitted to the general assembly for approval. Two Thousand one hundred seven (2,107) members
voted in favor and thirty six (36) voted against the resolution. In said general membership meeting the 1986
CBA was ratified by the members.
Under said resolution, each member of the union was assessed P1,098.00 to be deducted from the lump sum

of P10,980.00 which each employee was to receive under the CBA. Private respondents protested the
deduction and refused to sign the authorization slip for the deduction. Petitioner passed a resolution on
January 6, 1987, (Annex 9, Private Respondents Comment, p. 169, Rollo) expelling private respondents from
the union. SMB held in trust the amount of P1,098.00 pertaining to each private Respondent.

1(a), Omnibus Rules Implementing The Labor Code).

On January 8, 1987, private respondents Antonio Magsipoc and Abundio Ibasco filed a complaint (Annex I,
Petition, p. 59, Rollo) docketed as NLRC-NCR Case No. 1-092-87, before the Arbitration Branch, National
Capital Region, National Labor Relations Commission for illegal and exorbitant deduction and illegal expulsion
from the union. In February, 1987, a similar complaint docketed as NLRC Case No. 00-02-00731-87 was filed
by private respondents Carlos Villarante and Bienvenido Ramirez.

"ARTICLE 226. Bureau of Labor Relations The Bureau of Labor Relations and the Labor Relations Division
in the regional offices of the Department of Labor shall have original and exclusive authority to act, at their
own initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all
disputes, grievances or problems arising from or affecting labor-management relations in all work places
whether agricultural or non-agricultural, except those arising from the implementation or interpretation of
collective bargaining agreements which shall be subject of grievance procedure and/or voluntary arbitration."
library

On January 29, 1987, petitioner filed a motion to dismiss (Annex A, Petition, pp. 34-35, Rollo) Case No. 1092-87 on the ground of lack of jurisdiction of NLRC. On February 4, 1987, respondent Labor Arbiter Manuel
Asuncion issued an order (Annex B, Petition, pp. 36-37, Rollo) denying the motion to dismiss. It appears that
the two cases were consolidated, and respondent Labor Arbiter proceeded to take cognizance of the cases
and directed the parties to file their position papers. Only private respondents filed their position paper with
petitioner continuing to refuse to submit to the jurisdiction of the Labor Arbiter.

Article 226 of the Labor Code of the Philippines vests on the Bureau of Labor Relations and the Labor
Relations Divisions jurisdiction to act on all inter-union or intra-union conflicts. Said Article thus provides:

Unquestionably, therefore, NLRC Case No. 1-092-87 and Case No. 00-02-00731-87, the subject of which is
an intra-union dispute, fall under the original and exclusive jurisdiction of the Bureau of Labor Relations, and
respondent Labor Arbiter and NLRC have no jurisdiction over said cases.
In view of the foregoing conclusion, there is no further need to discuss the other errors assigned by petitioner.

On May 29, 1987, respondent Labor Arbiter rendered a decision (Annex C, Petition, pp. 39-43, Rollo) finding
the questioned assessment illegal and ordering petitioner and SMB to return the amount of P1,098.00 to each
of private respondents; declaring the expulsion of private respondents from the union null and void; and
ordering petitioner to desist from expelling the members who objected to the deduction of the questioned
assessment from their CBA differentials.
Petitioner seasonably filed a notice of appeal (Annex K, Petition, p. 61, Rollo) with respondent National Labor
Relations Commission. On October 12, 1987, the NLRC issued a resolution (Annex D, Petition, pp. 44-46,
Rollo) affirming the decision of respondent Labor Arbiter and dismissing the appeal. Petitioner filed a motion
for reconsideration but the same was denied in a resolution dated January 11, 1988. (Annex E, Petition, p. 47,
Rollo)
Hence, the instant recourse under the following assigned errors:
"1. The NLRC committed reversible error in assuming jurisdiction over the person of petitioner union;
2. The NLRC committed a reversible error in assuming jurisdiction over the nature of the action;
3. The NLRC committed reversible error in declaring the sum from which the special assessment is made, is a
wage, that it is a deduction from a wage and that it is an attorneys fee." (pp. 12-13, Rollo)
The second assigned error raising as it does the central issue of jurisdiction, attention must be focused on the
same. It is fundamental that jurisdiction over the subject matter is conferred by law (Tijan v. Sibonghanoy, 23
SCRA 29 [1968]) and is determined by the allegations of the complaint, irrespective of whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted therein (Serrano v. Munoz (Hi) Motors.
Inc., 21 SCRA 1085 [1967]).
A perusal of the complaint (Annex I, Petition, p. 59, Rollo) clearly shows that the subject-matter concerns: (a)
the assessment and deduction of 10% from private respondents CBA differential pay which were denounced
by private respondents as illegal and exorbitant and made against their will, and (b) private respondents
expulsion from the union. The assessment and deduction of 10% from each employees differential pay were
imposed by petitioner through Resolusyon Blg. 265 and the expulsion was adopted by petitioner through
Resolusyon Blg. 15, dated January 6, 1987, both of which were denounced by private respondents as illegal
and violative of their rights as union members. Clearly this is an intra-union dispute a dispute between a
labor union and its members. "Internal Union Dispute" includes all disputes or grievances arising from any
violation of or disagreement over any provision of the constitution and by-laws of a union, including any

WHEREFORE, the order dated February 4, 1987 issued by respondent Labor Arbiter, the decision rendered
on May 29, 1987, by said respondent, the resolution dated October 12, 1987, of respondent NLRC affirming
the decision of respondent Labor Arbiter and the resolution dated January 11, 1988, of respondent NLRC are
hereby ANNULLED and SET ASIDE. Respondent Labor Arbiter is hereby ordered to dismiss NLRC Case No.
1-072-87 and NLRC Case No. 00-02-00731-87, without prejudice to private respondents filing the same with
the Bureau of Labor Relations.
SO ORDERED.
x

[G.R. No. 89621. September 24, 1991.]

PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., v. HON. LOLITA O. GAL-LANG,
Respondents.

SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR ARBITER; SCOPE OF POWER; RULE. It must be
stressed that not every controversy involving workers and their employers can be resolved only by the labor
arbiters. This will be so only if there is a "reasonable causal connection" between the claim asserted and
employee-employer relations to put the case under the provisions of Article 217. Absent such a link, the
complaint will be cognizable by the regular courts of justice in the exercise of their civil and criminal
jurisdiction.
2. REMEDIAL LAW; CIVIL PROCEDURE; COMPLAINT FOR DAMAGE FOR MALICIOUS PROSECUTION
FILED BY EMPLOYEES AGAINST EMPLOYERS; COGNIZABLE BY REGULAR COURTS OF JUSTICE;
CASE AT BAR. The case now before the Court involves a complaint for damages for malicious prosecution
which was filed with the Regional Trial Court of Leyte by the employees of the defendant company. It does not
appear that there is a "reasonable causal connection" between the complaint and the relations of the parties
as employer and employees. The complaint did not arise from such relations and in fact could have arisen
independently of an employment relationship between the parties. No such relationship or any unfair labor

practice is asserted. What the employees are alleging is that the petitioners acted with bad faith when they
filed the criminal complaint which the Municipal Trial Court said was intended "to harass the poor employee"
and the dismissal of which was affirmed by the Provincial Prosecutor "for lack of evidence to establish even a
slightest probability that all the respondents herein have committed the crime imputed against them." This is a
matter which the labor arbiter has no competence to resolve as the applicable law is not the Labor Code but
the Revised Penal Code.

2. Those that workers may file involving wages, hours of work and other terms and conditions of employment;
3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for
employees compensation, social security, medicare and maternity benefits;
4. Cases involving household services; and

DECISION
The question now before us has been categorically resolved in earlier decisions of the Court that a little more
diligent research would have disclosed to the petitioners. On the basis of those cases and the facts now
before us, the petition must be denied.
The private respondents were employees of the petitioner who were suspected of complicity in the irregular
disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed a criminal complaint for theft
against them but this was later withdrawn and substituted with a criminal complaint for falsification of private
documents. On November 26, 1987, after a preliminary investigation conducted by the Municipal Trial Court of
Tanauan, Leyte, the complaint was dismissed. The dismissal was affirmed on April 8, 1988, by the Office of
the Provincial Prosecutor.
Meantime, allegedly after an administrative investigation, the private respondents were dismissed by the
petitioner company on November 23, 1987. As a result, they lodged a complaint for illegal dismissal with the
Regional Arbitration Branch of the NLRC in Tacloban City on December 1, 1987, and demanded
reinstatement with damages. In addition, they instituted in the Regional Trial Court of Leyte, on April 1988, a
separate civil complaint against the petitioners for damages arising from what they claimed to be their
malicious prosecution.
The petitioners moved to dismiss the civil complaint on the ground that the trial court had no jurisdiction over
the case because it involved employee-employer relations that were exclusively cognizable by the labor
arbiter. The motion was granted on February 6, 1989. On July 6, 1989, however, the respondent judge, acting
on the motion for reconsideration, reinstated the complaint, saying it was "distinct from the labor case for
damages now pending before the labor courts." The petitioners then came to this Court for relief.
The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court to support their
position that the private respondents civil complaint for damages falls under the jurisdiction of the labor
arbiter. They particularly cite the case of Getz Corporation v. Court of Appeals, 1 where it was held that a court
of first instance had no jurisdiction over the complaint filed by a dismissed employee "for unpaid salary and
other employment benefits, termination pay and moral and exemplary damages." library
We hold at the outset that the case is not in point because what was involved there was a claim arising from
the alleged illegal dismissal of an employee, who chose to complain to the regular court and not to the labor
arbiter. Obviously, the claim arose from employee-employer relations and so came under Article 217 of the
Labor Code which then provided as follows: 1aw library
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have the original
and exclusive jurisdiction to hear and decide within thirty (30) working days after submission of the case by
the parties for decision, the following cases involving all workers, whether agricultural or nonagricultural:chanrob1es virtual 1aw library
1. Unfair labor practice cases;

5. Cases arising from any violation of Article 265 of this Code, including questions involving the legality of
strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. 2
It must be stressed that not every controversy involving workers and their employers can be resolved only by
the labor arbiters. This will be so only if there is a "reasonable causal connection" between the claim asserted
and employee-employer relations to put the case under the provisions of Article 217. Absent such a link, the
complaint will be cognizable by the regular courts of justice in the exercise of their civil and criminal
jurisdiction.
In Medina v. Castro-Bartolome, 3 two employees filed in the Court of First Instance of Rizal a civil complaint
for damages against their employer for slanderous remarks made against them by the company president. On
the order dismissing the case because it came under the jurisdiction of the labor arbiters, Justice Vicente
Abad Santos said for the Court:
It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a simple
action for damages for tortuous acts allegedly committed by the defendants. Such being the case, the
governing statute is the Civil Code and not the Labor Code. It results that the orders under review are based
on a wrong premise. virtual law library
In Singapore Airlines Ltd. v. Pao, 4 where the plaintiff was suing for damages for alleged violation by the
defendant of an "Agreement for a Course of Conversion Training at the Expense of Singapore Airlines
Limited," the jurisdiction of the Court of First Instance of Rizal over the case was questioned. The Court, citing
the earlier case of Quisaba v. Sta. Ines Melale Veneer and Plywood, Inc., 5 declared through Justice Herrera:
1aw library
Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor
Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other
items demanded are not labor benefits demanded by workers generally taken cognizance of in labor disputes,
such as payment of wages, overtime compensation or separation pay. The items claimed are the natural
consequences flowing from breach of an obligation, intrinsically a civil dispute.
In Molave Sales, Inc. v. Laron, 6 the same Justice held for the Court that the claim of the plaintiff against its
sales manager for payment of certain accounts pertaining to his purchase of vehicles and automotive parts,
repairs of such vehicles, and cash advances from the corporation was properly cognizable by the Regional
Trial Court of Dagupan City and not the labor arbiter, because "although a controversy is between an
employer and an employee, the Labor Arbiters have no jurisdiction if the Labor Code is not involved." library
The latest ruling on this issue is found in San Miguel Corporation v. NLRC, 7 where the above cases are cited
and the changes in Article 217 are recounted. That case involved a claim of an employee for a P60,000.00
prize for a proposal made by him which he alleged had been accepted and implemented by the defendant
corporation in the processing of one of its beer products. The claim was filed with the labor arbiter, who
dismissed it for lack of jurisdiction but was reversed by the NLRC on appeal. In setting aside the appealed

decision and dismissing the complaint, the Court observed through Justice Feliciano: 1aw library
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.
x

WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED, with costs against the
petitioner.
SO ORDERED.
x

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

EVELYN TOLOSA, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION, Respondents.

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.
x

While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the entire
universe of money claims that might be asserted by workers against their employers has been absorbed into
the original and exclusive jurisdiction of Labor Arbiters.
x

For it cannot be presumed that money claims of workers which do not arise out of or in connection with their
employer-employee relationship, and which would therefore fall within the general jurisdiction of the regular
courts of justice, were intended by the legislative authority to be taken away from the jurisdiction of the courts
and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes and so holds that the
"money claims of workers" referred to in paragraph 3 of Article 217 embraces money claims which arise out of
or in connection with the employer-employee relationship, or some aspect or incident of such relationship. Put
a little differently, that money claims of workers which now fall within the original and exclusive jurisdiction of
Labor Arbiters are those money claims which have some reasonable causal connection with the employeremployee relationship (Ibid.).
The case now before the Court involves a complaint for damages for malicious prosecution which was filed
with the Regional Trial Court of Leyte by the employees of the defendant company. It does not appear that
there is a "reasonable causal connection" between the complaint and the relations of the parties as employer
and employees. The complaint did not arise from such relations and in fact could have arisen independently of
an employment relationship between the parties. No such relationship or any unfair labor practice is asserted.
What the employees are alleging is that the petitioners acted with bad faith when they filed the criminal
complaint which the Municipal Trial Court said was intended "to harass the poor employees" and the dismissal
of which was affirmed by the Provincial Prosecutor "for lack of evidence to establish even a slightest
probability that all the respondents herein have committed the crime imputed against them." This is a matter
which the labor arbiter has no competence to resolve as the applicable law is not the Labor Code but the
Revised Penal Code.
"Talents differ, all is well and wisely put," so observed the philosopher-poet. 8 So it must be in the case we
here decide.

As a rule, labor arbiters and the National Labor Relations Commission have no power or authority to grant
reliefs from claims that do not arise from employer-employee relations. They have no jurisdiction over torts
that have no reasonable causal connection to any of the claims provided for in the Labor Code, other labor
statutes, or collective bargaining agreements.chanrob1es virtua1 1aw 1ibrary
The Case
The Petition for Review before us assails the April 18, 2001 Decision 1 of the Court of Appeals (CA) in CA-GR
SP No. 57660, as well as the April 17, 2001 CA Resolution 2 denying petitioners Motion for Reconsideration.
The dispositive portion of the challenged Decision reads as follows:
"WHEREFORE, premises considered, the instant petition for certiorari is hereby DENIED and accordingly
DISMISSED, without prejudice to the right of herein petitioner to file a suit before the proper court, if she so,
desires. No pronouncement as to costs." 3
The Facts
The appellate court narrated the facts of the case in this manner:
"Evelyn Tolosa (hereafter EVELYN), was the widow of Captain Virgilio Tolosa (hereafter CAPT. TOLOSA) who
was hired by Qwana-Kaiun, through its manning agent, Asia Bulk Transport Phils. Inc., (ASIA BULK for
brevity), to be the master of the Vessel named M/V Lady Dona. CAPT. TOLOSA had a monthly compensation
of US$1700, plus US$400.00 monthly overtime allowance. His contract officially began on November 1, 1992,
as supported by his contract of employment when he assumed command of the vessel in Yokohama, Japan.
The vessel departed for Long Beach California, passing by Hawaii in the middle of the voyage. At the time of
embarkation, CAPT. TOLOSA was allegedly shown to be in good health.
"During channeling activities upon the vessels departure from Yokohama sometime on November 6, 1992,
CAPT. TOLOSA was drenched with rainwater. The following day, November 7, 1992, he had a slight fever and
in the succeeding twelve (12) days, his health rapidly deteriorated resulting in his death on November 18,
1992.
"According to Pedro Garate, Chief Mate of the Vessel, in his statement submitted to the U.S. Coast Guard on
November 23, 1992 upon arrival in Long Beach, California CAPT. TOLOSA experienced high fever between
November 1115, 1992 and suffered from loose bowel movement (LBM) beginning November 9, 1992. By
November 11, 1992, his temperature was 39.5 although his LBM had slightly stopped. The next day, his
temperature rose to 39.8 and had lost his appetite. In the evening of that day, November 13, 1992, he slipped

10

in the toilet and suffered scratches at the back of his waist. First aid was applied and CAPT. TOLOSA was
henceforth confined to his quarters with an able seaman to watch him 24 hours a day until November 15,
1992, when his conditioned worsened.
"On the same day, November 15, 1992, the Chief Engineer initiated the move and contacted ASIA BULK
which left CAPT. TOLOSAs fate in the hands of Pedro Garate and Mario Asis, Second Mate of the same
vessel who was in-charge of the primary medical care of its officers and crew. Contact with the U.S. Coast
Guard in Honolulu, Hawaii (USCGHH) was likewise initiated to seek medical advice.
"On November 17, 1992, CAPT. TOLOSA was losing resistance and his condition was getting serious. At
2215 GMT, a telex was sent to ASIA BULK requesting for the immediate evacuation of CAPT. TOLOSA and
thereafter an airlift was set on November 19, 1992. However, on November 18, 1992, at 0753 GMT, CAPT.
TOLOSA was officially recorded as having breathed his last.
"Because of the death of CAPT. TOLOSA, his wife, EVELYN, as petitioner, filed a Complaint/Position Paper
before the POEA (POEA Case No. 93-06-1080) against Qwana-Kaiun, thru its resident-agent, Mr. Fumio
Nakagawa, ASIA BULK, Pedro Garate and Mario Asis, as respondents.
"After initial hearings and submissions of pleadings, the case was however transferred to the Department of
Labor and Employment, National Labor Relations Commission (NLRC), when the amendatory legislation
expanding its jurisdiction, and removing overseas employment related claims from the ambit of POEA
jurisdiction. The case was then raffled to Labor Arbiter, Vladimir Sampang.
x

"After considering the pleadings and evidences, on July 8, 1997, the Labor Arbiter Vladimir P. L. Sampang, in
conformity with petitioners plea to hold respondents solidarily liable, granted all the damages, (plus legal
interest), as prayed for by the petitioner. The dispositive portion of his Decision reads: 1aw library
WHEREFORE, premises considered, the respondents are hereby ordered to jointly and solidarily pay
complainants the following:chanrob1es virtual 1aw library

(b) Labor Arbiters have jurisdiction over claims for damages arising from employer-employee relationship (Art.
217, Section (a) (3));
(c) In this case, gross negligence is imputed to respondents Garate and Asis, who have no employeremployee relationship with the late Capt. Virgilio Tolosa;
(d) The labor arbiter has no jurisdiction over the controversy;
x

"Despite other peripheral issues raised by the parties in their respective pleadings, the NLRC on September
10, 1998, vacated the appealed decision dated July 8, 1997 of the Labor Arbiter and dismissed petitioners
case for lack of jurisdiction over the subject matter of the action pursuant to the provisions of the Labor Code,
as amended." 4 (Citations omitted)
Ruling of the Court of Appeals
Sustaining the NLRC, the CA ruled that the labor commission had no jurisdiction over the subject matter of the
action filed by petitioner. Her cause did not arise from an employer-employee relation, but from a quasi delict
or tort. Further, there is no reasonable causal connection between her suit for damages and her claim under
Article 217 (a)(4) of the Labor Code, which allows an award of damages incident to an employer-employee
relation.chanrob1es virtua1 1aw 1ibrary
Hence, this Petition. 5
Issues
Petitioner raises the following issues for our consideration: library

1. US$176,400.00 (US$2,100.00 x 12 months x 7 years) or P4,586,400.00 (at P26.00 per US$1.00) by way of
lost income;
2. interest at the legal rate of six percent (6%) per annum or P1,238,328.00 (from November 1992 to May
1997 or 4 years);

"I
"Whether or not the NLRC has jurisdiction over the case.
"II

3. moral damages of P200,000.00;

4. exemplary damages of P100,000.00; and

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

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

x

After reviewing petitioners Memorandum, we find that we are specifically being asked to determine 1)
whether the labor arbiter and the NLRC had jurisdiction over petitioners action, and 2) whether the monetary
award granted by the labor arbiter has already reached finality.
The Courts Ruling

"On appeal, private respondents raised before the National Labor Relations Commission (NLRC) the following
grounds:
(a) the action before the Arbiter, as he himself concedes, is a complaint based on torts due to negligence. It is
the regular courts of law which have jurisdiction over the action;

The Petition has no merit.

11

First Issue:chanrob1es virtual 1aw library

15

Jurisdiction over the Action

We stress that the case does not involve the adjudication of a labor dispute, but the recovery of damages
based on a quasi delict. The jurisdiction of labor tribunals is limited to disputes arising from employeremployee relations, as we ruled in Georg Grotjahn GMBH Co. v. Isnani: 16

Petitioner argues that her cause of action is not predicated on a quasi delict or tort, but on the failure of private
respondents as employers of her husband (Captain Tolosa) to provide him with timely, adequate and
competent medical services under Article 161 of the Labor Code:
"ART 161. Assistance of employer. It shall be the duty of any employer to provide all the necessary
assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured
or sick employee in case of emergency." virtua1aw library
Likewise, she contends that Article 217 (a) (4) 7 of the Labor Code vests labor arbiters and the NLRC with
jurisdiction to award all kinds of damages in cases arising from employer-employee relations.
Petitioner also alleges that the "reasonable causal connection" rule should be applied in her favor. Citing San
Miguel Corporation v. Etcuban, 8 she insists that a reasonable causal connection between the claim asserted
and the employer-employee relation confers jurisdiction upon labor tribunals. She adds that she has satisfied
the required conditions: 1) the dispute arose from an employer-employee relation, considering that the claim
was for damages based on the failure of private respondents to comply with their obligation under Article 161
of the Labor Code; and 2) the dispute can be resolved by reference to the Labor Code, because the material
issue is whether private respondents complied with their legal obligation to provide timely, adequate and
competent medical services to guarantee Captain Tolosas occupational safety. 9
We disagree. We affirm the CAs ruling that the NLRC and the labor arbiter had no jurisdiction over petitioners
claim for damages, because that ruling was based on a quasi delict or tort per Article 2176 of the Civil Code.
10
Time and time again, we have held that the allegations in the complaint determine the nature of the action
and, consequently, the jurisdiction of the courts. 11 After carefully examining the complaint/position paper of
petitioner, we are convinced that the allegations therein are in the nature of an action based on a quasi delict
or tort. It is evident that she sued Pedro Garate and Mario Asis for gross negligence.chanrob1es virtua1 1aw
1ibrary
Petitioners complaint/position paper refers to and extensively discusses the negligent acts of shipmates
Garate and Asis, who had no employer-employee relation with Captain Tolosa. Specifically, the paper alleges
the following tortious acts:
". . . [R]espondent Asis was the medical officer of the Vessel, who failed to regularly monitor Capt. Tolosas
condition, and who needed the USCG to prod him to take the latters vital signs. In fact, he failed to keep a
medical record, like a patients card or folder, of Capt. Tolosas illness." 12
"Respondents, however, failed Capt. Tolosa because Garate never initiated actions to save him. . . . In fact,
Garate rarely checked personally on Capt. Tolosas condition, to wit:" 13
". . . Noticeably, the History (Annex "D") fails to mention any instance when Garate consulted the other
officers, much less Capt. Tolosa, regarding the possibility of deviation. To save Capt. Tolosas life was surely a
just cause for the change in course, which the other officers would have concurred in had they been consulted
by respondent Garate which he grossly neglected to do.
"Garates poor judgement, since he was the officer effectively in command of the vessel, prevented him from
undertaking these emergency measures, the neglect of which resulted in Capt. Tolosas untimely demise." 14

"Not every dispute between an employer and employee involves matters that only labor arbiters and the
NLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor
arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employeremployee relationship which can only be resolved by reference to the Labor Code, other labor statutes, or
their collective bargaining agreement." 17
The pivotal question is whether the Labor Code has any relevance to the relief sought by petitioner. From her
paper, it is evident that the primary reliefs she seeks are as follows: (a) loss of earning capacity denominated
therein as "actual damages" or "lost income" and (b) blacklisting. The loss she claims does not refer to the
actual earnings of the deceased, but to his earning capacity based on a life expectancy of 65 years. This
amount is recoverable if the action is based on a quasi delict as provided for in Article 2206 of the Civil Code,
18 but not in the Labor Code.chanrob1es virtua1 1aw 1ibrary
While it is true that labor arbiters and the NLRC have jurisdiction to award not only reliefs provided by labor
laws, but also damages governed by the Civil Code, 19 these reliefs must still be based on an action that has
a reasonable causal connection with the Labor Code, other labor statutes, or collective bargaining
agreements. 20
The central issue is determined essentially from the relief sought in the complaint. In San Miguel Corporation
v. NLRC, 21 this Court held:
"It is the character of the principal relief sought that appears essential in this connection. Where such principal
relief is to be granted under labor legislation or a collective bargaining agreement, the case should fall within
the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for damages might be asserted as an
incident to such claim." 22
The labor arbiter found private respondents to be grossly negligent. He ruled that Captain Tolosa, who died at
age 58, could expect to live up to 65 years and to have an earning capacity of US$176,400.
It must be noted that a workers loss of earning capacity and blacklisting are not to be equated with wages,
overtime compensation or separation pay, and other labor benefits that are generally cognized in labor
disputes. The loss of earning capacity is a relief or claim resulting from a quasi delict or a similar cause within
the realm of civil law.
"Claims for damages under paragraph 4 of Article 217 must have a reasonable causal connection with any of
the claims provided for in the article in order to be cognizable by the labor arbiter. Only if there is such a
connection with the other claims can the claim for damages be considered as arising from employer-employee
relations." 23 In the present case, petitioners claim for damages is not related to any other claim under Article
217, other labor statutes, or collective bargaining agreements.
Petitioner cannot anchor her claim for damages to Article 161 of the Labor Code, which does not grant or
specify a claim or relief. This provision is only a safety and health standard under Book IV of the same Code.
The enforcement of this labor standard rests with the labor secretary. 24 Thus, claims for an employers
violation thereof are beyond the jurisdiction of the labor arbiter. In other words, petitioner cannot enforce the
labor standard provided for in Article 161 by suing for damages before the labor arbiter.
It is not the NLRC but the regular courts that have jurisdiction over actions for damages, in which the

The labor arbiter himself classified petitioners case as "a complaint for damages, blacklisting and watchlisting

12

employer-employee relation is merely incidental, and in which the cause of action proceeds from a different
source of obligation such as a tort. 25 Since petitioners claim for damages is predicated on a quasi delict or
tort that has no reasonable causal connection with any of the claims provided for in Article 217, other labor
statutes, or collective bargaining agreements, jurisdiction over the action lies with the regular courts 26 not
with the NLRC or the labor arbiters.

heard, and that the DOLE Secretary had jurisdiction over the matter, as the jurisdictional limitation imposed by
Article 129 of the Labor Code on the power of the DOLE Secretary under Art. 128(b) of the Code had been
repealed by Republic Act No. (RA) 7730.[3]
In the Decision of this Court, the CA Decision was reversed and set aside, and the complaint against
petitioner was dismissed. The dispositive portion of the Decision reads as follows:

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

G.R. No. 179652 : March 06, 2012]

PEOPLES BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.), PETITIONER, VS. THE
SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, RESPONDENTS.
RESOLUTION
In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc. (Bombo Radyo Phils.,
Inc.) questioned the Decision and Resolution of the Court of Appeals (CA) dated October 26, 2006 and June
26, 2007, respectively, in C.A. G.R. CEB-SP No. 00855.cralaw
Private respondent Jandeleon Juezan filed a complaint against petitioner with the Department of Labor and
Employment (DOLE) Regional Office No. VII, Cebu City, for illegal deduction, nonpayment of service incentive
leave, 13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed
payment of wages and noncoverage of SSS, PAG-IBIG and Philhealth.[1] After the conduct of summary
investigations, and after the parties submitted their position papers, the DOLE Regional Director found that
private respondent was an employee of petitioner, and was entitled to his money claims. [2] Petitioner sought
reconsideration of the Directors Order, but failed. The Acting DOLE Secretary dismissed petitioners appeal
on the ground that petitioner submitted a Deed of Assignment of Bank Deposit instead of posting a cash or
surety bond. When the matter was brought before the CA, where petitioner claimed that it had been denied
due process, it was held that petitioner was accorded due process as it had been given the opportunity to be

WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution dated 26
June 2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE. The
Order of the then Acting Secretary of the Department of Labor and Employment dated 27 January 2005
denying petitioners appeal, and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004
and 27 February 2004, respectively, are ANNULLED. The complaint against petitioner is DISMISSED.[4]
The Court found that there was no employer-employee relationship between petitioner and private
respondent. It was held that while the DOLE may make a determination of the existence of an employeremployee relationship, this function could not be co-extensive with the visitorial and enforcement power
provided in Art. 128(b) of the Labor Code, as amended by RA 7730. The National Labor Relations
Commission (NLRC) was held to be the primary agency in determining the existence of an employeremployee relationship. This was the interpretation of the Court of the clause in cases where the relationship
of employer-employee still exists in Art. 128(b). [5]
From this Decision, the Public Attorneys Office (PAO) filed a Motion for Clarification of Decision (with Leave of
Court). The PAO sought to clarify as to when the visitorial and enforcement power of the DOLE be not
considered as co-extensive with the power to determine the existence of an employer-employee relationship.
[6]
In its Comment,[7] the DOLE sought clarification as well, as to the extent of its visitorial and enforcement
power under the Labor Code, as amended.
The Court treated the Motion for Clarification as a second motion for reconsideration, granting said motion
and reinstating the petition.[8] It is apparent that there is a need to delineate the jurisdiction of the DOLE
Secretary vis--vis that of the NLRC.
Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to hear and
decide any matter involving the recovery of wages and other monetary claims and benefits was qualified by
the proviso that the complaint not include a claim for reinstatement, or that the aggregate money claims not
exceed PhP 5,000. RA 7730, or an Act Further Strengthening the Visitorial and Enforcement Powers of the
Secretary of Labor, did away with the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its
visitorial and enforcement power for claims beyond PhP 5,000. The only qualification to this expanded power
of the DOLE was only that there still be an existing employer-employee relationship.
It is conceded that if there is no employer-employee relationship, whether it has been terminated or it has not
existed from the start, the DOLE has no jurisdiction. Under Art. 128(b) of the Labor Code, as amended by RA
7730, the first sentence reads, Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the power to issue compliance orders to give
effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the course of inspection. It is
clear and beyond debate that an employer-employee relationship must exist for the exercise of the visitorial
and enforcement power of the DOLE. The question now arises, may the DOLE make a determination of
whether or not an employer-employee relationship exists, and if so, to what extent?
The first portion of the question must be answered in the affirmative.
The prior decision of this Court in the present case accepts such answer, but places a limitation upon the

13

power of the DOLE, that is, the determination of the existence of an employer-employee relationship cannot
be co-extensive with the visitorial and enforcement power of the DOLE. But even in conceding the power of
the DOLE to determine the existence of an employer-employee relationship, the Court held that the
determination of the existence of an employer-employee relationship is still primarily within the power of the
NLRC, that any finding by the DOLE is merely preliminary.
This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE to determine the existence of an employeremployee relationship. No procedure was laid down where the DOLE would only make a preliminary finding,
that the power was primarily held by the NLRC. The law did not say that the DOLE would first seek the
NLRCs determination of the existence of an employer-employee relationship, or that should the existence of
the employer-employee relationship be disputed, the DOLE would refer the matter to the NLRC. The DOLE
must have the power to determine whether or not an employer-employee relationship exists, and from there to
decide whether or not to issue compliance orders in accordance with Art. 128(b) of the Labor Code, as
amended by RA 7730.
The DOLE, in determining the existence of an employer-employee relationship, has a ready set of guidelines
to follow, the same guide the courts themselves use. The elements to determine the existence of an
employment relationship are: (1) the selection and engagement of the employee; (2) the payment of wages;
(3) the power of dismissal; (4) the employers power to control the employees conduct. [9] The use of this test
is not solely limited to the NLRC. The DOLE Secretary, or his or her representatives, can utilize the same test,
even in the course of inspection, making use of the same evidence that would have been presented before
the NLRC.
The determination of the existence of an employer-employee relationship by the DOLE must be respected.
The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory
if the alleged employer could, by the simple expedient of disputing the employer-employee relationship, force
the referral of the matter to the NLRC. The Court issued the declaration that at least a prima facie showing of
the absence of an employer-employee relationship be made to oust the DOLE of jurisdiction. But it is
precisely the DOLE that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the
same does successfully refute the existence of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-employee relationship, it takes cognizance of
the matter, to the exclusion of the NLRC. The DOLE would have no jurisdiction only if the employer-employee
relationship has already been terminated, or it appears, upon review, that no employer-employee relationship
existed in the first place.
The Court, in limiting the power of the DOLE, gave the rationale that such limitation would eliminate the
prospect of competing conclusions between the DOLE and the NLRC. The prospect of competing
conclusions could just as well have been eliminated by according respect to the DOLE findings, to the
exclusion of the NLRC, and this We believe is the more prudent course of action to take.
This is not to say that the determination by the DOLE is beyond question or review. Suffice it to say, there are
judicial remedies such as a petition for certiorari under Rule 65 that may be availed of, should a party wish to
dispute the findings of the DOLE.
It must also be remembered that the power of the DOLE to determine the existence of an employer-employee
relationship need not necessarily result in an affirmative finding. The DOLE may well make the determination
that no employer-employee relationship exists, thus divesting itself of jurisdiction over the case. It must not be
precluded from being able to reach its own conclusions, not by the parties, and certainly not by this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-employee relationship in the exercise of its visitorial and

There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there is still a threshold
amount set by Arts. 129 and 217 of the Labor Code when money claims are involved, i.e., that if it is for PhP
5,000 and below, the jurisdiction is with the regional director of the DOLE, under Art. 129, and if the amount
involved exceeds PhP 5,000, the jurisdiction is with the labor arbiter, under Art. 217. The view states that
despite the wording of Art. 128(b), this would only apply in the course of regular inspections undertaken by the
DOLE, as differentiated from cases under Arts. 129 and 217, which originate from complaints. There are
several cases, however, where the Court has ruled that Art. 128(b) has been amended to expand the powers
of the DOLE Secretary and his duly authorized representatives by RA 7730. In these cases, the Court
resolved that the DOLE had the jurisdiction, despite the amount of the money claims involved. Furthermore,
in these cases, the inspection held by the DOLE regional director was prompted specifically by a complaint.
Therefore, the initiation of a case through a complaint does not divest the DOLE Secretary or his duly
authorized representative of jurisdiction under Art. 128(b).
To recapitulate, if a complaint is brought before the DOLE to give effect to the labor standards provisions of
the Labor Code or other labor legislation, and there is a finding by the DOLE that there is an existing
employer-employee relationship, the DOLE exercises jurisdiction to the exclusion of the NLRC. If the DOLE
finds that there is no employer-employee relationship, the jurisdiction is properly with the NLRC. If a
complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is
properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter has
original and exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and other
terms and conditions of employment, if accompanied by a claim for reinstatement. If a complaint is filed with
the NLRC, and there is still an existing employer-employee relationship, the jurisdiction is properly with the
DOLE. The findings of the DOLE, however, may still be questioned through a petition for certiorari under Rule
65 of the Rules of Court.
In the present case, the finding of the DOLE Regional Director that there was an employer-employee
relationship has been subjected to review by this Court, with the finding being that there was no employeremployee relationship between petitioner and private respondent, based on the evidence presented. Private
respondent presented self-serving allegations as well as self-defeating evidence. [10] The findings of the
Regional Director were not based on substantial evidence, and private respondent failed to prove the
existence of an employer-employee relationship. The DOLE had no jurisdiction over the case, as there was
no employer-employee relationship present. Thus, the dismissal of the complaint against petitioner is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with
theMODIFICATION that in the exercise of the DOLEs visitorial and enforcement power, the Labor Secretary
or the latters authorized representative shall have the power to determine the existence of an employeremployee relationship, to the exclusion of the NLRC.
SO ORDERED.
x

[G.R. Nos. 82211-12. March 21, 1989.]

TERESITA MONTOYA, Petitioner, v. TERESITA ESCAYO, Respondents.

SYLLABUS
1. LABOR LAW; PROVISIONS OF P.D. No. 1506 REQUIRING SUBMISSION OF DISPUTES BEFORE THE
BARANGAY LUPONG TAGAPAYAPA PRIOR TO THEIR FILING WITH THE COURT OR OTHER

14

GOVERNMENT OFFICES; NOT APPLICABLE TO LABOR CASES. From the three "WHEREAS" clauses
of P.D. No. 1508 can be gleaned clearly the decrees intended applicability only to courts of justice, and not to
labor relations commissions or labor arbitrators offices. The express reference to "judicial resources", to
"courts of justice", "court dockets", or simply to "courts" are significant. On the other hand, there is no mention
at all of labor relations or controversies and labor arbiters or commissions in the clauses involved. Letter of
Instructions No. 956 and Letter of Implementation No. 105, both issued on November 12, 1979 by the former
President in connection with the implementation of the Katarungang Pambarangay Law, affirm this conclusion.
These presidential issuances make clear that the only official directed to oversee the implementation of the
provisions of the Katarungang Pambarangay Law (P.D. No. 1508) are the then Minister of Justice, the then
Minister of Local Governments and Community Development, and the Chief Justice of the Supreme Court.
2. ID.; ID.; OTHER GOVERNMENT OFFICE MENTIONED IN SECTION 6 OF P.D. No.1508, CONSTRUED.
The "other government office" referred to in Section 6 of P.D. No. 1508 includes the Office of the Labor
Arbiter and the Med-Arbiter. The declared concern of the Katarungan Pambarangay Law is "to help relieve the
courts of such docket congestion and thereby enhance the quality of justice dispensed by the courts." Thus,
the "other government office" mentioned in Section 6 of P.D. No. 1508 refers only to such offices as the
Fiscals Office or, in localities where there is no fiscal, the Municipal Trial Courts, where complaints for crimes
(such as those punishable by imprisonment of not more than 30 days or a fine of not more than P200.00)
falling under the jurisdiction of the barangay court but which are not amicably settled, are subsequently filed
for proper disposition. All doubts on this score are dispelled by The Labor Code Of The Philippines
(Presidential Decree No. 442, as amended) itself. Article 226 thereof grants original and exclusive jurisdiction
over the conciliation and mediation of disputes, grievances, or problems in the regional offices of the
Department of Labor and Employment.
3. STATUTORY CONSTRUCTION; RULES ON PROCEDURE, SUPPLETORY TO THE LABOR DISPUTES.
It is already well-settled that the ordinary rules on procedure are merely suppletory in character vis-a-vis
labor disputes which are primarily governed by labor laws. And" (A)ll doubts in the implementation and
interpretation of this Code (Labor), including its implementing rules and regulations, shall be resolved in favor
of labor."
DECISION
This petition for certiorari seeks the annullment and setting aside of the resolution 1 dated August 20, 1987 of
the National Labor Relations Commission (NLRC), Third Division, which reversed and set aside the order
dated September 27, 1985 of Labor Arbiter Ethelwoldo R. Ovejera of the NLRCs Regional Arbitration Branch
No. VI, Bacolod City, dismissing the complaint filed by the private respondents against the petitioner. This
petition raises a singular issue, i.e., the applicability of Presidential Decree (P.D.) No. 1508, more commonly
known as the Katarungang Pambarangay Law, to labor disputes.

Acting favorably on the petitioners motion, Labor Arbiter Ethelwoldo R. Ovejera, on September 27, 1985,
ordered the dismissal of the complaints. The private respondents sought the reversal of the Labor Arbiters
order before the respondent NLRC. On August 20, 1987, the public respondent rendered the assailed
resolution reversing the order of Ovejera, and remanded the case to the Labor Arbiter for further proceedings.
A motion for reconsideration was filed by the petitioner but this was denied for lack of merit on October 28,
1987. Hence, this petition.
It is the petitioners contention that the provisions of the Katarungang Pambarangay Law (P.D. No. 1508)
relative to the prior amicable settlement proceedings before the Lupong Tagapayapa as a jurisdictional
requirement at the trial level apply to labor cases. More particularly, the petitioner insists that the failure of the
private respondents to first submit their complaints for possible conciliation and amicable settlement in the
proper barangay court in Bacolod City and to secure a certification from the Lupon Chairman prior to their
filing with the Labor Arbiter, divests the Labor Arbiter, as well as the respondent Commission itself, of
jurisdiction over these labor controversies and renders their judgments thereon null and void. library : red
On the other hand, the Solicitor General, as counsel for the public respondent NLRC, in his comment, strongly
argues and convincingly against the applicability of P.D. No. 1508 to labor cases.
We dismiss the petition for lack of merit, there being no satisfactory showing of any grave abuse of discretion
committed by the public Respondent.
The provisions of P.D. No. 1508 requiring the submission of disputes before the barangay Lupong
Tagapayapa prior to their filing with the court or other government offices are not applicable to labor cases.
For a better understanding of the issue in this case, the provisions of P.D. No. 1508 invoked by the petitioner
are quoted:
SEC. 6. Conciliation pre-condition to filing of complaint. No complaint, petition, action or proceeding
involving any matter within the authority of the Lupon as provided in Section 2 hereof shall be filed or instituted
in court or any other government office for adjudication unless there has been a confrontation of the parties
before the Lupon Chairman or the Pangkat and no conciliation or settlement has been reached as certified by
the Lupon Secretary or the Pangkat Secretary, attested by the Lupon or Pangkat Chairman, or unless the
settlement has been repudiated. However, the parties may go directly to court in the following cases:
(1) Where the accused is under detention;
(2) Where a person has otherwise been deprived of personal liberty calling for habeas corpusproceedings;
(3) Actions coupled with provisional remedies such as preliminary injunction, attachment, delivery of personal
property and support pendente lite; and

The chronology of events leading to the present controversy is as follows: virtual 1aw library
(4) Where the action may otherwise be barred by the Statute of Limitations.
The private respondents were all formerly employed as salesgirls in the petitioners store, the "Terrys Dry
Goods Store," in Bacolod City. On different dates, they separately filed complaints for the collection of sums of
money against the petitioner for alleged unpaid overtime pay, holiday pay, 13th month pay, ECOLA, and
service leave pay: for violation of the minimum wage law, illegal dismissal, and attorneys fees. The
complaints, which were originally treated as separate cases, were subsequently consolidated on account of
the similarity in their nature. On August 1, 1984, the petitioner-employer moved (Annex "C" of Petition) for the
dismissal of the complaints, claiming that among others, the private respondents failed to refer the dispute to
the Lupong Tagapayapa for possible settlement and to secure the certification required from the Lupon
Chairman prior to the filing of the cases with the Labor Arbiter. These actions were allegedly violative of the
provisions of P.D. No. 1508, which apply to the parties who are all residents of Bacolod City.

As correctly pointed out by the Solicitor General in his comment to the petition, even from the three
"WHEREAS" clauses of P.D. No. 1508 can be gleaned clearly the decrees intended applicability only to
courts of justice, and not to labor relations commissions or labor arbitrators offices. The express reference to
"judicial resources", to "courts of justice", "court dockets", or simply to "courts" are significant. On the other
hand, there is no mention at all of labor relations or controversies and labor arbiters or commissions in the
clauses involved.
These "WHEREAS" clauses state:chanrob1es virtual 1aw library
WHEREAS, the perpetuation and official recognition of the time-honored tradition of amicably settling disputes

15

among family and barangay members at the barangay level without judicial resources would promote the
speedy administration of justice and implement the constitutional mandate to preserve and develop Filipino
culture and to strengthen the family as a basic social institution;
WHEREAS, the indiscriminate filing of cases in the courts of justice contributes heavily and unjustifiably to the
congestion of court dockets, thus causing a deterioration in the quality of justice;
WHEREAS, in order to help relieve the courts of such docket congestion and thereby enhance the quality of
justice dispensed by the courts, it is deemed desirable to formally organize and institutionalize a system of
amicably settling disputes at the barangay level; (Emphasis supplied.)
In addition, Letter of Instructions No. 956 and Letter of Implementation No. 105, both issued on November 12,
1979 by the former President in connection with the implementation of the Katarungang Pambarangay Law,
affirm this conclusion. These Letters were addressed only to the following officials: all judges of the Courts of
First Instance, Circuit Criminal Courts, Juvenile and Domestic Relations Courts, Courts of Agrarian Relations,
City Courts and Municipal Courts, and all Fiscals and other Prosecuting Officers. These presidential issuances
make clear that the only official directed to oversee the implementation of the provisions of the Katarungang
Pambarangay Law (P.D. No. 1508) are the then Minister of Justice, the then Minister of Local Governments
and Community Development, and the Chief Justice of the Supreme Court. If the contention of the petitioner
were correct, the then Minister (now Secretary) of Labor and Employment would have been included in the
list, and the two presidential issuances also would have been addressed to the labor relations officers, labor
arbiters, and the members of the National Labor Relations Commission. Expressio unius est exclusio alterius.
Nor can we accept the petitioners contention that the "other government office" referred to in Section 6 of P.D.
No. 1508 includes the Office of the Labor Arbiter and the Med-Arbiter. The declared concern of the
Katarungan Pambarangay Law is "to help relieve the courts of such docket congestion and thereby enhance
the quality of justice dispensed by the courts." Thus, the "other government office" mentioned in Section 6 of
P.D. No. 1508 refers only to such offices as the Fiscals Office or, in localities where there is no fiscal, the
Municipal Trial Courts, where complaints for crimes (such as those punishable by imprisonment of not more
than 30 days or a fine of not more than P200.00) falling under the jurisdiction of the barangay court but which
are not amicably settled, are subsequently filed for proper disposition.
But, the opinion of the Honorable Minister of Justice (Opinion No. 59, s. 1983) to the contrary notwithstanding,
all doubts on this score are dispelled by The Labor Code Of The Philippines (Presidential Decree No. 442, as
amended) itself. Article 226 thereof grants original and exclusive jurisdiction over the conciliation and
mediation of disputes, grievances, or problems in the regional offices of the Department of Labor and
Employment. It is the said Bureau and its divisions, and not the barangay Lupong Tagapayapa, which are
vested by law with original and exclusive authority to conduct conciliation and mediation proceedings on labor
controversies before their endorsement to the appropriate Labor Arbiter for adjudication. Article 226,
previously adverted to is clear on this regard. It provides: 1aw library
ART. 226. Bureau of Labor Relations. The Bureau of Labor Relations and the Labor relations divisions in
the regional offices of the Department of Labor shall have original and exclusive authority to act, at their own
initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all disputes,
grievances or problems arising from or affecting labor-management relations in all workplaces whether
agricultural or non-agricultural, except those arising from the implementation or interpretation of collective
bargaining agreements which shall be the subject of grievance procedure and/or voluntary arbitration.
The Bureau shall have fifteen (15) working days to act on all labor cases, subject to extension by agreement
of the parties, after which the Bureau shall certify the cases to the appropriate Labor Arbiters. The 15-working
day deadline, however, shall not apply to cases involving deadlocks in collective bargaining which the Bureau
shall certify to the appropriate Labor Arbiters only after all possibilities of voluntary settlement shall have been
tried.

the law. Instead of simplifying labor proceedings designed at expeditious settlement or referral to the proper
court or office to decide it finally, the position taken by the petitioner would only duplicate the conciliation
proceedings and unduly delay the disposition of the labor case. The fallacy of the petitioners submission can
readily be seen by following it to its logical conclusion. For then, if the procedure suggested is complied with,
the private respondent would have to lodge first their complaint with the barangay court, and then if not settled
there, they would have to go to the labor relations division at the Regional Office of Region VI of the
Department of Labor and Employment, in Bacolod City, for another round of conciliation proceedings. Failing
there, their long travail would continue to the Office of the Labor Arbiter, then to the NLRC, and finally to us.
This suggested procedure would destroy the salutary purposes of P.D. 1508 and of The Labor Code Of The
Philippines. And labor would then be given another unnecessary obstacle to hurdle. We reject the petitioners
submission. It does violence to the constitutionally mandated policy of the State to afford full protection to
labor. 2
Finally, it is already well-settled that the ordinary rules on procedure are merely suppletory in character vis-avis labor disputes which are primarily governed by labor laws. 3 And" (A)ll doubts in the implementation and
interpretation of this Code (Labor), including its implementing rules and regulations, shall be resolved in favor
of labor." 4
WHEREFORE, the petition is DISMISSED. Costs against the petitioner.
SO ORDERED.
x

[G.R. No. 118651. October 16, 1997.]

PIONEER TEXTURIZING CORP. Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION,
Respondents.
The facts are as follows: virtual 1aw library
Private respondent Lourdes A. de Jesus is petitioners reviser/trimmer since 1980. As reviser/trimmer, de
Jesus based her assigned work on a paper note posted by petitioners. The posted paper which contains the
corresponding price for the work to be accomplished by a worker is identified by its P.O. Number. On August
15, 1992, de Jesus worked on P.O. No. 3853 by trimming the cloths ribs. She thereafter submitted tickets
corresponding to the work done to her supervisor. Three days later, de Jesus received from petitioners
personnel manager a memorandum requiring her to explain why no disciplinary action should be taken
against her for dishonesty and tampering of official records and documents with the intention of cheating as
P.O. No. 3853 allegedly required no trimming. The memorandum also placed her under preventive suspension
for thirty days starting from August 19, 1992. In her handwritten explanation, de Jesus maintained that she
merely committed a mistake in trimming P.O. No. 3853 as it has the same style and design as P.O. No. 3824
which has an attached price list for trimming the ribs and admitted that she may have been negligent in
presuming that the same work was to be done with P.O. No. 3853, but not for dishonesty or tampering.
Petitioners personnel department, nonetheless, terminated her from employment and sent her a notice of
termination dated September 18, 1992.
On September 22, 1992, de Jesus filed a complaint for illegal dismissal against petitioners. The Labor Arbiter
who heard the case noted that de Jesus was amply accorded procedural due process in her termination from
service. Nevertheless, after observing that de Jesus made some further trimming on P.O. No. 3853 and that
her dismissal was not justified, the Labor Arbiter held petitioners guilty of illegal dismissal. Petitioners were
accordingly ordered to reinstate de Jesus to her previous position without loss of seniority rights and with full
backwages from the time of her suspension on August 19, 1992. Dissatisfied with the Labor Arbiters decision,

16

petitioners appealed to public respondent National Labor Relations Commission (NLRC). In its July 21, 1994
decision, the NLRC 1 ruled that de Jesus was negligent in presuming that the ribs of P.O. No. 3853 should
likewise be trimmed for having the same style and design as P.O. No. 3824, thus petitioners cannot be entirely
faulted for dismissing de Jesus. The NLRC declared that the status quo between them should be maintained
and affirmed the Labor Arbiters order of reinstatement, but without backwages. The NLRC further "directed
petitioner to pay de Jesus her back salaries from the date she filed her motion for execution on September 21,
1993 up to the date of the promulgation of [the] decision." 2 Petitioners filed their partial motion for
reconsideration which the NLRC denied, hence this petition anchored substantially on the alleged NLRCs
error in holding that de Jesus is entitled to reinstatement and back salaries. On March 6, 1996, petitioners
filed its supplement to the petition amplifying further their arguments. In a resolution dated February 20, 1995,
the Court required respondents to comment thereon. Private respondent de Jesus and the Office of the
Solicitor General, in behalf of public respondent NLRC, subsequently filed their comments. Thereafter,
petitioners filed two rejoinders [should be replies] to respondents respective comments. Respondents in due
time filed their rejoinders.

award for backwages should necessarily be deleted." 6

We note that the NLRCs decision is quite categorical in finding that de Jesus was merely negligent in the
performance of her duty. Such negligence, the Labor Arbiter delineated, was brought about by the petitioners
plain improvidence. Thus:
"After careful assessment of the allegations and documents available on record, we are convinced that the
penalty of dismissal was not justified.
"At the outset, it is remarkable that respondents did not deny nor dispute that P.O. 3853 has the same style
and design as P.O. 3824; that P.O. 3824 was made as guide for the work done on P.O. 3853; and, most
importantly, that the notation correction on P.O. 3824 was made only after the error was discovered by
respondents Accounting Department.
"Be that as it may, the factual issue in this case is whether or not complainant trimmed the ribs of P.O. 3853?

There are two interrelated and crucial issues, namely: (1) whether or not de Jesus was illegally dismissed,
and (2) whether or not an order for reinstatement needs a writ of execution.

"Respondents maintained that she did not because the record in Accounting Department allegedly indicates
that no trimming is to be done on P.O. 3853. Basically, this allegation is unsubstantiated.

Petitioners insist that the NLRC gravely abused its discretion in holding that de Jesus is entitled to
reinstatement to her previous position for she was not illegally dismissed in the first place. In support thereof,
petitioners quote portions of the NLRC decision which stated that "respondents [petitioners herein] cannot be
entirely faulted for dismissing the complainant" 3 and that there was "no illegal dismissal to speak of in the
case at bar." 4 Petitioners further add that de Jesus breached the trust reposed in her, hence her dismissal
from service is proper on the basis of loss of confidence, citing as authority the cases of Ocean Terminal
Services, Inc. v. NLRC, 197 SCRA 491; Coca-Cola Bottlers Phil., Inc. v. NLRC, 172 SCRA 751, and Piedad v.
Lanao del Norte Electric Cooperative, 5 154 SCRA 500.

"It must be emphasized that in termination cases the burden of proof rests upon the employer.

The arguments lack merit.

The entire paragraph which comprises the gist of the NLRCs decision from where petitioners derived and
isolated the aforequoted portions of the NLRCs observation reads in full as follows:
"We cannot fully subscribe to the complainants claim that she trimmed the ribs of PO3853 in the light of the
sworn statement of her supervisor Rebecca Madarcos (Rollo, p. 64) that no trimming was necessary because
the ribs were already of the proper length. The complainant herself admitted in her sinumpaang salaysay
(Rollo, p. 45) that "Aking napansin na hindi pantay-pantay ang lapad ng mga ribs PO3853 mas maigsi ang
nagupit ko sa mga ribs ng PO3853 kaysa sa mga ribs ng mga nakaraang POs. The complainant being an
experienced reviser/trimmer for almost twelve (12) years should have called the attention of her supervisor
regarding her observation of PO3853. It should be noted that complainant was trying to claim as production
output 447 pieces of trimmed ribs of PO3853 which respondents insists that complainant did not do any. She
was therefore negligent in presuming that the ribs of PO3853 should likewise be trimmed for having the same
style and design as PO3824. Complainant cannot pass on the blame to her supervisor whom she claimed
checked the said tickets prior to the submission to the Accounting Department. As explained by respondent,
what the supervisor does is merely not the submission of tickets and do some checking before forwarding the
same to the Accounting Department. It was never disputed that it is the Accounting Department who does the
detailed checking and computation of the tickets as has been the company policy and practice. Based on the
foregoing and considering that respondent cannot be entirely faulted for dismissing complainant as the
complainant herself was also negligent in the performance of her job, We hereby rule that status quo between
them should be maintained as a matter of course. We thus affirm the decision of Labor Arbiter reinstating the
complainant but without backwages. The award of backwages in general are granted on grounds of equity for
earnings which a worker or employee has lost due to his illegal dismissal. (Indophil Acrylic Mfg. Corporation v.
NLRC, G.R. No. 96488 September 27, 1993) There being no illegal dismissal to speak in the case at bar, the

"In the instant case, respondents mere allegation that P.O. 3853 need not be trimmed does not satisfy the
proof required to warrant complainants dismissal.
"Now, granting that the Accounting record is correct, we still believe that complainant did some further
trimming on P.O. 3853 based on the following grounds:
"Firstly, Supervisor Rebecca Madarcos who ought to know the work to be performed because she was incharged of assigning jobs, reported no anomaly when the tickets were submitted to her.
"Incidentally, supervisor Madarcos testimony is suspect because if she could recall what she ordered the
complainant to do seven (7) months ago (to revise the collars and plackets of shirts) there was no reason for
her not to detect the alleged tampering at the time complainant submitted her tickets, after all, that was part of
her job, if not her main job.
"Secondly, she did not exceed her quota, otherwise she could have simply asked for more.
"That her output was remarkably big granting it is true, is well explained in that the parts she had trimmed
were lesser compared to those which she had cut before.
"In this connection, respondents misinterpreted the handwritten explanation of the complainant dated 20
August 1992, because the letter never admits that she never trimmed P.O. 3853, on the contrary the following
sentence,
Sa katunayan nakapagbawas naman talaga ako na di ko inaasahang inalis na pala ang presyo ng Sec. 9
P.O. 3853 na ito.
is crystal clear that she did trim the ribs on P.O. 3853." 7
Gleaned either from the Labor Arbiters observations or from the NLRCs assessment, it distinctly appears that
petitioners accusation of dishonesty and tampering of official records and documents with intention of
cheating against de Jesus was not substantiated by clear and convincing evidence. Petitioners simply failed,
both before the Labor Arbiter and the NLRC, to discharge the burden of proof and to validly justify de Jesus

17

dismissal from service. The law, in this light, directs the employers, such as herein petitioners, not to terminate
the services of an employee except for a just or authorized cause under the Labor Code. 8 Lack of a just
cause in the dismissal from service of an employee, as in this case, renders the dismissal illegal, despite the
employers observance of procedural due process. 9 And while the NLRC stated that "there was no illegal
dismissal to speak of in the case at bar" and that petitioners cannot be entirely faulted therefor, said
statements are inordinate pronouncements which did not remove the assailed dismissal from the realm of
illegality. Neither can these pronouncements preclude us from holding otherwise.
We also find the imposition of the extreme penalty of dismissal against de Jesus as certainly harsh and
grossly disproportionate to the negligence committed, especially where said employee holds a faithful and an
untarnished twelve-year service record. While an employer has the inherent right to discipline its employees,
we have always held that this right must always be exercised humanely, and the penalty it must impose
should be commensurate to the offense involved and to the degree of its infraction. 10 The employer should
bear in mind that, in the exercise of such right, what is at stake is not only the employees position but her
livelihood as well.
Equally unmeritorious is petitioners assertion that the dismissal is justified on the basis of loss of confidence.
While loss of confidence, as correctly argued by petitioners, is one of the valid grounds for termination of
employment, the same, however, cannot be used as a pretext to vindicate each and every instance of
unwarranted dismissal. To be a valid ground, it must be shown that the employee concerned is responsible for
the misconduct or infraction and that the nature of his participation therein rendered him absolutely unworthy
of the trust and confidence demanded by his position. 11 In this case, petitioners were unsuccessful in
establishing their accusations of dishonesty and tampering of records with intention of cheating. Indeed, even
if petitioners allegations against de Jesus were true, they just the same failed to prove that her position needs
the continued and unceasing trust of her employers. The breach of trust must be related to the performance of
the employees functions. 12 Surely, de Jesus who occupies the position of a reviser/trimmer does not require
the petitioners perpetual and full confidence. In this regard, petitioners reliance on the cases of Ocean
Terminal Services, Inc. v. NLRC; Coca-Cola Bottlers Phil., Inc. v. NLRC; and Piedad v. Lanao del Norte
Electric Cooperative, which when perused involve positions that require the employers full trust and
confidence, is wholly misplaced. In Ocean Terminal Services, for instance, the dismissed employee was
designated as expediter and canvasser whose responsibility is mainly to make emergency procurements of
tools and equipments and was entrusted with the necessary cash for buying them. The case of Coca-Cola
Bottlers, on the other hand, involves a sales agent whose job exposes him to the everyday financial
transactions involving the employers goods and funds, while that of Piedad concerns a bill collector who
essentially handles the employers cash collections. Undoubtedly, the position of a reviser/trimmer could not
be equated with that of a canvasser, sales agent, or a bill collector. Besides, the involved employees in the
three aforementioned cases were clearly proven guilty of infractions unlike private respondent in the case at
bar. Thus, petitioners dependence on these cited cases is inaccurate, to say the least. More, whether or not
de Jesus meets the days quota of work she, just the same, is paid the daily minimum wage. 13
Corollary to our determination that de Jesus was illegally dismissed is her imperative entitlement to
reinstatement and backwages as mandated by law. 14 Whence, we move to the second issue, i.e., whether or
not an order for reinstatement needs a writ of execution.
Petitioners theory is that an order for reinstatement is not self-executory. They stress that there must be a writ
of execution which may be issued by the NLRC or by the Labor Arbiter motu proprio or on motion of an
interested party. They further maintain that even if a writ of execution was issued, a timely appeal coupled by
the posting of appropriate supersedeas bond, which they did in this case, effectively forestalled and stayed
execution of the reinstatement order of the Labor Arbiter. As supporting authority, petitioners emphatically cite
and bank on the case of Maranaw Hotel Resort Corporation (Century Park Sheraton Manila) v. NLRC , 238
SCRA 190.
Private respondent de Jesus, for her part, maintains that petitioners should have reinstated her immediately

after the decision of the Labor Arbiter ordering her reinstatement was promulgated since the law mandates
that an order for reinstatement is immediately executory. An appeal, she says, could not stay the execution of
a reinstatement order for she could either be admitted back to work or merely reinstated in the payroll without
need of a writ of execution. De Jesus argues that a writ of execution is necessary only for the enforcement of
decisions, orders, or awards which have acquired finality. In effect, de Jesus is urging the Court to re-examine
the ruling laid down in Maranaw.
Article 223 of the Labor Code, as amended by R.A. No. 6715 which took effect on March 21, 1989, pertinently
provides:
"ART. 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and executory unless
appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such
decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds: 1aw
library
x

"In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall
either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement provided herein.
x

We initially interpreted the aforequoted provision in Inciong v. NLRC . 15 The Court 16 made this brief
comment:
"The decision of the Labor Arbiter in this case was rendered on December 18, 1988, or three (3) months
before Article 223 of the Labor Code was amended by Republic Act 6715 (which became law on March 21,
1989), providing that a decision of the Labor Arbiter ordering the reinstatement of a dismissed or separated
employee shall be immediately executory insofar as the reinstatement aspect is concerned, and the posting of
an appeal bond by the employer shall not stay such execution. Since this new law contains no provision giving
it retroactive effect (Art. 4, Civil Code), the amendment may not be applied to this case." virtua1aw library
which the Court adopted and applied in Callanta v. NLRC. 17 In Zamboanga City Water District v. Buat, 18 the
Court construed Article 223 to mean exactly what it says. We said:
"Under the said provision of law, the decision of the Labor Arbiter reinstating a dismissed or separated
employee insofar as the reinstatement aspect is concerned, shall be immediately executory, even pending
appeal. The employer shall reinstate the employee concerned either by: (a) actually admitting him back to
work under the same terms and conditions prevailing prior to his dismissal or separation; or (b) at the option of
the employer, merely reinstating him in the payroll. Immediate reinstatement is mandated and is not stayed by
the fact that the employer has appealed, or has posted a cash or surety bond pending appeal. 19
We expressed a similar view a year earlier in Medina v. Consolidated Broadcasting System (CBS)-DZWX 20
and laid down the rule that an employer who fails to comply with an order of reinstatement makes him liable
for the employees salaries. Thus:
"Petitioners construe the above paragraph to mean that the refusal of the employer to reinstate an employee
as directed in an executory order of reinstatement would make it liable to pay the latters salaries. This

18

interpretation is correct. Under Article 223 of the Labor Code, as amended, an employer has two options in
order for him to comply with an order of reinstatement, which is immediately executory, even pending appeal.
Firstly, he can admit the dismissed employee back to work under the same terms and conditions prevailing
prior to his dismissal or separation or to a substantially equivalent position if the former position is already
filled up as we have ruled in Union of Supervisors (RB) NATU v. Sec. of Labor, 128 SCRA 442 [1984]; and
Pedroso v. Castro, 141 SCRA 252 [1986]. Secondly, he can reinstate the employee merely in the payroll.
Failing to exercise any of the above options, the employer can be compelled under pain of contempt, to pay
instead the salary of the employee. This interpretation is more in consonance with the constitutional protection
to labor (Section 3, Art. XIII, 1987 Constitution). The right of a person to his labor is deemed to be property
within the meaning of the constitutional guaranty that no one shall be deprived of life, liberty, and property
without due process of law. Therefore, he should be protected against any arbitrary and unjust deprivation of
his job (Bondoc v. Peoples Bank and Trust Co., Inc., 103 SCRA 599 [1981]). The employee should not be left
without any remedy in case the employer unreasonably delays reinstatement. Therefore, we hold that the
unjustified refusal of the employer to reinstate an illegally dismissed employee entitles the employee to
payment of his salaries . . ." 21chanroblesvirtuallawlibrary:red
The Court, however, deviated from this construction in the case of Maranaw. Reinterpreting the import of
Article 223 in Maranaw, the Court 22 declared that the reinstatement aspect of the Labor Arbiters decision
needs a writ of execution as it is not self-executory, a declaration the Court recently reiterated and adopted in
Archilles Manufacturing Corp. v. NLRC . 23
We note that prior to the enactment of R.A. No. 6715, Article 223 24 of the Labor Code contains no provision
dealing with the reinstatement of an illegally dismissed employee. The amendment introduced by R.A. No.
6715 is an innovation and a far departure from the old law indicating thereby the legislatures unequivocal
intent to insert a new rule that will govern the reinstatement aspect of a decision or resolution in any given
labor dispute. In fact, the law as now worded employs the phrase "shall immediately be executory" without
qualification emphasizing the need for prompt compliance. As a rule, "shall" in a statute commonly denotes an
imperative obligation and is inconsistent with the idea of discretion 25 and that the presumption is that the
word "shall", when used in a statute, is mandatory. 26 An appeal or posting of bond, by plain mandate of the
law, could not even forestall nor stay the executory nature of an order of reinstatement. The law, moreover, is
unambiguous and clear. Thus, it must be applied according to its plain and obvious meaning, according to its
express terms. In Globe-Mackay Cable and Radio Corporation v. NLRC, 27 we held that:
"Under the principles of statutory construction, if a statute is clear, plain and free from ambiguity, it must be
given its literal meaning and applied without attempted interpretation. This plain-meaning rule or verba legis
derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid
presumption that the words employed by the legislature in a statute correctly express its intent or will and
preclude the court from construing it differently. The legislature is presumed to know the meaning of the
words, to have used words advisedly, and to have expressed its intent by the use of such words as are found
in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure.
"28
And in conformity with the executory nature of the reinstatement order, Rule V, Section 16 (3) of the New
Rules of Procedure of the NLRC strictly requires the Labor Arbiter to direct the employer to immediately
reinstate the dismissed employee. Thus:
"In case the decision includes an order of reinstatement, the Labor Arbiter shall direct the employer to
immediately reinstate the dismissed or separated employee even pending appeal. The order of reinstatement
shall indicate that the employee shall either be admitted back to work under the same terms and conditions
prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the
payroll." library
In declaring that reinstatement order is not self-executory and needs a writ of execution, the Court, in
Maranaw, adverted to the rule provided under Article 224. We said:

"It must be stressed, however, that although the reinstatement aspect of the decision is immediately
executory, it does not follow that it is self-executory. There must be a writ of execution which may be issued
motu proprio or on motion of an interested party. Article 224 of the Labor Code provides: virtual 1aw library
ART. 224. Execution of decisions, orders or awards. (a) The Secretary of Labor and Employment or any
Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu
proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from
the date it becomes final and executory . . . (Emphasis supplied)
"The second paragraph of Section 1, Rule VIII of the New Rules of Procedure of the NLRC also
provides:chanrob1es virtual 1aw library
The Labor Arbiter, POEA Administrator, or the Regional Director, or his duly authorized hearing officer of
origin shall, motu proprio or on motion of any interested party, issue a writ of execution on a judgment only
within five (5) years from the date it becomes final and executory . . . No motion for execution shall be
entertained nor a writ be issued unless the Labor Arbiter is in possession of the records of the case which
shall include an entry of judgment. (Emphasis supplied)
x

"In the absence then of an order for the issuance of a writ of execution on the reinstatement aspect of the
decision of the Labor Arbiter, the petitioner was under no legal obligation to admit back to work the private
respondent under the terms and conditions prevailing prior to her dismissal or, at the petitioners option, to
merely reinstate her in the payroll. An option is a right of election to exercise a privilege, and the option in
Article 223 of the Labor Code is exclusively granted to the employer. The event that gives rise for its exercise
is not the reinstatement decree of a Labor Arbiter, but the writ for its execution commanding the employer to
reinstate the employee, while the final act which compels the employer to exercise the option is the service
upon it of the writ of execution when, instead of admitting the employee back to his work, the employer
chooses to reinstate the employee in the payroll only. If the employer does not exercise this option, it must
forthwith admit the employee back to work, otherwise it may be punished for contempt." 29
A closer examination, however, shows that the necessity for a writ of execution under Article 224 applies only
to final and executory decisions which are not within the coverage of Article 223. For comparison, we quote
the material portions of the subject articles:
"ART. 223. Appeal. . . .
"In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall
either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or
separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement provided herein.
x

"ART. 224. Execution of decisions, orders, or awards. (a) The Secretary of Labor and Employment or any
Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu
propio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from
the date it becomes final and executory, requiring a sheriff or a duly deputized officer to execute or enforce
final decisions, orders or awards of the Secretary of Labor and Employment or regional director, the
Commission, the Labor Arbiter or med-arbiter, or voluntary arbitrators. In any case, it shall be the duty of the

19

responsible officer to separately furnish immediately the counsels of record and the parties with copies of said
decisions, orders or awards. Failure to comply with the duty prescribed herein shall subject such responsible
officer to appropriate administrative sanctions." virtua1aw library
Article 224 states that the need for a writ of execution applies only within five (5) years from the date a
decision, an order or award becomes final and executory. It can not relate to an award or order of
reinstatement still to be appealed or pending appeal which Article 223 contemplates. The provision of Article
223 is clear that an award for reinstatement shall be immediately executory even pending appeal and the
posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite
obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal. To require
the application for and issuance of a writ of execution as prerequisites for the execution of a reinstatement
award would certainly betray and run counter to the very object and intent of Article 223, i.e., the immediate
execution of a reinstatement order. The reason is simple. An application for a writ of execution and its
issuance could be delayed for numerous reasons. A mere continuance or postponement of a scheduled
hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223.
In other words, if the requirements of Article 224 were to govern, as we so declared in Maranaw, then the
executory nature of a reinstatement order or award contemplated by Article 223 will be unduly circumscribed
and rendered ineffectual. In enacting the law, the legislature is presumed to have ordained a valid and
sensible law, one which operates no further than may be necessary to achieve its specific purpose. Statutes,
as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be remedied. 30
And where the statute is fairly susceptible of two or more constructions, that construction should be adopted
which will most tend to give effect to the manifest intent of the lawmaker and promote the object for which the
statute was enacted, and a construction should be rejected which would tend to render abortive other
provisions of the statute and to defeat the object which the legislator sought to attain by its enactment. 31 In
introducing a new rule on the reinstatement aspect of a labor decision under R A. No. 6715, Congress should
not be considered to be indulging in mere semantic exercise. On appeal, however, the appellate tribunal
concerned may enjoin or suspend the reinstatement order in the exercise of its sound discretion.
Furthermore, the rule is that all doubts in the interpretation and implementation of labor laws should be
resolved in favor of labor. 32 In ruling that an order or award for reinstatement does not require a writ of
execution the Court is simply adhering and giving meaning to this rule. Henceforth, we rule that an award or
order for reinstatement is self-executory. After receipt of the decision or resolution ordering the employees
reinstatement, the employer has the right to choose whether to re-admit the employee to work under the same
terms and conditions prevailing prior to his dismissal or to reinstate the employee in the payroll. In either
instance, the employer has to inform the employee of his choice. The notification is based on practical
considerations for without notice, the employee has no way of knowing if he has to report for work or not.
WHEREFORE, the petition is DENIED and the decision of the Labor Arbiter is hereby REINSTATED.

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. (ICTSI), through this special civil action
forcertiorari, prays for the modification of the Decision of the National Labor Relations Commission dated 23
September 1993 by deleting therefrom that portion which orders it to pay private respondent Gabriel
Tanpiengco his wages from 25 January 1991 up to the promulgation of the Decision despite his valid
dismissal for cause.
Petitioner ICTSI is a corporation engaged in stevedoring. It operates the Manila International Container
Terminal (MICT) under a management contract with the Philippine Ports Authority. On 12 July 1988 it
employed private respondent Tanpiengco as a CFS Priority pursuant to a collective bargaining agreement with
private respondents labor union, the Associated Ports Checkers Services and Workers Union (APCSWU).
Tanpiengco has since then become a regular employee assigned either to a shipping line or bodega to strip
and examine cargoes from abroad with usual working schedule from 8:00 a.m. to 5:00 p.m. although in actual
practice cleaning time would start at 4:30 p.m.
On 7 March 1990 Tanpiengco was assigned at Bodega I. When it was time for him to clean himself he took his
T-shirt which was hanging from a post, tucked it at his waist and proceeded to the washroom. He was
accosted by a security guard allegedly for behaving suspiciously. Tanpiengco was haled to the comfort room
and frisked but nothing of value was found in his person. Nonetheless he was taken to the security office for
further questioning; he was accused of taking a T-shirt marked "Gesim Corp." from one of the balikbayan
boxes inside the container yard.
On 21 March 1990 Tanpiengco was referred to petitioners personnel department for investigation. According
to petitioner, he admitted to the investigating officer that he took the "Gesim Corp." T-shirt valued at P100.00,
but Tanpiengco insisted on his innocence claiming that he was coerced at knifepoint into admitting the theft.
On 30 April 1990, after a brief suspension, Tanpiengco was dismissed for pilferage which petitioner
considered as breach of trust, dishonesty and theft of property.
Tanpiengco sued the stevedoring firm for illegal dismissal, reinstatement and backwages. The Labor Arbiter, in
his decision of 3 December 1990, found the dismissal to be totally unjustified as neither theft nor pilferage was
committed by Tanpiengco. The Labor Arbiter gave credence to Tanpiengcos allegation that the T-shirt he was
accused of stealing actually belonged to him, having bought the same from one Maxima Icabandi, a
businesswoman. Accordingly, petitioner was ordered to reinstate Tanpiengco with full back wages in the total
amount of P91,078.00 from 2 July 1988 to 30 November 1990, with temporary adjustments as the need would
arise until his actual reinstatement. 1
On appeal, the National Labor Relations Commission reversed the decision of the Labor Arbiter and
dismissed the complaint of Tanpiengco, in effect holding that his termination was legal, but ordered petitioner
to pay him his wages from 25 January 1991 (date of filing of appeal with the NLRC) up to 23 September 1993
(promulgation of NLRC decision) pursuant to Art. 223 of the Labor Code. 2 Both parties moved for
reconsideration but were denied on 6 April 1994. 3

Costs against petitioner.

SO ORDERED.
x

[G.R. No. 115452. December 21, 1998.]

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., Petitioner, v. NATIONAL LABOR
RELATIONS COMMISSION Respondents.

Petitioner now contends that the NLRC committed grave abuse of discretion when it awarded back wages to
Tanpiengco from 25 January 1991 to 23 September 1993. Petitioner claims that the monetary award to
Tanpiengco who was subsequently found to have been validly and legally terminated is "absolutely
unwarranted and patently erroneous and unjustifiable." 4 While it is true that under the law the employer found
to have illegally dismissed an employee is required to reinstate the employee either actually or through payroll
at the employers option, this requirement according to petitioner needs execution or enforcement by the
employee in coordination with the labor department. In the instant case, Tanpiengco never pursued the
execution of the decision of the Labor Arbiter despite the fact that petitioner was perfectly willing to actually
recall him during the pendency of the appeal to NLRC. No writ of execution was ever issued by the Labor
Arbiter; neither was there any sheriffs return. Thus, by his own inaction or lethargy, Tanpiengco prevented
petitioner from actually reinstating him. There is therefore no reason to award him back wages for a failed
reinstatement. 5

20

While we are not in full accord with the finding of the NLRC that Tanpiengco was validly dismissed for cause,
he appears to have accepted the legality of his dismissal as he did not appeal therefrom. He now focuses his
attention on collecting his back wages corresponding to the period when his case was pending appeal before
the NLRC and in his Comment accuses petitioner of "delay(ing) the execution of the Orders and Decisions of
the National Labor Relations Commission dated September 23, 1993 and April 6, 1994." Tanpiengco stresses
that he did not waive his reinstatement. In fact he promptly filed on 27 February 1991 a motion for writ of
execution with the NLRC but the Labor Tribunal failed to act on it. As a result, petitioner cannot fault him for
NLRCs inaction.
Private respondent Tanpiengco is correct. In its En Banc decision in Pioneer Texturizing Corporation v. NLRC ,
6 the Court veered away from Maranaw Hotel Corporation (Century Park Sheraton Manila) v. NLRC ,7 cited in
the succeeding cases of Archilles Manufacturing Corporation v. NLRC ,8 and Purification Ram v. NLRC ,9
holding that although the reinstatement aspect of the Labor Arbiters decision was immediately executory, it
did not follow that it was self-executory. There must be a writ of execution which may be issued motu proprio
or on motion of the interested party pursuant to Art. 224 of the Labor Code. However under the Pioneer case,
now the law of the case, the reinstatement order is already considered self-executory.
Art. 223 of the Labor Code, as amended by RA No. 6715 which took effect on 21 March 1989, provides: 1aw
library
Art. 223. Appeal. Decisions, awards or orders of the Labor Arbiter are final and executory unless appealed
to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions,
awards, or orders. Such appeal may be entertained only on any of the following grounds: . . . In any event, the
decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or,
at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not
stay the execution for reinstatemet provided herein . . .
On the other hand, Art. 224 provides: 1aw library
Art. 224. Execution of decisions, orders, or awards. (a) The Secretary of Labor and Employment or any
Regional Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu
proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from
the date it becomes final and executory, requiring a sheriff or a duly deputized officer to execute or enforce
final decisions, orders or awards of the Secretary of Labor and Employment or regional director, the
Commission, the Labor Arbiter or med-arbiter, or voluntary arbitrators. In any case, it shall be the duty of the
responsible officer to separately furnish immediately the counsels of record and the parties with copies of said
decisions, orders or awards. Failure to comply with the duty prescribed herein shall subject such responsible
officer to appropriate administrative sanctions.
To be sure, the Court has not been consistent in its interpretation of Art. 223. The nagging issue has always
been whether the reinstatement order is self-executory. Citing the divergent views of the Court beginning with
Inciong v. NLRC 10 followed by the deviation in interpretation in Maranaw Hotel Corporation (Century Park
Sheraton Manila) v. NLRC , as reiterated and adopted in Archilles Manufacturing Corporation v. NLRC and
Purificacion Ram v. NLRC , the Court in the 1997 Pioneer case has laid down the doctrine that henceforth an
order or award for reinstatement is self-executory, meaning that it does not require a writ of execution, much
less a motion for its issuance, as maintained by petitioner. It proceeded to explain that Art. 224, adverted to in
Maranaw as the basis for the need for a writ of execution, applies only to final and executory decisions which
are not within the coverage of Art. 223. It further expounded on the objective of Art. 223 as envisioned by our
lawmakers. Thus:

be appealed or pending appeal which Art. 223 contemplates. The provision of Art. 223 is clear that an award
for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the
employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an
award of reinstatement immediately enforceable, even pending appeal. To require the application for an
issuance of a writ of execution as prerequisites for the execution of a reinstatement award would certainly
betray and run counter to the very object and intent of Art. 223, i.e., the immediate execution of a
reinstatement order. The reason is simple. An application for a writ of execution and its issuance could be
delayed for numerous reasons. A mere continuance or postponement of a scheduled hearing, for instance, or
an inaction on the part of the Labor Arbiter or the NLRC could easily delay the issuance of a writ thereby
setting at naught the strict mandate and noble purpose envisioned by Art. 223. In other words, if the
requirements of Art. 224 were to govern, as we so declared in Maranaw, then the executory nature of a
reinstatement order or order contemplated by Art. 223 will be unduly circumscribed and rendered ineffectual.
In enacting the law, the legislature is presumed to have ordained a valid and sensible law, one which operates
no further than may be necessary to achieve a specific purpose . . . In introducing a new rule on the
reinstatement aspect of a labor decision under R. A. No. 6715, Congress should not be considered to be
indulging in mere semantic exercise. On appeal, however, the appellate tribunal concerned may enjoin or
suspend the reinstatement order in the exercise of its sound discretion.
Furthermore, the rule is that all doubts in the interpretation and implementation of labor laws should be
resolved in favor of labor. In ruling that an order or award for reinstatement does not require a writ of
execution the Court is simply adhering and giving meaning to this rule. Henceforth, we rule that an award or
order for reinstatement is self-executory. After receipt of the decision or resolution ordering the employees
reinstatement, the employer has the right to choose whether to re-admit the employee to work under the same
terms and conditions prevailing prior to his dismissal or to reinstate the employee in the payroll. In either
instance, the employer has to inform the employee of his choice. The notification is based on practical
considerations for without notice, the employee has no way of knowing if he has to report for work or not. 11
Thus, in the light of the Pioneer ruling, we hold that the NLRC did not commit grave abuse of discretion in
ordering petitioner to pay Tanpiengco his wages from 25 January 1991 when he appealed to the NLRC, up to
23 September 1993 when the NLRC decision finding his dismissal valid was promulgated. That portion of the
decision, which is the sole issue in this petition, should stand. Under Art. 223 as presently construed, the
reinstatement aspect of the Labor Arbiters decision, albeit under appeal, was immediately enforceable as a
consequence of which, Petitioner, as the employer, was duty-bound to choose forthwith whether to re-admit
Tanpiengco or to reinstate him in the payroll and to inform Tanpiengco of its choice to enable the latter to act
accordingly. Failing to exercise the options in the alternative, petitioner must pay the salary of Tanpiengco
which automatically accrued from notice of the Labor Arbiters order of reinstatement until its ultimate reversal
by the NLRC.
A final word. In the instant case, for some inexplicable reason, the NLRC failed to act on Tanpiengcos motion
for the issuance of a writ to execute the Labor Arbiters reinstatement order. It did not even mention the fact of
its filing in its assailed Decision. While this may no longer adversely affect the cause of the dismissed
employee under the Pioneer case, the Court cannot let this pass. The Commissions inaction is a serious
oversight for which it should be admonished. While it is incumbent upon the party to take an active role in his
case and not adopt a wait-and-see attitude, the adjudicating body has the corresponding obligation to act
promptly on all incidents brought before it.
WHEREFORE, the instant petition praying for the modification of the Decision of the National Labor Relations
Commission dated 23 September 1993 to delete therefrom that portion which orders petitioner International
Container Terminal Services, Inc., to pay private respondent Gabriel Tanpiengco his wages from 25 January
1991 up to 23 September 1993 is DENIED. The Decision of the NLRC directing petitioner to pay private
respondent Gabriel Tanpiengco his wages from 25 January 1991 to 23 September 1993 is SUSTAINED. No
costs.

Art. 224 states that the need for a writ of execution applies only within five (5) years from the date a decision,

21

SO ORDERED.
x

G.R. No. 88957. June 25, 1992.]

PHILIPS INDUSTRIAL DEVELOPMENT, INC., Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION Respondents.

1. LABOR AND SOCIAL LEGISLATION; LABOR ORGANIZATION; COVERAGE; SECURITY PERSONNEL

ELIGIBLE FOR MEMBERSHIP THEREOF. At the time Case No. NLRC-NCR-00-11-03936-87 was filed in
1987, security personnel were no longer disqualified from joining or forming a union. Section 6 of E.O No. 111,
enacted on 24 December 1986, repealed the original provisions of Article 245 of the Labor Code, reading as
follows: "ARTICLE 245. Ineligibility of security personnel to join any labor organization. Security guards and
other personnel employed for the protection and security of the person, properties and premises of the
employer shall not be eligible for membership in any labor organization." and substituted it with the following
provision: "ARTICLE 245. Right of employees in the public service. ." . . By virtue of such repeal and
substitution, security guards became eligible for membership in any labor organization. Manila Electric Co. v.
Secretary of Labor and Employment. (197 SCRA 275 [1991]).
2. ID.; ID.; ID.; CONFIDENTIAL EMPLOYEES; NOT INCLUDED THEREIN. Respondent NLRC committed
grave abuse of discretion in reversing the decision of the Executive Labor Arbiter and in decreeing that PIDIs
"Service Engineers, Sales Force, division secretaries, all Staff of General Management, Personnel and
Industrial Relations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank
and file bargaining unit." all these employees, with the exception of the service engineers and the sales force
personnel, are confidential employees. Their classification as such is not seriously disputed by PEO-FFW; the
five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them as confidential employees. By
the very nature of their functions, they assist and act in a confidential capacity to, or have access to
confidential matters of, persons who exercise managerial functions in the field of labor relations. As such, the
rationale behind the ineligibility of managerial employees to form, assist or join a labor union equally applies to
them. In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated on this rationale, thus:
". . . The rationale for this inhibition has been stated to be, because if these managerial employees would
belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of
evident conflict of interests. The Union can also become company-dominated with the presence of managerial
employees in Union membership." In Golden Farms, Inc. v. Ferrer-Calleja, this Court explicitly made this
rationale applicable to confidential employees.
3. CONSTITUTIONAL LAW; BILL OF RIGHTS; RIGHT TO SELF-ORGANIZATION; VIOLATED WHEN NLRC
HELD THAT SERVICE ENGINEERS AND SALES REPRESENTATIVES INCLUDED IN BARGAINING UNIT
FOR RANK AND FILE EMPLOYEES. As regards the service engineers and the sales representatives, in
holding that they are included in the bargaining unit for the rank and file employees of PIDI, the NLRC
practically forced them to become members of PEO-FFW or to be subject to its sphere of influence, it being
the certified bargaining agent for the subject bargaining unit. This violates, obstructs, impairs and impedes the
service engineers and the sales representatives constitutional right to form unions or associations and to selforganization. In Victoriano v. Elizalde Rope Workers Union, this Court already ruled: ". . . an employee may,
as he pleases, join or refrain from joining an association. It is, therefore, the employee who should decide for
himself whether he should join or not an association; and should he choose to join, he himself makes up his
mind as to which association he would join; and even after he has joined, he still retains the liberty and the
power to leave and cancel his membership with said organization at any, time. It is clear, therefore, that the
right to join a union includes the right to abstain from joining any union. Inasmuch as what both the
Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is the right to
join associations of his choice, it would be absurd to say that the law also imposes, in the same breath, upon

the employee the duty to join associations. The law does not enjoin an employee to sign up with any
association." The decision then of the Executive Labor Arbiter in merely directing the holding of a referendum
"to determine the will of the service engineers, sales representatives as to their inclusion or exclusion in (sic)
the bargaining unit" is the most appropriate procedure that conforms with their right to form, assist or join a
labor union or organization.
4. LABOR AND SOCIAL LEGISLATION; LABOR ORGANIZATION; COVERAGE; SUPERVISORY
EMPLOYEES; RULE. It must be stressed that service engineers and sales representatives holding
supervisory positions or functions are concerned, take into account the present Article 245 of the Labor Code
which, as amended by R.A. No. 6715, now reads: "ARTICLE 245. Ineligibility of managerial employees to join
any labor organization; right of supervisory employees. Managerial employees are not eligible to join, assist
or form any labor organization. Supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form separate labor organizations of their
own." virtua1aw library
5. ID.; ID.; GLOBE DOCTRINE; NOT APPLICABLE IN CASE AT BAR. Since the only issue is the subject
employees inclusion in or exclusion from the bargaining unit in question, and PIDI never questioned the
decision of the Executive Labor Arbiter, the Globe Doctrine finds no application. Besides, this doctrine applies
only in instances of evenly balanced claims by competitive groups for the right to be established as the
bargaining unit, which do not obtain in this case.
DECISION
In this petition for certiorari and prohibition under Rule 65 of the Rules of Court with a prayer for a temporary
restraining order and/or a writ of preliminary injunction, petitioner Philips Industrial Development, Inc. (PIDI)
seeks to set aside the Decision and Resolution, dated 16 January 1989 and 17 March 1989, respectively, of
the National Labor Relations Commission (NLRC) in Case No. NLRC-NCR-00-11-03936-87 on the ground
that it committed grave abuse of discretion amounting to lack of jurisdiction in holding that service engineers,
sales representatives and confidential employees of PIDI are qualified to be included in the existing
bargaining unit.
PIDI is a domestic corporation engaged in the manufacturing and marketing of electronic products. Since
1971, it had a total of six (6) collective bargaining agreements (CBAs) with private respondent Philips
Employees Organization-FFW (PEO-FFW), registered labor union and the certified bargaining agent of all the
rank and file employees of PIDI. In the first CBA (1971-1974), the supervisors referred to in R.A. No. 875,
confidential employees, security guards, temporary employees and sales representatives were excluded from
the bargaining unit. In the second to the fifth CBAs (1975-1977; 1978-1980; 1981-1983; and 1984-1986), the
sales force, confidential employees and heads of small units, together with the managerial employees,
temporary employees and security personnel, were specifically excluded from the bargaining unit. 1 The
confidential employees are the division secretaries of light/telecom/data and consumer electronics, marketing
managers, secretaries of the corporate planning and business manager, fiscal and financial system manager
and audit and EDP manager, and the staff of both the General Management and the Personnel Department.
2
In the sixth CBA covering the years 1987 to 1989, it was agreed upon, among others, that the subject of
inclusion or exclusion of service engineers, sales personnel and confidential employees in the coverage of the
bargaining unit would be submitted for arbitration. Pursuant thereto, on June 1987, PEO-FFW filed a petition
before the Bureau of Labor Relations (BLR) praying for an order "directing the parties to select a voluntary
arbitrator in accordance with its rules and regulations." virtual law library
As the parties failed to agree on a voluntary arbitrator, the BLR endorsed the petition to the Executive Labor

22

Arbiter of the National Capital Region for compulsory arbitration pursuant to Article 228 of the Labor Code.
Docketed as Case No. NLRC-NCR-00-11-03936-87, the case was assigned to Executive Labor Arbiter Arthur
Amansec.
On 17 March 1988, Labor Arbiter Amansec rendered a decision, the dispositive portion of which states:

THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN

HOLDING THAT SERVICE ENGINEERS, SALES REPRESENTATIVES AND CONFIDENTIAL EMPLOYEES
OF PETITIONER ARE QUALIFIED TO BE PART OF THE EXISTING BARGAINING UNIT.

"In view of the foregoing, a decision is hereby rendered, ordering the respondent to conduct a referendum to
determine the will of the service engineers, sales representatives as to their inclusion or exclusion in the
bargaining unit.
It is hereby declared that the Division Secretaries and all Staff of general management, personnel and
industrial relations department, secretaries of audit, EDP, financial system are confidential employees and as
such are hereby deemed excluded in the bargaining unit.
SO ORDERED."
PEO-FFW appealed from the decision to the NLRC.
On 16 January 1989, the NLRC rendered the questioned decision, the dispositive portion of which reads:
"WHEREFORE, the foregoing premises considered, the appealed decision of the Executive Labor Arbiter is
hereby SET ASIDE and a new one entered declaring respondent companys Service Engineers, Sales Force,
division secretaries, all Staff of General Management, Personnel and Industrial Relations Department,
Secretaries of Audit, EDP and Financial Systems are included within the rank and file bargaining unit.
SO ORDERED." virtua1aw library
The reversal is anchored on the respondent NLRCs conclusion that based on Section 1, 3 Rule II, Book V of
the Omnibus Rules Implementing the Labor Code, as amended by Section 3, Implementing Rules of E.O. No.
111; paragraph (c), Section 2, Rule V of the same Code, as amended by Section 6 4 of the Implementing
Rules of E.O. No. 111; and Article 245 5 of the Labor Code, as amended:
". . . all workers, except managerial employees and security personnel, are qualified to join or be a part of the
bargaining unit . . ." It further ruled that:
"The Executive Labor Arbiters directive that the service engineers and sales representatives to (sic) conduct
a referendum among themselves is erroneous inasmuch as it arrogates unto said employees the right to
define what the law means. It would not be amiss to state at this point that there would be no one more
interested in excluding the subject employees from the bargaining unit than management and that it would not
be improbable for the latter to lobby and/or exert pressure on the employees concerned, thus agitating unrest
among the rank-and-file. Likewise, the Executive Labor Arbiters declaration that the Division Secretaries and
all Staff of general management, personnel and industrial relations department, secretaries of audit, EDP and
financial system are confidential employees and as such are hereby deemed excluded in (sic) the bargaining
unit is contrary to law for the simple reason that the law, as earlier quoted, does not mention them as among
those to be excluded from the bargaining unit only (sic) managerial employees and security guards. As a
matter of fact, supervisory unions have already been dissolved and their members who do not fall within the
definition of managerial employees have become eligible to join or assist the rank-and-file organization." 6
Its motion for the reconsideration of this decision having been denied by the NLRC in its Resolution of 16
March 1989, a copy of which it received on 8 June 1989, petitioner PIDI filed the instant petition on 20 July
1989, alleging that:

II
THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
NOT APPLYING THE TIME HONORED GLOBE DOCTRINE." 7
On 31 July 1989, this Court required the respondents to comment on the petition, which PEO-FFW complied
with on 28 August 1989. Public respondent NLRC, thru its counsel, the Solicitor General, moved for, and was
granted a 30-day extension to file its Comment.
On 18 September 1989, this Court required the parties to show cause why the petition should not be
dismissed in view of the finality of the NLRC decision as provided for by the penultimate sentence of Article
223 of the Labor Code, as amended by R.A. No. 6715. R.A. No. 6715, which amended Article 223 of the
Labor Code, was enacted on 2 March 1989 and took effect on 21 March 1989. The parties subsequently
complied with the Resolution.
On 16 May 1990, this Court required the parties to submit Memoranda explaining the effect in this case of
Article 223 of the Labor Code, as amended by Section 12 of R.A. No. 6715 with respect to the finality of
decisions of the NLRC. The parties complied separately with the same.
On 10 September 1990, this Court gave due course to the petition and required the parties to submit their
respective Memoranda. The petitioner and the Office of the Solicitor General filed their separate Memoranda.
On the other hand, PEO-FFW moved that its motion and manifestation dated 23 August 1989 be considered
as its Memorandum; this Court granted the same.
As stated earlier, the principal issue in this case is whether the NLRC committed grave abuse of discretion in
holding that service engineers, sales representatives and confidential employees (division secretaries, staff of
general management, personnel and industrial relations department, secretaries of audit, EDP and financial
system) are qualified to be included in the existing bargaining unit. Petitioner maintains that it did, and in
support of its stand that said employees should not be absorbed by the existing bargaining unit, it urges this
Court to consider these points:chanrob1es virtual 1aw library
1) The inclusion of the group in the existing bargaining unit would run counter to the history of the parties
CBA. The parties five (5) previous CBAs consistently excluded this group of employees from the scope of the
bargaining unit. The rationale for such exclusion is that these employees hold positions which are highly
sensitive, confidential and of a highly fiduciary nature; to include them in the bargaining unit may subject the
company to breaches in security and the possible revelation of highly sensitive and confidential matters. It
would cripple the companys bargaining position and would give undue advantage to the union.
2) The absence of mutuality of interests between this group of employees and the regular rank and file
militates against such inclusion. A table prepared by the petitioner shows the disparity of interests between the
said groups: 1aw library
SERVICE ENGINEERS SERVICE SALES REPRESENTATIVES TECHNICIANS
(Non-Bargaining

"I

23

(Bargaining
Kilometer allowance
AREAS OF INTEREST Unit Employees) Unit Employees)
Qualifications Professional Employees High School/
Vocational
Grads.
Work Schedule With Night Shift None
Schedule
Night Shift 10% of Basic Rate None
Differential Pay
Stand-By Call & On Stand-By Call with: None
Allowance First Line: 15% of

The Office of the Solicitor General supports the decision of the Executive Labor Arbiter and refuses to uphold
the position of the NLRC. It holds the view that the division secretaries; the staff members of General
Management, Personnel and the Industrial Relations Department; and the secretaries of Audit, EDP and
Financial Systems, are disqualified from joining the PEO-FFW as they are confidential employees. They
cannot even form a union of their own for, as held in Golden Farms, Inc. v. Ferrer-Calleja, 8 the rationale for
the disqualification of managerial employees from joining unions holds true also for confidential employees. As
regards the sales representatives and service engineers, however, there is no doubt that they are entitled to
join or form a union, as they are not disqualified by law from doing so. Considering that they have interests
dissimilar to those of the rank and file employees comprising the existing bargaining unit, and following the
Globe Doctrine enunciated in In Re: Globe Machine and Stamping Company 9 to the effect that in determining
the proper bargaining unit the express will or desire of the employees shall be considered, they should be
allowed to determine for themselves what union to join or form. The best way to determine their preference is
through a referendum As shown by the records, such a referendum was decreed by the Executive Labor
Arbiter. The petition is impressed with merit.
At the outset, We express Our agreement with the petitioners view that respondent NLRC did not quite
accurately comprehend the issue raised before it. Indeed, the issue is not whether the subject employees may
join or form a union, but rather, whether or not they may be part of the existing bargaining unit for the rank and
file employees of PIDI.

basic rate
Second Line: 10% of
basic rate
Uniforms None 2 sets of polo
& pants every

Even if the issue was, indeed, as perceived by the NLRC, still, a palpable error was committed by it in ruling
that under the law, all workers, except managerial employees and security personnel, are qualified to join a
union, or form part of a bargaining unit. At the time Case No. NLRC-NCR-00-11-03936-87 was filed in 1987,
security personnel were no longer disqualified from joining or forming a union. Section 6 of E.O No. 111,
enacted on 24 December 1986, repealed the original provisions of Article 245 of the Labor Code, reading as
follows:

6 months

"ARTICLE 245. Ineligibility of security personnel to join any labor organization. Security guards and other
personnel employed for the protection and security of the person, properties and premises of the employer
shall not be eligible for membership in any labor organization." and substituted it with the following provision:

Retirement Benefits 15 yrs. ser. 70% 15 yrs serv. 50%

"ARTICLE 245. Right of employees in the public service. " 10

16 75% 16 85%

17 80% 17 90%
18 85% 18 100%
19 90% 19 115%
20 100% 20 135%
Year End Performance Merit Increase System None
Evaluation
Sales Commission Yes None
Car Loan Yes None

By virtue of such repeal and substitution, security guards became eligible for membership in any labor
organization. 11
On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave abuse of
discretion in reversing the decision of the Executive Labor Arbiter and in decreeing that PIDIs "Service
Engineers, Sales Force, division secretaries, all Staff of General Management, Personnel and Industrial
Relations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank and file
bargaining unit." library
In the first place, all these employees, with the exception of the service engineers and the sales force
personnel, are confidential employees. Their classification as such is not seriously disputed by PEO-FFW; the
five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them as confidential employees. By
the very nature of their functions, they assist and act in a confidential capacity to, or have access to
confidential matters of, persons who exercise managerial functions in the field of labor relations. 12 As such,

24

the rationale behind the ineligibility of managerial employees to form, assist or join a labor union equally
applies to them.
In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, 13 this Court elaborated on this rationale, thus:
". . . The rationale for this inhibition has been stated to be, because if these managerial employees would
belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of
evident conflict of interests. The Union can also become company-dominated with the presence of managerial
employees in Union membership." library
In Golden Farms, Inc. v. Ferrer-Calleja, 14 this Court explicitly made this rationale applicable to confidential
employees:
"This rationale holds true also for confidential employees such as accounting personnel, radio and telegraph
operators, who having access to confidential information, may become the source of undue advantage. Said
employee(s) may act as a spy or spies of either party to a collective bargaining agreement. This is specially
true in the present case where the petitioning Union is already the bargaining agent of the rank-and-file
employees in the establishment. To allow the confidential employees to join the existing Union of the rankand-file would be in violation of the terms of the Collective Bargaining Agreement wherein this kind of
employees by the nature of their functions/positions are expressly excluded. virtua1aw library
As regards the service engineers and the sales representatives, two (2) points which respondent NLRC
likewise arbitrarily and erroneously ruled upon, need to be discussed. Firstly, in holding that they are included
in the bargaining unit for the rank and file employees of PIDI, the NLRC practically forced them to become
members of PEO-FFW or to be subject to its sphere of influence, it being the certified bargaining agent for the
subject bargaining unit. This violates, obstructs, impairs and impedes the service engineers and the sales
representatives constitutional right to form unions or associations 15 and to self-organization. 16 In Victoriano
v. Elizalde Rope Workers Union, 17 this Court already ruled:
". . . Notwithstanding the different theories propounded by the different schools of jurisprudence regarding the
nature and contents of a right, it can be safely said that whatever theory one subscribes to, a right
comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint,
whereby an employee may act for himself without being prevented by law; and second, power, whereby an
employee may, as he pleases, join or refrain from joining an association. It is, therefore, the employee who
should decide for himself whether he should join or not an association; and should he choose to join, he
himself makes up his mind as to which association he would join; and even after he has joined, he still retains
the liberty and the power to leave and cancel his membership with said organization at any, time. 18 It is clear,
therefore, that the right to join a union includes the right to abstain from joining any union. 19 Inasmuch as
what both the Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is
the right to join associations of his choice, it would be absurd to say that the law also imposes, in the same
breath, upon the employee the duty to join associations. The law does not enjoin an employee to sign up with
any association." library
The decision then of the Executive Labor Arbiter in merely directing the holding of a referendum "to determine
the will of the service engineers, sales representatives as to their inclusion or exclusion in (sic) the bargaining
unit" is the most appropriate procedure that conforms with their right to form, assist or join a labor union or
organization. However, since this decision was rendered before the effectivity of R.A. No. 6715, it must now
be stressed that its future application to the private parties in this case should, insofar as service engineers
and sales representatives holding supervisory positions or functions are concerned, take into account the
present Article 245 20 of the Labor Code which, as amended by R.A. No. 6715, now reads:
"ARTICLE 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees. Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file

The foregoing disquisitions render unnecessary a discussion on the second ground on the alleged grave
abuse of discretion on the part of the NLRC in not applying the "Globe Doctrine." Suffice it to state here that
since the only issue is the subject employees inclusion in or exclusion from the bargaining unit in question,
and PIDI never questioned the decision of the Executive Labor Arbiter, the Globe Doctrine finds no
application. Besides, this doctrine applies only in instances of evenly balanced claims by competitive groups
for the right to be established as the bargaining unit, 21 which do not obtain in this case
WHEREFORE, the petition is hereby GRANTED. The Decision of public respondent National Labor Relations
Commission in Case No. NLRC-NCR-00-11-03936-87, promulgated on 16 January 1989, is hereby SET
ASIDE while the Decision of the Executive Labor Arbiter in said case dated 17 March 1988 is hereby
REINSTATED, subject to the modifications above indicated.
Costs against private Respondent.
SO ORDERED.
x

[G.R. No. 91902. May 20, 1991.]

MANILA ELECTRIC COMPANY, Petitioner, v. THE HON. SECRETARY OF LABOR AND
EMPLOYMENTRespondents.

This petition seeks to review the Resolution of respondent Secretary of Labor and Employment Franklin M.
Drilon dated November 3, 1989 which affirmed an Order of Med-Arbiter Renato P. Parungo (Case No. NCRO-D-M-1-70), directing the holding of a certification election among certain employees of petitioner Manila
Electric Company (hereafter "MERALCO") as well as the Order dated January 16, 1990 which denied the
Motion for Reconsideration of MERALCO.
The facts are as follows:chanrob1es virtual 1aw library
On November 22, 1988, the Staff and Technical Employees Association of MERALCO (hereafter "STEAMPCWF") a labor organization of staff and technical employees of MERALCO, filed a petition for certification
election, seeking to represent regular employees of MERALCO who are: (a) non-managerial employees with
Pay Grades VII and above; (b) non-managerial employees in the Patrol Division, Treasury Security Services
Section, Secretaries who are automatically removed from the bargaining unit; and (c) employees within the
rank and file unit who are automatically disqualified from becoming union members of any organization within
the same bargaining unit.
Among others, the petition alleged that "while there exists a duly-organized union for rank and file employees
in Pay Grade I-VI, which is the MERALCO Employees and Workers Association (MEWA) which holds a valid
CBA for the rank and file employees 1 , there is no other labor organization except STEAM-PCWF claiming to
represent the MERALCO employees.
The petition was premised on the exclusion/disqualification of certain MERALCO employees pursuant to Art. I,
Secs. 2 and 3 of the existing MEWA CBA as follows:
"ARTICLE I
SCOPE

25

SECTION 2. Excluded from the appropriate bargaining unit and therefore outside the scope of this Agreement
are:chanrob1es virtual 1aw library

assisting the rank-and-file union; 3) secretaries who do not consent to the petitioners representation and
whom petitioner can not represent; and 4) rank-and-file employees represented by the certified or duly
recognized bargaining representative of the only rank-and-file bargaining unit in the company, the Meralco
Employees Workers Association (MEWA), in accordance with the existing Collective Bargaining Agreement
with the latter.

(a) Employees in Patrol Division;

II

(b) Employees in Treasury Security Services Section;

The petition for certification election will disturb the administration of the existing Collective Bargaining
Agreement in violation of Art. 232 of the Labor Code.

(c) Managerial Employees; and

(d) Secretaries.

III

Any member of the Union who may now or hereafter be assigned or transferred to Patrol Division or Treasury
Security Services Section, or becomes Managerial Employee or a Secretary, shall be considered
automatically removed from the bargaining unit and excluded from the coverage of this agreement. He shall
thereby likewise be deemed automatically to have ceased to be member of the union, and shall desist from
further engaging in union activity of any kind.
SECTION 3. Regular rank-and-file employees in the organization elements herein below listed shall be
covered within the bargaining unit, but shall be automatically disqualified from becoming union members: 1aw
library
1. Office of the Corporate Secretary

The petition itself shows that it is not supported by the written consent of at least twenty percent (20%) of the
alleged 2,500 employees sought to be represented. (Resolution, Sec. of Labor, pp. 223-224, Rollo)
Before Med-Arbiter R. Parungo, MERALCO contended that employees from Pay Grades VII and above are
classified as managerial employees who, under the law, are prohibited from forming, joining or assisting a
labor organization of the rank and file. As regards those in the Patrol Division and Treasury Security Service
Section, MERALCO maintains that since these employees are tasked with providing security to the company,
they are not eligible to join the rank and file bargaining unit, pursuant to Sec. 2(c), Rule V, Book V of the then
Implementing Rules and Regulations of the Labor Code (1988) which reads as follows:
"Sec. 2. Who may file petition. The employer or any legitimate labor organization may file the petition.

2. Corporate Staff Services Department

"The petition, when filed by a legitimate labor organization, shall contain, among others:

3. Managerial Payroll Office

"x

4. Legal Service Department

x;

"(c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise
require, and provided, further: that the appropriate bargaining unit of the rank and file employees shall not
include security guards (As amended by Sec. 6, Implementing Rules of EO 111).

5. Labor Relations Division

6. Personnel Administration Division

". . ." (p. 111, Labor Code, 1988 Ed.)

7. Manpower Planning & Research Division

As regards those rank and file employees enumerated in Sec. 3, Art. I, MERALCO contends that since they
are already beneficiaries of the MEWA-CBA, they may not be treated as a separate and distinct appropriate
bargaining unit.

8. Computer Services Department

9. Financial Planning & Control Department
10. Treasury Department, except Cash Section 11. General Accounting Section.
". . ." (p. 19, Rollo).
MERALCO moved for the dismissal of the petition on the following grounds: virtual 1aw library
I
The employees sought to be represented by petitioner are either 1) managerial who are prohibited by law
from forming or joining supervisory union; 2) security services personnel who are prohibited from joining or

MERALCO raised the same argument with respect to employees sought to be represented by STEAM-PCWF,
claiming that these were already covered by the MEWA-CBA.
On March 15, 1989, the Med-Arbiter ruled that having been excluded from the existing Collective Bargaining
Agreement for rank and file employees, these employees have the right to form a union of their own, except
those employees performing managerial functions. With respect to those employees who had resented their
alleged involuntary membership in the existing CBA, the Med-Arbiter stated that the holding of a certification
election would allow them to fully translate their sentiment on the matter, and thus directed the holding of a
certification election. The dispositive portion of the Resolution provides as follows:
"WHEREFORE, premises considered, a certification election is hereby ordered conducted among the regular
rank-and-file employees of MERALCO to wit:

26

"SO ORDERED." (p. 7, Rollo)

"1. Non-managerial employees with Pay Grades VII and above;
MERALCOs motion for reconsideration was denied on January 16, 1990.
"2. Non-managerial employees of Patrol Division, Treasury Security Services Section and Secretaries; and
On February 9, 1990, MERALCO filed this petition, premised on the following ground:
"3. Employees prohibited from actively participating as members of the union.
within 20 days from receipt hereof, subject to the usual pre-election conference with the following choices:
"1. Staff and Technical Employees Association of MERALCO (STEAM-PCWF);

"RESPONDENT SECRETARY ACTED WITH GRAVE ABUSE OF DISCRETION AND/OR IN EXCESS OF

JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN RULING THAT:
"I. ANOTHER RANK-AND-FILE BARGAINING UNIT CAN BE ESTABLISHED INDEPENDENT, DISTINCT
AND SEPARATE FROM THE EXISTING RANK-AND-FILE BARGAINING UNIT.

"2. No Union.
"II. THE EMPLOYEES FROM PAY GRADES VII AND ABOVE ARE RANK-AND-FILE EMPLOYEES.
"SO ORDERED." (p. 222, Rollo)
On April 4, 1989, MERALCO appealed, contending that "until such time that a judicial finding is made to the
effect that they are not managerial employee, STEAM-PCWF cannot represent employees from Pay Grades
VII and above, additionally reiterating the same reasons they had advanced for disqualifying respondent
STEAM-PCWF.
On April 7, 1989, MEWA filed an appeal-in-intervention, submitting as follows: 1aw library
A. The Order of the Med-Arbiter is null and void for being in violation of Article 245 of the Labor Code;
B. The Order of the Med-Arbiter violates Article 232 of the Labor Code; and
C. The Order is invalid because the bargaining unit it delineated is not an appropriated (sic) bargaining unit.
On May 4, 1989, STEAM-PCWF opposed the appeal-in-intervention.
With the enactment of RA 6715 and the rules and regulations implementing the same, STEAM-PCWF
renounced its representation of the employees in Patrol Division, Treasury Security Services Section and
rank-and-file employees in Pay Grades.
On September 13, 1989, the First Line Association of Meralco Supervisory Employees. (hereafter FLAMES)
filed a similar petition (NCR-OD-M-9-731-89) seeking to represent those employees with Pay Grades VII to
XIV, since "there is no other supervisory union at MERALCO." (p. 266, Rollo). The petition was consolidated
with that of STEAM-PCWF.
On November 3, 1989, the Secretary of Labor affirmed with modification, the assailed order of the MedArbiter, disposing as follows:
"WHEREFORE, premises considered, the Order appealed from is hereby affirmed but modified as far as the
employees covered by Section 3, Article I of the existing CBA in the Company are concerned. Said employees
shall remain in the unit of the rank-and file already existing and may exercise their right to self organization as
above enunciated.
"Further, the First Line Association of Meralco Supervisory Employees (FLAMES) is included as among the
choices in the certification election.
"Let, therefore, the pertinent records of the case be immediately forwarded to the Office of origin for the
conduct of the certification election.

"III. THE SECURITY GUARDS OR PERSONNEL MAY BE LUMPED TOGETHER WITH THE RANK-ANDFILE UNION AND/OR THE SUPERVISORY UNION." (p. 8, Rollo)
On February 26, 1990, We issued a temporary restraining order (TRO) against the implementation of the
disputed resolution.
In its petition, MERALCO has relented and recognized respondents STEAM-PCWF and FLAMES desired
representation of supervisory employees from Grades VII up. However, it believes that all that the Secretary of
Labor has to do is to establish a demarcation line between supervisory and managerial rank, and not to
classify outright the group of employees represented by STEAM-PCWF and FLAMES as rank and file
employees.
In questioning the Secretary of Labors directive allowing security guards (Treasury/Patrol Services Section) to
be represented by respondents, MERALCO contends that this contravenes the provisions of the recently
passed RA 6715 and its implementing rules (specifically par. 2, Sec. 1, Rule II, Book V) which disqualifies
supervisory employees and security guards from membership in a labor organization of the rank and file (p.
11, Rollo).
The Secretary of Labors Resolution was obviously premised on the provisions of Art. 212, then par. (k), of the
1988 Labor Code defining "managerial" and "rank and file" employees, the law then in force when the
complaint was filed. At the time, only two groups of employees were recognized, the managerial and rank and
file. This explains the absence of evidence on job descriptions on who would be classified managerial
employees. It is perhaps also for this reason why the Secretary of Labor limited his classification of the
Meralco employees belonging to Pay Grades VII and up, to only two groups, the managerial and rank and file.
library
However, pursuant to the Department of Labors goal of strenghthening the constitutional right of workers to
self-organization, RA 6715 was subsequently passed which reorganized the employee-ranks by including a
third group, or the supervisory employees, and laying down the distinction between supervisory employees
and those of managerial ranks in Art. 212, renumbered par. [m], depending on whether the employee
concerned has the power to lay down and execute management policies, in the case of managerial
employees, or merely to recommend them, in case of supervisory employees.
In this petition, MERALCO has admitted that the employees belonging to Pay Grades VII and up are
supervisory (p. 10, Rollo). The records also show that STEAM-PCWF had "renounced its representation of the
employees in Patrol Division, Treasury Security Service Section and rank and file employees in Pay Grades IVI" (p. 6, Rollo); while FLAMES, on the other hand, had limited its representation to employees belonging to
Pay Grades VII-XIV, generally accepted as supervisory employees, as follows:

27

"It must be emphasized that private respondent First Line Association of Meralco Supervisory Employees
seeks to represent only the Supervisory Employees with Pay Grades VII to XIV.
"Supervisory Employees with Pay Grades VII to XIV are not managerial employees. In fact the petition itself of
petitioner Manila Electric Company on page 9, paragraph 3 of the petition stated as follows, to wit:chanrob1es
virtual 1aw library
There was no need for petitioner to prove that these employees are not rank-and-file. As adverted to above,
the private respondents admit that these are not the rank-and-file but the supervisory employees, whom they
seek to represent. What needs to be established is the rank where supervisory ends and managerial begins.
and First Line Association of Meralco Supervisory Employees herein states that Pay Grades VII to XIV are not
managerial employees. In fact, although employees with Pay Grade XV carry the Rank of Department
Managers, these employees only enjoys (sic) the Rank Manager but their recommendatory powers are
subject to evaluation, review and final action by the department heads and other higher executives of the
company." (FLAMES Memorandum, p. 305, Rollo).

employees therein, that he has the authority to hire or discharge other employees or that his suggestions and
recommendations as to the hiring and discharging and or to the advancement and promotion or any other
change of status of other employees are given particular weight, that he customarily and regularly exercises
discretionary powers . . . (56 CJS, pp. 666-668.)" (p. 226, Rollo)
We shall now discuss the rights of the security guards to self-organize. MERALCO has questioned the legality
of allowing them to join either the rank and file or the supervisory union, claiming that this is a violation of par.
2, Sec. 1, Rule II, Book V of the Implementing Rules of RA 6715, which states as follows:
"Sec. 1. Who may join unions . . . .
"x

"Supervisory employees and security guards shall not be eligible for membership in a labor organization of the
rank-and-file employees but may join, assist or form separate labor organizations of their own; . . .
". . ." (Emphasis supplied).

Based on the foregoing, it is clear that the employees from Pay Grades VII and up have been recognized and
accepted as supervisory. On the other hand, those employees who have been automatically disqualified have
been directed by the Secretary of Labor to remain in the existing labor organization for the rank and file, (the
condition in the CBA deemed as not having been written into the contract, as unduly restrictive of an
employees exercise of the right to self-organization). We shall discuss the rights of the excluded employees
(or those covered by Sec. 2, Art. I, MEWA-CBA later.

Paragraph 2, Sec. 1, Rule II, Book V, is similar to Sec. 2 (c) Rule V, also of Book V of the implementing rules
of RA 6715:jgc:chanrobles.com.ph
"Rule V.

Anent the instant petition therefore, STEAM-PCWF, and FLAMES would therefore represent supervisory
employees only. In this regard, the authority given by the Secretary of Labor for the establishment of two labor
organizations for the rank and file will have to be disregarded since We hereby uphold certification elections
only for supervisory employees from Pay Grade VII and up, with STEAM-PCWF and FLAMES as choices.

REPRESENTATION CASES ANDINTERNAL-UNION CONFLICTS

As to the alleged failure of the Secretary of Labor to establish a demarcation line for purposes of segregating
the supervisory from the managerial employees, the required parameter is really not necessary since the law
itself, Art. 212-m, (as amended by Sec. 4 of RA 6715) has already laid down the corresponding guidelines:

"Sec. 2. Who may file. Any legitimate labor organization or the employer, when requested to bargain
collectively, may file the petition.

"Art. 212. Definitions . . .

"(m) Managerial employee is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the employer, effectively recommend
such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment. All employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of this Book." virtua1aw library

Sec. 1. . . .

"The petition, when filed by a legitimate labor-organization shall contain, among others:
"(a) . . .
"(b) . . .
"(c) description of the bargaining unit which shall be the employer unit unless circumstances otherwise
require; and provided further, that the appropriate bargaining unit of the rank-and-file employees shall not
include supervisory employees and/or security guards;

In his resolution, the Secretary of Labor further elaborated:

". . ." (Emphasis supplied)

". . . Thus, the determinative factor in classifying an employee as managerial, supervisory or rank-and-file is
the nature of the work of the employee concerned.

Both rules, barring security guards from joining a rank and file organization, appear to have been carried over
from the old rules which implemented then Art. 245 of the Labor Code, and which provided thus:

"In National Waterworks and Sewerage Authority v. National Waterworks and Sewerage Authority
Consolidated Unions (11 SCRA 766) the Supreme Court had the occasion to come out with an enlightening
dissertation of the nature of the work of a managerial employees as follows:chanrob1es virtual 1aw library

"Art. 245. Ineligibility of security personnel to join any labor organization. Security guards and other
personnel employed for the protection and security of the person, properties and premises of the employer
shall not be eligible for membership in any labor organization." library

. . . that the employees primary duty consists of the management of the establishment or of a customarily
recognized department or subdivision thereof, that he customarily and regularly directs the work of other

On December 24, 1986, Pres. Corazon C. Aquino issued E.O No. 111 which eliminated the above-cited
provision on the disqualification of security guards. What was retained was the disqualification of managerial
employees, renumbered as Art. 245 (previously Art. 246), as follows:

28

"ART. 245. Ineligibility of managerial employees to joint any labor organization. Managerial employees are
not eligible to join, assist or form any labor organization." virtua1aw library
With the elimination, security guards were thus free to join a rank and file organization.
On March 2, 1989, the present Congress passed RA 6715. 2 Section 18 thereof amended Art. 245, to read as
follows:
"Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory employees.
Managerial employees are not eligible to join, assist or form any labor organization. Supervisory employees
shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist,
or form separate labor organizations of their own." (Emphasis supplied).
As will be noted, the second sentence of Art. 245 embodies an amendment disqualifying supervisory
employees from membership in a labor organization of the rank-and-file employees. It does not include
security guards in the disqualification.
The implementing rules of RA 6715, therefore, insofar as they disqualify security guards from joining a rank
and file organization are null and void, for being not germane to the object and purposes of EO 111 and RA
6715 upon which such rules purportedly derive statutory moorings. In Shell Philippines, Inc. v. Central Bank,
G.R. No. 51353, June 27, 1988, 162 SCRA 628, We stated:chanrob1es virtual 1aw library
The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect
the law as it has been enacted. The power cannot be extended to amending or expanding the statutory
requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be
sanctioned." (citing University of Sto. Tomas v. Board of Tax Appeals, 93 Phil. 376).
While therefore under the old rules, security guards were barred from joining a labor organization of the rank
and file, under RA 6715, they may now freely join a labor organization of the rank and file or that of the
supervisory union, depending on their rank. By accommodating supervisory employees, the Secretary of
Labor must likewise apply the provisions of RA 6715 to security guards by favorably allowing them free
access to a labor organization, whether rank and file or supervisory, in recognition of their constitutional right
to self-organization.
We are aware however of possible consequences in the implementation of the law in allowing security
personnel to join labor unions within the company they serve. The law is apt to produce divided loyalties in the
faithful performance of their duties. Economic reasons would present the employees concerned with the
temptation to subordinate their duties to the allegiance they owe the union of which they are members, aware
as they are that it is usually union action that obtains for them increased pecuniary benefits.
Thus, in the event of a strike declared by their union, security personnel may neglect or outrightly abandon
their duties, such as protection of property of their employer and the persons of its officials and employees,
the control of access to the employers premises, and the maintenance of order in the event of emergencies
and untoward incidents.
It is hoped that the corresponding amendatory and/or suppletory laws be passed by Congress to avoid
possible conflict of interest in security personnel.
ACCORDINGLY, the petition is hereby DISMISSED. We AFFIRM with modification the Resolution of the
Secretary of Labor dated November 3, 1989 upholding an employees right to self-organization. A certification
election is hereby ordered conducted among supervisory employees of MERALCO, belonging to Pay Grades
VII and above, using as guideliness an employees power to either recommend or execute management

policies, pursuant to Art. 212 (m), of the Labor Code, as amended by Sec. 4 of RA 6715, with respondents
STEAM-PCWF and FLAMES as choices.
Employees of the Patrol Division, Treasury Security Services Section and Secretaries may freely join either
the labor organization of the rank and file or that of the supervisory union depending on their employee rank.
Disqualified employees covered by Sec. 3, Art. I of the MEWA-CBA, shall remain with the existing labor
organization of the rank and file, pursuant to the Secretary of Labors directive:
"By the parties own agreement, they find the bargaining unit, which includes the positions enumerated in
Section 3, Article I of their CBA, appropriate for purposes of collective bargaining. The composition of the
bargaining unit should be left to the agreement of the parties, and unless there are legal infirmities in such
agreement, this Office will not substitute its judgment for that of the parties. Consistent with the history of
collective bargaining in the company, the membership of said group of employees in the existing rank-and-file
unit should continue, for it will enhance stability in that unit already well established. However, we cannot
approve of the condition set in Section 3, Article I of the CBA that the employees covered are automatically
disqualified from becoming union members. The condition unduly restricts the exercise of the right to self
organization by the employees in question. It is contrary to law and public policy and, therefore, should be
considered to have not been written into the contract. Accordingly, the option to join or not to join the union
should be left entirely to the employees themselves." (p. 229, Rollo)
The Temporary Restraining Order (TRO) issued on February 26, 1990 is hereby LIFTED. Costs against
petitioner.

SO ORDERED.
x

[G.R. No. 79526 : December 21, 1990.]

NATIONAL ASSOCIATION OF FREE TRADE UNIONS (NAFTU), Petitioner, vs. MAINIT LUMBER
DEVELOPMENT COMPANY WORKERS UNION-UNITED LUMBER AND GENERAL WORKERS OF THE
PHILIPPINES. (MALDECOWU-ULGWP), Respondents.

This is a petition for Certiorari to annul and set aside the resolution ** of the public respondent Bureau of
Labor Relation dated January 29,1987 in BLR Case No. A-5-99-85 entitled: IN RE: Petition for Direct
Certification or Certification Election, Mainit Lumber Development Company Workers Union-United Lumber
and General Workers of the Philippines (MALDECOWU-ULGWP), petitioner-appellee vs. Mainit Lumber and
Development Company, Inc. (MALDECO), respondent; National Association of Free Trade Unions (NAFTU),
compulsory intervenor-appellant, affirming the Order of the Med-Arbiter date September 24, 1986 and denying
petitioner's motion for reconsideration.
The facts are as follows:
On January 28, 1985, private respondent Mainit Lumber Development Company Workers Union-United
Lumber and General Workers of the Philippines, MALDECOWU-ULGWP (ULGWP, for short), a legitimate
labor organization duly registered with the Ministry of Labor and Employment under Registry No. 2944-IP, filed
with Regional Office No. 10, Ministry of Labor and Employment at Cagayan de Oro City, a petition for
certification election to determine the sole and exclusive collective bargaining representative among the rank

29

and file workers/employees of Mainit Lumber Development Company Inc. (MALDECO), a duly organized,
registered and existing corporation engaged in the business of logging and saw-mill operations employing
approximately 136 rank and file employees/workers (Rollo, p. 11; Petition; Annex "A"). The case was
scheduled for hearing two (2) times. During the first scheduled hearing on February 20, 1985, the counsel for
compulsory intervenor (now petitioner), National Association of Free Trade Union (NAFTU) requested for
postponement on the ground that he was leaving for abroad. During the scheduled hearing of March 13, 1985,
they, however, agreed to submit simultaneously their respective position papers within twenty (20) days
(Rollo, p. 17; Petition; Annex "D").
Petitioner ULGWP, private respondent herein, in its petition and position paper alleged, among others: (1) that
there was no certification election conducted within 12 months prior to the filing of the petition; (2) that the
petition was filed within the 60 day freedom period, i.e. CBA expired on February 28, 1985; (3) that the petition
is supported by the signatures of 101 rank and file employees out of a total of 201 employees of the employer
or more than thirty percent (30%) than that required by law (Rollo, p. 13; Petition; Annex "B").:On April 11, 1985, the Med-Arbiter granted the petition for certification election. On April 26, 1985, NAFTU
appealed the decision of the Med-Arbiter on the ground that MALDECO was composed of two (2) bargaining
units, the Sawmill Division and the Logging Division, but both the petition and decision treated these separate
and distinct units only as one (Rollo, p. 20; Petition; Annex "E").
On April 28, 1986, the Bureau of Labor Relations affirmed the decision (Rollo, p. 26; Petition; Annex "J").
Thus, a certification election was held on separate dates at the employer's sawmill division and logging area
respectively. In said election MALDECOWU-ULGWP garnered a total vote of 146 while NAFTU garnered a
total of 2 votes (Rollo, p. 42; Petition; Annex "O").
On July 26, 1986, NAFTU filed an election protest alleging massive vote buying accompanied with grave and
serious threat force and intimidation on the lives of 25 applicants as stated in a Joint Affidavit attached thereto
(Rollo, p. 28; Petition; Annexes "K", "K-3").
MALDECO filed its Manifestation on August 3, 1986, which corroborated petitioner's stand. Attached to the
said Manifestation was a joint affidavit executed by thirty five (35) of its employees/workers (Rollo, p. 33;
Petition; Annexes "L", "L-1").
On September 3, 1986, private respondent filed its position paper (Rollo, p. 36; Petition; Annex "I"). On
September 8, 1986 petitioner filed its opposition to private respondent's position paper (Rollo, p. 39; Petition;
Annex "N"). On September 24, 1986, the Med-Arbiter dismissed the election protest (Rollo, p. 42; Petition;
Annex "O").
On October 10, 1986, petitioner NAFTU appealed the order of the Med-Arbiter to the Bureau of Labor
Relations in Manila (Rollo, p. 46) which denied the appeal (Rollo, p. 48) and the two motions for
reconsideration (Rollo, pp. 51, 55).
Hence, this petition.
The issues raised in this petition are:
I
WHETHER OR NOT IT WAS RIGHT FOR THE MED-ARBITER TO CHANGE THE EMPLOYER FROM TWO
SEPARATE BARGAINING UNITS TO ONLY ONE.
II
WHETHER OR NOT THERE WAS MASSIVE VOTE BUYING AND SERIOUS THREAT TO LIFE TO JUSTIFY
INVALIDATING THE RESULT OF THE ELECTION.
III

WHETHER OR NOT AN ELECTION PROTEST IN A CERTIFICATION ELECTION CAN BE GIVEN DUE

COURSE EVEN IF NOT ENTERED IN THE MINUTES OF THE ELECTION.
In the case at bar, petitioner alleges that the employer MALDECO was composed of two bargaining units, the
Sawmill Division in Butuan City and the Logging Division, in Zapanta Valley, Kitcharao, Agusan Norte, about
80 kilometers distant from each other and in fact, had then two separate CBA's, one for the Sawmill Division
and another for the Logging Division, both the petition and decision referred only to one bargaining unit; that
from 1979 to 1985, the Ministry of Labor and Employment recognized the existence of two (2) separate
bargaining units at MALDECO, one for its Logging Division and another for its Sawmill Division.
Significantly, out of two hundred and one (201) employees of MALDECO, one hundred seventy five (175)
consented and supported the petition for certification election, thereby confirming their desire for one
bargaining representative (Rollo, p. 104).:- nad
Moreover, while the existence of a bargaining history is a factor that may be reckoned with in determining the
appropriate bargaining unit, the same is not decisive or conclusive. Other factors must be considered. The
test of grouping is community or mutuality of interests. This is so because "the basic test of an asserted
bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure to all
employees the exercise of their collective bargaining rights." (Democratic Labor Association v. Cebu
Stevedoring Company, Inc., et al., 103 Phil. 1103 [1958]).
Certainly, there is a mutuality of interest among the employees of the Sawmill Division and the Logging
Division. Their functions mesh with one another. One group needs the other in the same way that the
company needs them both. There may be difference as to the nature of their individual assignments but the
distinctions are not enough to warrant the formation of a separate bargaining unit.
Secondly, the issue had been raised earlier by petitioner. The respondent Bureau of Labor Relations had
already ruled on the same in its decision dated April 28, 1986 affirming the Med-Arbiter's Order dated April 11,
1985 which granted the petition for Certification Election. NAFTU did not elevate the April 28, 1986 decision to
this Court. On the contrary, it participated in the questioned election and later it did not raise the issue in its
election protest (Rollo, p. 210). Hence, the principle of res judicata applies. It was settled as early as 1956 that
"the rule which forbids the reopening of a matter once judicially determined by competent authority applies as
well to the judicial and quasi-judicial acts of public, executive or administrative officers and boards acting
within their jurisdiction as to the judgments of courts having general judicial powers . . ." (B.F. Goodrich
Philippines, Inc. v. Workmen's Compensation Commission and Leandro M. Castro, 159 SCRA 355 [1988]).
With regard to the second and third issues raised by petitioner, the public respondent Bureau of Labor
Relations in its order dated September 24, 1986 found the following, to wit:
"After a careful perusal of the records of this case and after considering, adducing and weighing all the
pleadings, arguments, etc. and the circumstances attendant to the instant case, this Office is of the opinion
that the grounds relied upon by the protestant NAFTU in its protest are bereft of any merit, hence, this Office
finds no cogent reason to order the invalidation or annulment of the certification election under protest or the
holding of a run-off election thereat between no union and the protestee, MALDECOWU-ULGWP. Indeed, the
minutes of said certification elections conducted both at the sawmill and logging departments on August 15
and 21, 1986 respectively, of the respondent/employer showed that there was no protest on massive vote
buying accompanied with grave and serious threats, force and intimidation raised by any of the parties who
were ably represented in said elections. Paragraph 2, Section 9, Rule 6 of the Rules and Regulations
implementing the Labor Code of the Philippines (now Section 3, Rule VI, Book 5 of the Omnibus Rules
Implementing the Labor Code) provides that protests not so raised and contained in the minutes of the
proceedings are deemed waived. Allegations of vote buying, grave and serious threats, force and intimidation
are questions of fact which should be contained in the minutes of said proceedings. There is no clear and
convincing proof presented by the protestant in support of its contention, hence, we have no other alternative
than to uphold the election results."

30

In the case of Philippine Airlines Employees' Association (PALEA) v. Hon. Pura Ferrer-Calleja, et al., 162
SCRA 425 [1988]), this Court held that factual findings of the Bureau of Labor Relations which are supported
by substantial evidence are binding on this Court and must be respected.:
PREMISES CONSIDERED, the resolution of public respondent Bureau of Labor Relations dated January 29,
1987 is hereby AFFIRMED.
SO ORDERED.
x

6. ID.; ID.; ID.; EMPLOYEES WHO ARE NOT MEMBERS OF COOPERATIVE MAY EXERCISE RIGHTS TO
FORM LABOR ORGANIZATIONS. However, in so far as it involves cooperatives with employees who are
not members or co-owners thereof, certainly such employees are entitled to exercise the rights of all workers
to organization, collective bargaining, negotiations and others as are enshrined in the Constitution and
existing laws of the country.
7. ID.; ID.; ID.; INELIGIBILITY OF MANAGERIAL EMPLOYEES. Article 243 of the Labor Code enumerates
who are eligible to form, join, or assist labor organizations for purposes of collective bargaining. The
recognized exception to this enumeration is found in Article 245 of the same code, which provides for the
ineligibility of managerial employees to join any labor organization.

[G.R. No. 77951. September 26, 1988.]

DECISION

COOPERATIVE RURAL BANK OF DAVAO CITY, INC., Petitioner, v. PURA FERRERCALLEJA Respondents.
SYLLABUS
1. LABOR LAWS; LABOR CODE; CERTIFICATION ELECTION; A PETITION TO ENJOIN CERTIFICATION
ELECTION IS NOT RENDERED MOOT AND ACADEMIC EVEN IF IT WENT ON AS SCHEDULED. This
case cannot be considered moot and academic simply because the certification election sought to be enjoined
went on as scheduled. The instant Petition is one for certiorari as a special civil action. Errors of jurisdiction on
the part of the public respondents are alleged in the Petition itself. If the public respondents had indeed
committed jurisdictional errors, the action taken by both the Med-Arbiter and the Bureau Director will be
deemed null and void ab initio. And if this were so, the certification election would, necessarily, have no legal
justification. The arguments raised in the instant Petition strike at the very heart of the validity of the
certification election itself.
2. COMMERCIAL LAW; COOPERATIVE; DEFINED. Under Section 2 of P.D. No. 175, a cooperative is
defined to mean "organizations composed primarily of small producers and of consumers who voluntarily join
together to form business enterprises which they themselves own, control, and patronize." library
3. ID.; ID.; ID.; RATIONALE. The creation and growth of cooperative was declared as a policy of the State
as a means of increasing the income and purchasing power of the low-income sector of the population in
order to attain a more equitable distribution of income.
4. ID.; ID.; DIFFERS FROM ORDINARY BUSINESS. A cooperative, therefore, is by its nature different from
an ordinary business concern, being run either by persons, partnerships, or corporations. Its owners and/or
members are the ones who run and operate the business while the others are its employees. As above stated,
irrespective of the number of shares owned by each member they are entitled to cast one vote each in
deciding upon the affairs of the cooperative. Their share capital earn limited interests. They enjoy special
privileges as exemption from income tax and sales taxes, preferential right to supply their products to State
agencies and even exemption from the minimum wages laws.
5. LABOR LAWS; LABOR CODE; COLLECTIVE BARGAINING; MEMBERS-EMPLOYEES OF
COOPERATIVE HAVE NO RIGHT TO FORM LABOR ORGANIZATIONS. An employee therefore of such a
cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for
certainly an owner cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of the
Solicitor General he correctly opined that employees of cooperatives who are themselves members of the
cooperative have no right to form or join labor organizations for purposes of collective bargaining for being
themselves co-owners of the cooperative.

This is a Petition for certiorari under Rule 65 of the Rules of Court where the issue is whether or not the
employees of a cooperative can organize themselves for purposes of collective bargaining.
The record of the case discloses that the herein petitioner Cooperative Rural Bank of Davao City, Inc. is a
cooperative banking corporation operating in Davao City. It is owned in part by the Government and its
employees are members and co-owners of the same. The petitioner has around 16 rank-and-file employees.
As of August, 1986, there was no existing collective bargaining agreement between the said employees and
the establishment. On the other hand, the herein private respondent Federation of Free Workers is a labor
organization registered with the Department of Labor and Employment. It is interested in representing the said
employees for purposes of collective bargaining.
On August 27, 1986, the private respondent filed with the Davao City Regional Office of the then Ministry of
Labor and Employment a verified Petition for certification election among the rank-and-file employees of the
petitioner. 1 The same was docketed as Case No. R-325 ROXIMED-UR-73-86. On September 18, 1986, the
herein public respondent issued an Order granting the Petition for certification election.
On October 3, 1986, the petitioner filed an Appeal Memorandum and sought a reversal of the Order of the
Med-Arbiter. 2 The petitioner argues therein that, among others, a cooperative is not covered by the Rules
governing certification elections inasmuch as it is not an institution operating for profit. The petitioner also
adds that two of the alleged rank-and-file employees seeking the certification election are managerial
employees disqualified from joining concerted labor activities. In sum, the petitioner insists that its employees
are disqualified from forming labor organizations for purposes of collective bargaining.
On October 8, 1986, the private respondent filed a "Motion to Dismiss the Appeal." On October 15, 1986, the
petitioner filed its opposition to the said Motion.
On February 11, 1987, the herein public respondent Bureau of Labor Relations Director Pura Ferrer-Calleja
issued a Resolution affirming the Order of the Med-Arbiter and dismissing the Appeal. 3 The pertinent portions
of the said Resolution are as follows
"It is beyond doubt that respondent-appellant, Cooperative Rural Bank of Davao City falls within the purview of
Article 212, paragraph C of the Labor Code, acting as such in the interest of an employer. To argue otherwise
would amount to closing ones eyes to the realities of todays cooperative banking institutions . . .
"Moreover, basic is the right of every worker in any establishment whether operated for profit or not to
organize and engage in concerted activity, mutually beneficial to their interest. Such right is sacredly
enshrined and protected in our fundamental law, granting every worker the right to organize into a collective

31

group and engage in concerted activities for purposes of promoting their well being, subject only to such
limitations as may be provided for by law.
"x

"As this Office has consistently ruled and applied in various cases, being a member of a cooperative
organization does not preclude one from forming or joining a labor union provided that such person or persons
are not among those disqualified by law. Nowhere in the records can we find any piece of evidence showing
that the signatories in the petition are among those disqualified to form or join a union.
"Finally, we cannot give credence to (the) employers allegation that two of the signatories thereof, are
managerial employees, since no evidence showing such fact can be found from the records.
"x

x"

In a Motion dated March 2, 1987, the petitioner asked for a reconsideration of the said Resolution. 4 The
petitioner reiterated therein its view that its employees are disqualified from forming the labor organization so
contemplated. The petitioner also called attention to an Opinion rendered by then Solicitor General and
Minister of Justice Estelito P. Mendoza dated August 14, 1981. 5 The Opinion states that employees of an
electric cooperative who are themselves members/co-owners of the same cannot form or join labor
organizations for purposes of collective bargaining. The Opinion also states that the duty to bargain exists
only between an employer and his/its employees, and that an employer has no duty to bargain with his coowners of a corporation who are also its employees. The petitioner submits that the said Opinion calls for
application in the present controversy.
On March 26, 1987, director Calleja issued a Resolution denying the reconsideration sought by the petitioner.
6 Thus, the certification election was scheduled in the morning of April 23, 1987.
Finding the action taken by the Bureau unsatisfactory, the petitioner brought the case directly to this Court on
April 9, 1987 by way of the instant Petition for certiorari. The petitioner maintains that the public respondents
both acted without jurisdiction or in excess thereof, or with grave abuse of discretion amounting to lack of
jurisdiction, in allowing the certification election sought by the private respondent despite the arguments of the
petitioner in opposition thereto. The petitioner reiterates its argument that employees of cooperatives who are
members and co-owners of the same cannot form and join labor organizations for purposes of collective
bargaining.
On April 15, 1987, this Court issued a temporary restraining order enjoining the Bureau of Labor Relations
from proceeding with the certification election scheduled on April 23, 1987. 7 The certification election
nonetheless pushed through as scheduled for the alleged reason that the temporary restraining order was not
seasonably transmitted to Davao City. 8
This court also required the respondents to file their Comment on the Petition. 9 The respondents complied as
instructed. The Office of the Solicitor General represented the public respondents.
The Solicitor General intimated to this Court that the instant Petition has been rendered moot and academic
inasmuch as the certification election sought to be enjoined had already been conducted. The Solicitor
General added that the public respondents did not commit any jurisdictional error. 10
In due time, the parties submitted other pleadings. On January 6, 1988, the case was deemed submitted for
decision.
After a careful examination of the entire record of the case, We find the instant Petition meritorious.

one for certiorari as a special civil action. Errors of jurisdiction on the part of the public respondents are
alleged in the Petition itself. If the public respondents had indeed committed jurisdictional errors, the action
taken by both the Med-Arbiter and the Bureau Director will be deemed null and void ab initio. 11 And if this
were so, the certification election would, necessarily, have no legal justification. The arguments raised in the
instant Petition strike at the very heart of the validity of the certification election itself.
We come now to the main aspect of the case.
Article 243 of the Labor Code 12 enumerates who are eligible to form, join, or assist labor organizations for
purposes of collective bargaining, to wit
"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 of collective bargaining . . ." library
The recognized exception to this enumeration is found in Article 245 of the same code, which provides for the
ineligibility of managerial employees to join any labor organization, viz
"ART. 245. Ineligibility of managerial employees to join any labor organization. Managerial employees are
not eligible to join, assist or form any labor organization." library
From the foregoing provisions of law it would appear at first blush that all the rank and file employees of a
cooperative who are not managerial employees are eligible to form, join or assist any labor organization of
their own choosing for the purpose of collective bargaining.
However, under Section 2 of P.D. No. 175, a cooperative is defined to mean "organizations composed
primarily of small producers and of consumers who voluntarily join together to form business enterprises
which they themselves own, control, and patronize." Its creation and growth were declared as a policy of the
State as a means of increasing the income and purchasing power of the low-income sector of the population
in order to attain a more equitable distribution of income and wealth. 13
The principles governing it are:chanrob1es virtual 1aw library
a) Open membership "Should be voluntary and available without artificial restriction, or any social, political,
racial or religious discrimination, to all persons who can make use of its services and are willing to accept
responsibilities of membership;"
b) Democratic control "Irrespective of the number of shares owned, each member can only cast one vote in
deciding upon the affairs of the cooperative;"
c) Limited interests to capital "Share capital shall earn only limited interest, the maximum rate of interest to
be established by the Department of Local Government and Community Development from time to time;"
and"
d) Patronage refund "Net income after the interest on capital has been paid shall be redistributed among
the members in proportion to their patronage." 14
While cooperatives may exercise the same rights and privileges given to persons, partnership and
corporations provided under existing laws, operate business enterprises of all kinds, establish rural banks,
enjoy all the privileges and incentives granted by the NACIDA Act and other government agencies to business
organizations under existing laws, to expropriate idle urban or rural lands for its purposes, to own and dispose
of properties, enter into contracts, to sue and be sued and perform other acts necessary to pursue its

Contrary to the view espoused by the Solicitor General, this case cannot be considered moot and academic

32

objectives, 15 such cooperatives enjoy such privileges as:chanrob1es virtual 1aw library
a) Exemption from income tax and sales taxes;

G.R. No. 94045. September 13, 1991.]

b) Preferential right to supply rice, corn and other grains, and other commodities produced by them to State
agencies administering price stabilization program; and
c) In appropriate cases, exemption from application of minimum wage law upon recommendation of the
Bureau of Cooperative Development subject to the approval of the Secretary of Labor. 16
A cooperative development loan fund has been created for the development of the cooperative movement. 17
It may be further stated that the Department of Local Government and Community Development through the
Bureau of Cooperative Development is vested with full authority to promulgate rules and regulations to cover
the promotion, organization, registration, regulation and supervision of all types of cooperatives. 18 Electric
cooperatives, however, are under the regulation and supervision of the National Electrification Administration,
19 while it is the Monetary Board of the Central Bank that has exclusive responsibility and authority over the
banking functions and operations of cooperative banks. 20
A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by
persons, partnerships, or corporations. Its owners and/or members are the ones who run and operate the
business while the others are its employees. As above stated, irrespective of the number of shares owned by
each member they are entitled to cast one vote each in deciding upon the affairs of the cooperative. Their
share capital earn limited interests. They enjoy special privileges as exemption from income tax and sales
taxes, preferential right to supply their products to State agencies and even exemption from the minimum
wages laws.
An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right
to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of
August 14, 1981 of the Solicitor General he correctly opined that employees of cooperatives who are
themselves members of the cooperative have no right to form or join labor organizations for purposes of
collective bargaining for being themselves co-owners of the cooperative. 21
However, in so far as it involves cooperatives with employees who are not members or co-owners thereof,
certainly such employees are entitled to exercise the rights of all workers to organization, collective
bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country. 22
The questioned ruling therefore of public respondent Pura Ferrer-Calleja must be upheld insofar as it refers to
the employees of petitioner who are not members or co-owners of petitioner. It cannot extend to the other
employees who are at the same time its members or co-owners.
The Court upholds the findings of said public respondent that no persuasive evidence has been presented to
show that two of the signatories in the petition for certification election are managerial employees who under
the law are disqualified from pursuing union activities.
WHEREFORE, the herein petition is hereby GRANTED and the resolution of public respondent Pura FerrerCalleja, Director, Bureau of Labor Relations, of February 11, 1987 is hereby MODIFIED to the effect that only
the rank and file employees of petitioner who are not its members or co-owners are entitled to selforganization, collective bargaining, and negotiations, while the other employees who are members or coowners thereof can not enjoy such right.

CENTRAL NEGROS ELECTRIC COOPERATIVE, INC. (CENECO), Petitioner, v. HONORABLE

SECRETARY, DEPARTMENT OF LABOR AND EMPLOYMENT, Respondents.

SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; MED-ARBITER; SCOPE OF POWER OVER
CERTIFICATION ELECTION. Under Article 256 of the Labor Code, to have a valid certification election at
least a majority of all eligible voters in the unit must have cast their votes. It is apparent that incidental to the
power of the med-arbiter to hear and decide representation cases is the power to determine who the eligible
voters are. In so doing, it is axiomatic that the med-arbiter should determine the legality of the employees
membership in the union.
2. ID.; ID.; RIGHT OF EMPLOYEES TO SELF-ORGANIZATION; MUST BE ACCORDED WITH HIGHEST
RESPECT. The right of the employees to self-organization is a compelling reason why their withdrawal
from the cooperative must be allowed. As pointed out by CURE, the resignation of the member-employees is
an expression of their preference for union membership over that of membership in the cooperative. The
avowed policy of the State to afford full protection to labor and to promote the primacy of free collective
bargaining mandates that the employees right to form and join unions for purpose of collective bargaining be
accorded the highest consideration.
3. ID.; ID.; DIRECT CERTIFICATION AS A METHOD OF SELECTING THE EXCLUSIVE BARGAINING
AGENT OF THE WORKERS; NO LONGER AVAILABLE UNDER EXECUTIVE ORDER NO. 111. We rule,
that the direct certification ordered by respondent Secretary is not proper. By virtue of Executive Order No.
111, which became effective on March 4, 1987, the direct certification originally allowed under Article 257 of
the Labor Code has apparently been discontinued as a method of selecting the exclusive bargaining agent of
the workers. This amendment affirms the superiority of the certification election over the direct certification
which is no longer available now under the change in said provision.
4. ID.; ID.; ID.; NOT WARRANTED EVEN IN THE ABSENCE OF OPPOSITION. We have said that where
a union has filed a petition for certification election, the mere fact that no opposition is made does not warrant
a direct certification. In said case which has similar features to that at bar, wherein the respondent Minister
directly certified the union, we held that: ". . . As pointed out by petitioner in its petition, what the respondent
Minister achieved in rendering the assailed orders was to make a mockery of the procedure provided under
the law for representation cases because: . . . (c) By directly certifying a Union without sufficient proof of
majority representation, he has in effect arrogated unto himself the right, vested naturally in the employees to
choose their collective bargaining representative. (d) He has in effect imposed upon the petitioner the
obligation to negotiate with a union whose majority representation is under serious question. This is highly
irregular because while the Union enjoys the blessing of the Minister, it does not enjoy the blessing of the
employees. Petitioner is therefore under threat of being held liable for refusing to negotiate with a union
whose right to bargaining status has not been legally established."
DECISION

SO ORDERED.
x

33

In this special civil action for certiorari, petitioner Central Negros Electric Cooperative, Inc. (CENECO) seeks
to annul the order 1 issued by then Acting Secretary of Labor Bienvenido E. Laguesma on June 6, 1990,
declaring the projected certification election unnecessary and directing petitioner CENECO to continue
recognizing private respondent CENECO Union of Rational Employees (CURE) as the sole and exclusive
bargaining representative of all the rank-and-file employees of petitioners electric cooperative for purposes of
collective bargaining.
It appears from the records that on August 15, 1987, CENECO entered into a collective bargaining agreement
with CURE, a labor union representing its rank-and-file employees, providing for a term of three years
retroactive to April 1, 1987 and extending up to March 31, 1990. On December 28, 1989, CURE wrote
CENECO proposing that negotiations be conducted for a new collective bargaining agreement (CBA).
On January 18, 1990, CENECO denied CUREs request on the ground that, under applicable decisions of the
Supreme Court, employees who at the same time are members of an electric cooperative are not entitled to
form or join a union. 2
Prior to the submission of the proposal for CBA re negotiation, CURE members, in a general assembly held
on December 9, 1989, approved Resolution No. 35 whereby it was agreed that "all union members shall
withdraw, retract, or recall the union members membership from Central Negros Electric Cooperative, Inc. in
order to avail (of the full benefits under the existing Collective Bargaining Agreement entered into by and
between CENECO and CURE, and the supposed benefits that our union may avail (of) under the renewed
CBA." 3 This was ratified by 259 of the 362 union members. CENECO and the Department of Labor and
Employment, Bacolod District, were furnished copies of this resolution.
However, the withdrawal from membership was denied by CENECO on February 27, 1990 under Resolution
No. 90 "for the reason that the basis of withdrawal is not among the grounds covered by Board Resolution No.
5023, dated November 22, 1989 and that said request is contrary to Board Resolution No. 5033 dated
December 13, 1989, . . . ." 4
By reason of CENECOs refusal to re negotiate a new CBA, CURE filed a petition for direct recognition or for
certification election, supported by 282 or 72% of the 388 rank-and-file employees in the bargaining unit of
CENECO.
CENECO filed a motion to dismiss on the ground that there are legal constraints to the filing of the certification
election, citing the ruling laid down by this Court in Batangas I Electric Cooperative Labor Union v. Romeo A.
Young, 5 (BATANGAS case) to the effect that "employees who at the same time are members of an electric
cooperative are not entitled to form or join unions for purposes of collective bargaining agreement, for
certainly an owner cannot bargain with himself or his co-owners." library
Med-Arbiter Felizardo T. Serapio issued an order, 6 granting the petition for certification election which, in
effect, was a denial of CENECOs motion to dismiss, and directing the holding of a certification election
between CURE and No Union.
CENECO appealed to the Department of Labor and Employment which issued the questioned order modifying
the aforestated order of the med-arbiter by directly certifying CURE as the exclusive bargaining representative
of the rank-and-file employees of CURE.

self-organization, it avers that this is not absolute. Thus, it opines that employees of an electric cooperative
who at the same time are members thereof are not allowed to form or join labor unions for purposes of
collective bargaining. However, petitioner does not hesitate to admit that the prohibition does not extend to
employees of an electric cooperative who are not members of the cooperative.
The issue, therefore, actually involves a determination of whether or not the employees of CENECO who
withdrew their membership from the cooperative are entitled to form or join CURE for purposes of the
negotiations for a collective bargaining agreement proposed by the latter.
As culled from the records, it is the submission of CENECO that the withdrawal from membership in the
cooperative and, as a consequence, the employees acquisition of membership in the union cannot be allowed
for the following reasons: virtual 1aw library
1. It was made as a subterfuge or to subvert the ruling in the BATANGAS case: 1aw library
2. To allow the withdrawal of the members of CENECO from the cooperative without justifiable reason would
greatly affect the objectives and goals of petitioner as an electric cooperative;
3. The Secretary of Labor, as well as the Med-Arbiter, has no jurisdiction over the issue of the withdrawal from
membership which is vested in the National Electrification Administration (NEA) which has direct control and
supervision over the operations of electric cooperatives; and
4. Assuming that the Secretary has jurisdiction, CURE failed to exhaust administrative remedies by not
referring the matter of membership withdrawal to the NEA.
The petition is destitute of merit; certiorari will not lie.
We first rule on the alleged procedural infirmities affecting the instant case. CENECO avers that the medarbiter has no jurisdiction to rule on the issue of withdrawal from membership of its employees in the
cooperative which, it claims, is properly vested in the NEA which has control and supervision over all electric
cooperatives.
From a perusal of petitioners motion to dismiss filed with the med-arbiter, it becomes readily apparent that the
sole basis for petitioners motion is the illegality of the employees membership in respondent union despite
the fact that they allegedly are still members of the cooperative. Petitioner itself adopted the aforesaid
argument in seeking the dismissal of the petition for certification election filed with the med-arbiter, and the
finding made by the latter was merely in answer to the arguments advanced by petitioner. Hence, petitioner is
deemed to have submitted the issue of membership withdrawal from the cooperative to the jurisdiction of the
med-arbiter and it is now estopped from questioning that same jurisdiction which it invoked in its motion to
dismiss after obtaining an adverse ruling thereon.
Under Article 256 of the Labor Code, to have a valid certification election at least a majority of all eligible
voters in the unit must have cast their votes. It is apparent that incidental to the power of the med-arbiter to
hear and decide representation cases is the power to determine who the eligible voters are. In so doing, it is
axiomatic that the med-arbiter should determine the legality of the employees membership in the union. In the
case at bar, it obviously becomes necessary to consider first the propriety of the employees membership
withdrawal from the cooperative before a certification election can be had.

Hence, this petition.

Petitioner CENECO argues that respondent Secretary committed a grave abuse of discretion in not applying
to the present case the doctrine enunciated in the BATANGAS case that employees of an electric cooperative
who at the same time are members of the electric cooperative are prohibited from forming or joining labor
unions for purposes of a collective bargaining agreement. While CENECO recognizes the employees right to

Lastly, it is petitioner herein who is actually questioning the propriety of the withdrawal of its members from the
cooperative. Petitioner could have brought the matter before the NEA if it wanted to and if such remedy had
really been available, and there is nothing to prevent it from doing so. It would be absurd to fault the
employees for the neglect or laxity of petitioner in protecting its own interests.

34

The argument of CENECO that the withdrawal was merely to subvert the ruling of this Court in the
BATANGAS case is without merit. The case referred to merely declared that employees who are at the same
time members of the cooperative cannot join labor unions for purposes of collective bargaining. However,
nowhere in said case is it stated that member-employees are prohibited from withdrawing their membership in
the cooperative in order to join a labor union.
As discussed by the Solicitor General, Article I, Section 9 of the Articles of Incorporation and By-Laws of
CENECO provides that "any member may withdraw from membership upon compliance with such uniform
terms and conditions as the Board may prescribe." The same section provides that upon withdrawal, the
member is merely required to surrender his membership certificate and he is to be refunded his membership
fee less any obligation that he has with the cooperative. There appears to be no other condition or
requirement imposed upon a withdrawing member. Hence, there is no just cause for petitioners denial of the
withdrawal from membership of its employees who are also members of the union. 7
The alleged board resolutions relied upon by petitioner in denying the withdrawal of the members concerned
were never presented nor their contents disclosed either before the med-arbiter or the Secretary of Labor if
only to prove the ratiocination for said denial. Furthermore, CENECO never averred noncompliance with the
terms and conditions for withdrawal, if any. It appears that the Articles of Incorporation of CENECO do not
provide any ground for withdrawal from membership which accordingly gives rise to the presumption that the
same may be done at any time and for whatever reason. In addition, membership in the cooperative is on a
voluntary basis. Hence, withdrawal therefrom cannot be restricted unnecessarily. The right to join an
organization necessarily includes the equivalent right not to join the same.
The right of the employees to self-organization is a compelling reason why their withdrawal from the
cooperative must be allowed. As pointed out by CURE, the resignation of the member-employees is an
expression of their preference for union membership over that of membership in the cooperative. The avowed
policy of the State to afford full protection to labor and to promote the primacy of free collective bargaining
mandates that the employees right to form and join unions for purposes of collective bargaining be accorded
the highest consideration.
Membership in an electric cooperative which merely vests in the member a right to vote during the annual
meeting becomes too trinal and insubstantial vis-a-vis the primordial and more important constitutional right of
an employee to join a union of his choice. Besides, the 390 employees of CENECO, some of whom have
never been members of the cooperative, represent a very small percentage of the cooperatives total
membership of 44,000. It is inconceivable how the withdrawal of a negligible number of members could
adversely affect the business concerns and operations of CENECO.
We rule, however, that the direct certification ordered by respondent Secretary is not proper. By virtue of
Executive Order No. 111, which became effective on March 4, 1987, the direct certification originally allowed
under Article 257 of the Labor Code has apparently been discontinued as a method of selecting the exclusive
bargaining agent of the workers. This amendment affirms the superiority of the certification election over the
direct certification which is no longer available now under the change in said provision. 8
We have said that where a union has filed a petition for certification election, the mere fact that no opposition
is made does not warrant a direct certification. 9 In said case which has similar features to that at bar, wherein
the respondent Minister directly certified the union, we held that:: virtual law library
". . . As pointed out by petitioner in its petition, what the respondent Minister achieved in rendering the
assailed orders was to make a mockery of the procedure provided under the law for representation cases
because: . . . (c) By directly certifying a Union without sufficient proof of majority representation, he has in
effect arrogated unto himself the right, vested naturally in the employees to choose their collective bargaining
representative. (d) He has in effect imposed upon the petitioner the obligation to negotiate with a union whose
majority representation is under serious question This is highly irregular because while the Union enjoys the

blessing of the Minister, it does not enjoy the blessing of the employees. Petitioner is therefore under threat of
being held liable for refusing to negotiate with a union whose right to bargaining status has not been legally
established." library
While there may be some factual variances, the rationale therein is applicable to the present case in the
sense that it is not alone sufficient that a union has the support of the majority. What is equally important is
that everyone be given a democratic space in the bargaining unit concerned. The most effective way of
determining which labor organization can truly represent the working force is by certification election. 10
WHEREFORE, the questioned order for the direct certification of respondent CURE as the bargaining
representative of the employees of petitioner CENECO is hereby ANNULLED and SET ASIDE. The medarbiter is hereby ordered to conduct a certification election among the rank-and-file employees of CENECO
with CURE and No Union as the choices therein.
SO ORDERED.
x

[G.R. NO. 164856 : August 29, 2007]

JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners, v. PHILIPPINE AIRLINES,
INC.,Respondent.
DECISION
This Petition for Review assails both the Decision 1 dated December 5, 2003 and the Resolution2dated April
16, 2004 of the Court of Appeals in CA-G.R. SP No. 69540, which had annulled the Resolutions 3 dated
November 26, 2001 and January 28, 2002 of the National Labor Relations Commission (NLRC) in NLRC
Injunction Case No. 0001038-01, and also denied the motion for reconsideration, respectively.
The antecedent facts of the case are as follows:
Petitioners Alberto J. Dumago and Juanito A. Garcia were employed by respondent Philippine Airlines, Inc.
(PAL) as Aircraft Furnishers Master "C" and Aircraft Inspector, respectively. They were assigned in the PAL
Technical Center.
On July 24, 1995, a combined team of the PAL Security and National Bureau of Investigation (NBI) Narcotics
Operatives raided the Toolroom Section - Plant Equipment Maintenance Division (PEMD) of the PAL Technical
Center. They found petitioners, with four others, near the said section at that time. When the PAL Security
searched the section, they found shabu paraphernalia inside the company-issued locker of Ronaldo Broas
who was also within the vicinity. The six employees were later brought to the NBI for booking and proper
investigation.
On July 26, 1995, a Notice of Administrative Charge4 was served on petitioners. They were allegedly "caught
in the act of sniffing shabu inside the Toolroom Section," then placed under preventive suspension and
required to submit their written explanation within ten days from receipt of the notice.
Petitioners vehemently denied the allegations and challenged PAL to show proof that they were indeed
"caught in the act of sniffing shabu." Dumago claimed that he was in the Toolroom Section to request for an

35

allen wrench to fix the needles of the sewing and zigzagger machines. Garcia averred he was in the Toolroom
Section to inquire where he could take the Trackster's tire for vulcanizing.
On October 9, 1995, petitioners were dismissed for violation of Chapter II, Section 6, Article 46 (Violation of
Law/Government Regulations) and Chapter II, Section 6, Article 48 (Prohibited Drugs) of the PAL Code of
Discipline.5 Both simultaneously filed a case for illegal dismissal and damages.
In the meantime, the Securities and Exchange Commission (SEC) placed PAL under an Interim Rehabilitation
Receiver due to severe financial losses.
On January 11, 1999, the Labor Arbiter rendered a decision6 in petitioners' favor:
WHEREFORE, conformably with the foregoing, judgment is hereby rendered finding the respondents guilty of
illegal suspension and illegal dismissal and ordering them to reinstate complainants to their former position
without loss of seniority rights and other privileges. Respondents are hereby further ordered to pay jointly and
severally unto the complainants the following:
Alberto J. Dumago - P409,500.00 backwages as of 1/10/99
34,125.00 for 13th month pay
Juanito A. Garcia - P1,290,744.00 backwages as of 1/10/99
107,562.00 for 13th month pay
The amounts of P100,000.00 and P50,000.00 to each complainant as and by way of moral and exemplary
damages; and
The sum equivalent to ten percent (10%) of the total award as and for attorneys fees.
Respondents are directed to immediately comply with the reinstatement aspect of this Decision. However, in
the event that reinstatement is no longer feasible, respondent[s] are hereby ordered, in lieu thereof, to pay
unto the complainants their separation pay computed at one month for [e]very year of service.
SO ORDERED.7

1. To the Office of respondent PAL Building I, Legaspi St., Legaspi Village, Makati City or to any of its Offices
in the Philippines and cause reinstatement of complainants to their former position and to cause the collection
of the amount of [P]549,309.60 from respondent PAL representing the backwages of said complainants on the
reinstatement aspect;
2. In case you cannot collect from respondent PAL for any reason, you shall levy on the office equipment and
other movables and garnish its deposits with any bank in the Philippines, subject to the limitation that
equivalent amount of such levied movables and/or the amount garnished in your own judgment, shall be
equivalent to [P]549,309.60. If still insufficient, levy against immovable properties of PAL not otherwise exempt
from execution.
x x x x11
Although PAL filed an Urgent Motion to Quash Writ of Execution, the Labor Arbiter issued a Notice of
Garnishment12 addressed to the President/Manager of the Allied Bank Head Office in Makati City for the
amount of P549,309.60.
PAL moved to lift the Notice of Garnishment while petitioners moved for the release of the garnished amount.
PAL opposed petitioners' motion. It also filed an Urgent Petition for Injunction which the NLRC resolved as
follows:
WHEREFORE, premises considered, the Petition is partially GRANTED. Accordingly, the Writ of Execution
dated October 5, 2000 and related [N]otice of Garnishment [dated October 25, 2000] are DECLARED valid.
However, the instant action is SUSPENDED and REFERRED to the Receiver of Petitioner PAL for appropriate
action.
SO ORDERED.13
PAL appealed to the Court of Appeals on the grounds that: (1) by declaring the writ of execution and the notice
of garnishment valid, the NLRC gave petitioners undue advantage and preference over PAL's other creditors
and hampered the task of the Permanent Rehabilitation Receiver; and (2) there was no longer any legal or
factual basis to reinstate petitioners as a result of the reversal by the NLRC of the Labor Arbiter's decision.
The appellate court ruled that the Labor Arbiter issued the writ of execution and the notice of garnishment
without jurisdiction. Hence, the NLRC erred in upholding its validity. Since PAL was under receivership, it
could not have possibly reinstated petitioners due to retrenchment and cash-flow constraints. The appellate
court declared that a stay of execution may be warranted by the fact that PAL was under rehabilitation
receivership. The dispositive portion of the decision reads:

Meanwhile, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.
On appeal, the NLRC reversed the Labor Arbiter's decision and dismissed the case for lack of
merit.8Reconsideration having been denied, an Entry of Judgment9 was issued on July 13, 2000.
On October 5, 2000, the Labor Arbiter issued a Writ of Execution10 commanding the sheriff to proceed:
xxx

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE
COURSE. The assailed November 26, 2001 Resolution, as well as the January 28, 2002 Resolution of public
respondent National Labor Relations Commission is hereby ANNULLED and SET ASIDE for having been
issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of
Execution and the Notice of Garnishment issued by the Labor Arbiter are hereby
likewise ANNULLED and SET ASIDE.
SO ORDERED.14
Hence, the instant petition raising a single issue as follows:

36

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE PETITIONERS ARE
ENTITLED TO THEIR ACCRUED WAGES DURING THE PENDENCY OF PAL'S APPEAL.15

its/his powers free from any judicial or extra-judicial interference that might unduly hinder or prevent the
rescue of the corporation.16

Simply put, however, there are really two issues for our consideration: (1) Are petitioners entitled to their
wages during the pendency of PAL's appeal to the NLRC? and (2) In the light of new developments
concerning PAL's rehabilitation, are petitioners entitled to execution of the Labor Arbiter's order of
reinstatement even if PAL is under receivership?

More importantly, the suspension of all actions for claims against the corporation embraces all phases of the
suit, be it before the trial court or any tribunal or before this Court. 17 No other action may be taken, including
the rendition of judgment during the state of suspension. It must be stressed that what are automatically
stayed or suspended are the proceedings of a suit and not just the payment of claims during the execution
stage after the case had become final and executory.18

We shall first resolve the issue of whether the execution of the Labor Arbiter's order is legally possible even if
PAL is under receivership.
We note that during the pendency of this case, PAL was placed by the SEC first, under an Interim
Rehabilitation Receiver and finally, under a Permanent Rehabilitation Receiver. The pertinent law on this
matter, Section 5(d) of Presidential Decree (P.D.) No. 902-A, as amended, provides that:
SECTION 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as expressly
granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide
cases involving:
xxx
d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of
payments in cases where the corporation, partnership or association possesses property to cover all of its
debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the
corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the
[management of a rehabilitation receiver or] Management Committee created pursuant to this Decree.

Furthermore, the actions that are suspended cover all claims against the corporation whether for damages
founded on a breach of contract of carriage, labor cases, collection suits or any other claims of a pecuniary
nature.19 No exception in favor of labor claims is mentioned in the law. law library
This Court's adherence to the above-stated rule has been resolute and steadfast as evidenced by its oftrepeated application in a plethora of cases involving PAL, the most recent of which is Philippine Airlines, Inc. v.
Zamora.21
Since petitioners' claim against PAL is a money claim for their wages during the pendency of PAL's appeal to
the NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter,
the NLRC, as well as the Court of Appeals should have abstained from resolving petitioners' case for illegal
dismissal and should instead have directed them to lodge their claim before PAL's receiver.22
However, to still require petitioners at this time to re-file their labor claim against PAL under the peculiar
circumstances of the case - that their dismissal was eventually held valid with only the matter of reinstatement
pending appeal being the issue - this Court deems it legally expedient to suspend the proceedings in this
case.

The same P.D., in Section 6(c) provides that:

WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are
SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is
hereby DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs.

SECTION 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following
powers:

SO ORDERED.

xxx
c) To appoint one or more receivers of the property, real or personal, which is the subject of the action pending
before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the
investing public and creditors:' Provided, finally, That upon appointment of a management committee,
rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations,
partnerships or associations under management or receivership pending before any court, tribunal, board or
body shall be suspended accordingly.

[G.R. Nos. 95237-38. September 13, 1991.]

DAVAO CITY WATER DISTRICT, v. CIVIL SERVICE COMMISSION, Respondents.

SYLLABUS

xxx
Worth stressing, upon appointment by the SEC of a rehabilitation receiver, all actions for claims against the
corporation pending before any court, tribunal or board shall ipso jure be suspended. The purpose of the
automatic stay of all pending actions for claims is to enable the rehabilitation receiver to effectively exercise

1. PUBLIC CORPORATION; PROVINCIAL WATER UTILITIES ACT OF 1973 (P.D. NO. 198); RESOLUTION
OF SANGUNIAN; CONSTITUTES THE OPERATIVE ACT OF FORMING AND MAINTAINING A LOCAL
WATER DISTRICT. P.D. 198 is a general legislation which authorizes the formation of water districts.
However, the operative act which creates a water district is not said decree but the resolution of the

37

Sanggunian concerned forming and maintaining a local water district. It is apparent that insofar as the
formation of local water districts are concerned, P.D. 198 is not an original charter but a general act
authorizing the formation of water districts on local option basis (Sec. 2, P.D. 198) similar to the Corporation
Code.
2. ID.; ID.; GIVES THE WATER DISTRICT JURIDICAL PERSONALITY. Local water districts are formed by
resolutions of the respective Provincial, City and Municipal councils (Sec. 7, P.D. 198) filed with the Local
Water Utilities Administration, a government corporation chartered under Section 49, P.D. 198 and attached to
the Office of the President. Consequently, without the requisite resolution of the Sanggunian concerned
forming the water district having been filed with the Local Water Utility Administration, no water district is
formed. What gives the water districts juridical personality is the resolution of the respective Sanggunian
forming the district and filed with the local Water Utilities Administration. Once formed water district is subject
to the provisions of P.D. 198 and no longer under the jurisdiction of any political administration which shall
thereafter lose ownership supervision and control over the district (Sec. 7, P.D. 198).
3. ID.; ID.; OFFICERS AND EMPLOYEES OF WATER DISTRICTS; NOT COVERED BY THE CIVIL
SERVICE LAW. Justice Bidin votes to Grant the petition and to declare petitioners as quasi-public
corporations performing public service without original charters and therefore not embraced by the Civil
Service.

As an offshoot of the immediately cited ruling, the CSC issued Resolution No. 90-575, the dispositive portion
of which reads:
"NOW THEREFORE, in view of all the foregoing, the Commission resolved, as it hereby resolves to rule that
Local Water Districts, being quasi-public corporations created by law to perform public services and supply
public wants, the matter of hiring and firing of its officers and employees should be governed by the Civil
Service Law, rules and regulations. Henceforth, all appointments of personnel of the different local water
districts in the country shall be submitted to the Commission for appropriate action." (Rollo, p. 22).
However, on May 16, 1990, in G.R. No. 85760, entitled "Metro Iloilo Water District v. National Labor Relations
Commission, Et Al.," the Third Division of this Court ruled in a minute resolution:
"x

"Considering that PD 198 is a general legislation empowering and or authorizing government agencies and
entities to create water districts, said PD 198 cannot be considered as the charter itself creating the Water
District. Public respondent NLRC did not commit any grave abuse of discretion in holding that the operative
act, that created the Metro Ilo-ilo Water District was the resolution of the Sangguniang Panglunsod of Iloilo
City. Hence, the employees of Water Districts are not covered by Civil Service Laws as the latter do (sic) not
have original charters.

DECISION
In adherence to the just cited ruling, the CSC suspended the implementation of Resolution No. 90-575 by
issuing Resolution No. 90-770 which reads:
Whether or not the Local Water Districts formed and created pursuant to the provisions of Presidential Decree
No. 198, as amended, are government-owned or controlled corporations with original charter falling under the
Civil Service Law and/or covered by the visitorial power of the Commission on Audit is the issue which the
petitioners entreat this Court, en banc, to shed light on.
Petitioners are among the more than five hundred (500) water districts existing throughout the country formed
pursuant to the provisions of Presidential Decree No. 198, as amended by Presidential Decrees Nos. 768 and
1479, otherwise known as the "Provincial Water Utilities Act of 1973." library
Presidential Decree No. 198 was issued by the then President Ferdinand E. Marcos by virtue of his legislative
power under Proclamation No. 1081. It authorized the different local legislative bodies to form and create their
respective water districts through a resolution they will pass subject to the guidelines, rules and regulations
therein laid down. The decree further created and formed the "Local Water Utilities Administration" (LWUA), a
national agency attached to the National Economic and Development Authority (NEDA), and granted with
regulatory power necessary to optimize public service from water utilities operations.
The respondents, on the other hand, are the Civil Service Commission (CSC) and the Commission on Audit
(COA), both government agencies and represented in this case by the Solicitor General.
On April 17, 1989, this Court ruled in the case of Tanjay Water District v. Gabaton, Et. Al. (G.R. No. 63742,
172 SCRA 253):
"Significantly, Article IX(B), Section 2(1) of the 1987 Constitution provides that the Civil Service embraces all
branches, subdivisions, instrumentalities, and agencies of the government, including government-owned and
controlled corporations with original charters. Inasmuch as PD No. 198, as amended, is the original charter of
the petitioner, Tanjay Water District, and respondent Tarlac Water District and all water districts in the country,
they come under the coverage of the Civil Service Law, rules and regulations. (Sec. 35, Art. VIII and Sec. 37,
Art. IX of PD No. 807)." virtua1aw library

"x

x.

"NOW, THEREFORE, in view of all the foregoing, the Commission resolved to rule, as it hereby rules, that the
implementation of CSC Resolution No. 575 dated June 27, 1990 be deferred in the meantime pending
clarification from the Supreme Court as regards its conflicting decisions in the cases of Tanjay Water District v.
Gabaton and Metro Iloilo Water District v. National Labor Relations Commission." (p. 26, Rollo).
In the meanwhile, there exists a divergence of opinions between COA on one hand, and the LWUA on the
other hand, with respect to the authority of COA to audit the different water districts.
COA opined that the audit of the water districts is simply an act of discharging the visitorial power vested in
them by law (letter of COA to LWUA, dated August 13, 1985, pp. 29-30, Rollo).
On the other hand, LWUA maintained that only those water districts with subsidies from the government fall
within the COAs jurisdiction and only to the extent of the amount of such subsidies, pursuant to the provision
of the Government Auditing Code of the Phils.
It is to be observed that just like the question of whether the employees of the water districts falls under the
coverage of the Civil Service Law, the conflict between the water districts and the COA is also dependent on
the final determination of whether or not water districts are government-owned or controlled corporations with
original charter. The reason behind this is Sec. 2(1), Article IX-D of the 1987 constitution which reads:
"Sec. 2(1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all
accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or
held in trust by, or pertaining to the Government, or any of its subdivisions, agencies or instrumentalities,
including government-owned or controlled corporations with original charters, and on a post audit basis."
(Emphasis supplied)

38

Petitioners main argument is that they are private corporations without original charter, hence they are outside
the jurisdiction of respondents CSC and COA. Reliance is made on the Metro Iloilo case which declared
petitioners as quasi-public corporations created by virtue of PD 198, a general legislation which cannot be
considered as the charter itself creating the water districts. Holding on to this ruling, petitioners contend that
they are private corporations which are only regarded as quasi-public or semi-public because they serve
public interest and convenience and that since PD 198 is a general legislation, the operative act which created
a water district is not the said decree but the resolution of the sanggunian concerned.
After a fair consideration of the parties arguments coupled with a careful study of the applicable laws as well
as the constitutional provisions involved, We rule against the petitioners and reiterate Our ruling in Tanjay
case declaring water districts government-owned or controlled corporations with original charter.
As early as Baguio Water District v. Trajano, Et Al., (G.R. No. 65428, February 20, 1984, 127 SCRA 730), We
already ruled that a water district is a corporation created pursuant to a special law P.D. No. 198, as
amended, and as such its officers and employees are covered by the Civil Service Law.
In another case (Hagonoy Water District v. NLRC, G.R. No. 81490, August 31, 1988, 165 SCRA 272), We
ruled once again that local water districts are quasi-public corporations whose employees belong to the Civil
Service. The Courts pronouncement in this case, as extensively quoted in the Tanjay case, supra, partly
reads: law library
"The only question here is whether or not local water districts are government owned or controlled
corporations whose employees are subject to the provisions of the Civil Service Law. The Labor Arbiter
asserted Jurisdiction over the alleged illegal dismissal of private respondent Villanueva by relying on Section
25 of Presidential Decree No. 198, known as the Provincial Water Utilities Act of 1973 which went onto effect
in 25 May 1973, and which provides as follows:chanrob1es virtual 1aw library
Exemption from Civil Service. The district and its employees, being engaged in a proprietary function, are
hereby exempt from the provisions of the Civil Service Law. Collective Bargaining shall be available only to
personnel below supervisory levels: Provided, however, That the total of all salaries, wages, emoluments,
benefits or other compensation paid to all employees in any month shall not exceed fifty percent (50%) of
average net monthly revenue. Said net revenue representing income from water sales and sewerage service
charges, less pro-rata share of debt service and expenses for fuel or energy for pumping during the preceding
fiscal year.
"The Labor Arbiter failed to take into account the provisions of Presidential Decree No. 1479, which went into
effect on 11 June 1978, P.D. No. 1479 wiped away Section 25 of PD 198 quoted above, and Section 26 of PD
198 was renumbered as Section 25 in the following manner:
"Section 26 of the same decree PD 198 is hereby amended to read as Section 25 as follows: 1aw library
Section 25. Authorization. The district may exercise all the powers which are expressly granted by this Title
or which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose
of carrying out the objectives of this Act, a district is hereby granted the power of eminent domain, the
exercise thereof shall, however, be subject to review by the Administration
Thus, Section 25 of PD 198 exempting the employees of water districts from the application of the Civil
Service Law was removed from the statute books:
"x

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

"3. The BWD is a corporation created pursuant to a special

law PD No. 198, as amended. As such its officers and employees are part of the Civil Service (Sec. 1, Art.
XII-B, [1973] Constitution; PD No. 868)." virtua1aw library
Ascertained from a consideration of the whole statute, PD 198 is a special law applicable only to the different
water districts created pursuant thereto. In all its essential terms, it is obvious that it pertains to a special
purpose which is intended to meet a particular set of conditions and circumstances. The fact that said decree
generally applies to all water districts throughout the country does not change the fact that PD 198 is a special
law. Accordingly, this Courts resolution in Metro Iloilo case declaring PD 198 as a general legislation is hereby
abandoned.
By "government-owned or controlled corporation with original charter," We mean government owned or
controlled corporation created by a special law and not under the Corporation Code of the Philippines. Thus,
in the case of Lumanta v. NLRC (G.R. No. 82819, February 8, 1989, 170 SCRA 79, 82), We held: library : red
"The Court, in National Service Corporation (NASECO) v. National Labor Relations Commission, G.R. No.
69870, promulgated on 29 November 1988, quoting extensively from the deliberations of the 1986
Constitutional Commission in respect of the intent and meaning of the new phrase with original charter, in
effect held that government-owned and controlled corporations with original charter refer to corporations
chartered by special law as distinguished from corporations organized under our general incorporation statute
the Corporation Code. In NASECO, the company involved had been organized under the general
incorporation statute and was a subsidiary of the National Investment Development Corporation (NIDC) which
in turn was a subsidiary of the Philippine National Bank, a bank chartered by a special statute. Thus,
government-owned or controlled corporations like NASECO are effectively, excluded from the scope of the
Civil Service." (Emphasis supplied)
From the foregoing pronouncement, it is clear that what has been excluded from the coverage of the CSC are
those corporations created pursuant to the Corporation Code. Significantly, petitioners are not created under
the said code, but on the contrary, they were created pursuant to a special law and are governed primarily by
its provision.
No consideration may thus be given to petitioners contention that the operative act which created the water
districts are the resolutions of the respective local sanggunians and that consequently, PD 198, as amended,
cannot be considered as their charter.
It is to be noted that PD 198, as amended is the source of authorization and power to form and maintain a
district. Section 6 of said decree provides:
"Sec. 6. Formation of District. This Act is the source of authorization and power to form and maintain a
district. Once formed, a district is subject to the provisions of this Act and not under the jurisdiction of any
political subdivision. . . . ." library
Moreover, it must be observed that PD 198, contains all the essential terms necessary to constitute a charter
creating a juridical person. For example, Section 6(a) provides for the name that will be used by a water
district, thus:

"We grant the petition for the following reasons:

"Section 6. . . . To form a district, the legislative body of any city, municipality or province shall enact a

39

resolution containing the following:

"a) The name of the local water district, which shall include the name of the city, municipality, or province, or
region thereof, served by said system, followed by the words Water District.
It also prescribes for the numbers and qualifications of the members of the Board of Directors:
"Sec. 8. Number and Qualification. The Board of Directors of a district shall be composed of five citizens of
the Philippines who are of voting age and residents within the district. One member shall be a representative
of civic- oriented service clubs, one member of representative of professional associations, one member a
representative of business, commercial or financial organizations, one member a representative of
educational institutions and one member a representative of womens organization. No public official shall
serve as director. Provided, however, that if the district has availed of the financial assistance of the
Administration, the Administration may appoint any off its personnel to sit in the board of directors with all the
rights and privileges appertaining to a regular member for such period as the indebtedness remains unpaid in
which case the board shall be composed of six members;" (as amended by PDs Nos. 768 and 1479).
the manner of their appointment and nominations;
"Section 9. Appointment. Board members shall be appointed by the appointing authority. Said
appointments shall be made from a list of nominees, if any, submitted pursuant to Section 10. If no
nominations are submitted, the appointing authority shall appoint any qualified person of the category to the
vacant position.
"Section 10. Nominations. On or before October 1 of each even numbered year, the secretary of the district
shall contact each known organization, association, or institution being represented by the director whose
term will expire on December 31 and solicit nominations from these organizations to fill the position for the
ensuing term. One nomination may be submitted in writing by each such organization to the Secretary of the
district on or before November 1 of such year: This list of nominees shall be transmitted by the Secretary of
the district to the office of the appointing authority on or before November 15 of such year and he shall make
his appointment from the list submitted on or before December 15. In the event the appointing authority fails to
make his appointments on or before December 15, selection shall be made from said list of nominees by
majority vote of the seated directors of the district constituting a quorum. Initial nominations for all five seats of
the board shall be solicited by the legislative body or bodies at the time of adoption of the resolution forming
the district. Thirty days thereafter, a list of nominees shall be submitted to the provincial governor in the event
the resolution forming the district is by a provincial board, or the mayor of the city or municipality in the event
the resolution forming the adoption of the district is by the city or municipal board of councilors, who shall
select the initial directors therefrom within 15 days after receipt of such nominations;"
their terms of office:
"Section 11. Term of Office. Of the five initial directors of each newly formed district, two shall be appointed
for a maximum term of two years, two for a maximum term of four years, and one for a maximum term of six
years. Terms of office of all directors in a given district shall be such that the term of at least one director, but
not more then two, shall expire on December 31 of each even-numbered year. Regular terms of office after
the initial terms shall be for six years commencing on January 1 of odd-numbered years. Directors may be
removed for cause only, subject to review and approval of the Administration;" (as amended by PD 768).

to the appointing authority for his appointment of a replacement director from the list of nominees. In the
absence of such nominations, the appointing authority shall make such appointment. If within 30 days after
submission to him of a list of nominees the appointing authority fails to make am appointment, the vacancy
shall be filled from such list by a majority vote of the remaining members of the Board of Directors constituting
a quorum. Vacancies occurring within the last six months of an unexpired term shall also be filled by the Board
in the above manner. The director thus appointed shall serve the unexpired term only;" (as amended by PD
768).
and the compensation and personal liability of the members of the Board of Directors:
"Section 13. Compensation. Each director shall receive a per diem, to be determined by the board, for each
meeting of the board actually attended by him, but no director shall receive per diems in any given month in
excess of the equivalent of the total per diems of four meetings in any given month. No director shall receive
other compensation for services to the district.
"Any per diem in excess of P50.00 shall be subject to approval of the Administration (as amended by PD 768).
"Section 14. Personal Liability. No director may be held to be personally liable for any action of the district."
red
Noteworthy, the above quoted provisions of PD 198, as amended, are similar to those which are actually
contained in other corporate charters. The conclusion is inescapable that the said decree is in truth and in fact
the charter of the different water districts for it clearly defines the latters primary purpose and its basic
organizational set-up. In other words, PD 198, as amended, is the very law which gives a water district
juridical personality. While it is true that a resolution of a local sanggunian is still necessary for the final
creation of a district, this Court is of the opinion that said resolution cannot be considered as its charter, the
same being intended only to implement the provisions of said decree. In passing a resolution forming a water
district, the local sanggunian is entrusted with no authority or discretion to grant a charter for the creation of a
private corporation. It is merely given the authority for the formation of a water district, on a local option basis,
to be exercised under and in pursuance of PD 198.
More than the aforequoted provisions, what is of important interest in the case at bar is Section 3, par. (b) of
the same decree which reads:
"Section 3(b). Appointing of authority. The person empowered to appoint the members of the Board of
Directors of a local water district, depending upon the geographic coverage and population make-up of the
particular district. In the event that more than seventy-five percent of the total active water service connections
of a local water districts are within the boundary of any city or municipality, the appointing authority shall be
the mayor of that city or municipality, as the cage may be; otherwise, the appointing authority shall be the
governor of the province within which the district is located: Provided, That if the existing waterworks system
in the city or municipality established as a water district under this Decree is operated and managed by the
province, initial appointment shall be extended by the governor of the province. Subsequent appointments
shall be as specified herein.
If portions of more than one province are included within the boundary of the district, and the appointing
authority is to be the governors then the power to appoint shall rotate between the governors involved with the
initial appointments made by the governor in whose province the greatest number of service connections
exists (as amended by PD 768).

the manner of filling up vacancies;

"Section 12. Vacancies. In the event of a vacancy in the board of directors occurring more than six months
before expiration of any director s term, the remaining directors shall within 30 days, serve notice to or request
the secretary of the district for nominations and within 30 days, thereafter a list of nominees shall be submitted

The above-quoted section definitely sets to naught petitioners contention that they are private corporations. It
is clear therefrom that the power to appoint the members who will comprise the Board of Directors belongs to
the local executives of the local subdivision units where such districts are located. In contrast, the members of
the Board of Directors or trustees of a private corporation are elected from among the members and

40

stockholders thereof. It would not be amiss to emphasize at this point that a private corporation is created for
the private purpose, benefit, aim and end of its members or stockholders. Necessarily, said members or
stockholders should be given a free hand to choose those who will compose the governing body of their
corporation. But this is not the case here and this clearly indicates that petitioners are definitely not private
corporations. The foregoing disquisition notwithstanding, We are, however, not unaware of the serious
repercussion this may bring to the thousands of water districts employees throughout the country who stand
to be affected because they do not have the necessary civil service eligibilities. As these employees are
equally protected by the constitutional guarantee to security of tenure, We find it necessary to rule for the
protection of such right which cannot be impaired by a subsequent ruling of this Court. Thus, those employees
who have already acquired their permanent employment status at the time of the promulgation of this decision
cannot be removed by the mere reason that they lack the necessary civil service eligibilities. law library
ACCORDINGLY, the petition is hereby DISMISSED. Petitioners are declared "government-owned or
controlled corporations with original charter" which fall under the jurisdiction of the public respondents CSC
and COA.
SO ORDERED.
x

[G.R. No. 85611. April 6, 1990.]

VICTORIANO ZAMORAS, Petitioner, v. ROQUE SU, Respondents.
SYLLABUS
1. LABOR LAWS; AGRICULTURAL TENANCY ACT (R.A. No. 1199); TENANT DEFINED. Under Section 5
(a) of R.A. No. 1199, a tenant is "a person who by himself, or with the aid available from within his immediate
household, cultivates the land belonging to or possessed by another, with the latters consent for purposes of
production, sharing the produce with the landholder or for a price certain or ascertainable in produce or in
money or both, under the leasehold tenancy system" (Matienzo v. Servidad, 107 SCRA 276). Agricultural
tenancy is defined as "the physical possession by a person of land devoted to agriculture, belonging to or
legally possessed by another for the purpose of production through the labor of the former and of the
members of his immediate farm household in consideration of which the former agrees to share the harvest
with the latter or to pay a price certain or ascertainable, whether in produce or in money, or both" (Sec. 3, R.A.
No. 1199; 50 O.G. 4655-56; Miguel Carag v. CA, Et Al., 151 SCRA 44).
2. ID.; ID.; TENANCY RELATIONSHIP; ESSENTIAL REQUISITES. The essential requisites of a tenancy
relationship are: (1) the parties are the landholder and the tenant; (2) the subject is the agricultural holding; (3)
there is consent between the parties; (4) the purpose is agricultural production; (5) there is personal cultivation
by the tenant; and (6) there is a sharing of harvests between landlord and tenant (Antonio Castro v. CA and
De la Cruz, G.R. L-34613, January 26, 1989; Tiongson v. CA, 130 SCRA 482; Guerrero v. CA, 142 SCRA
138).
3. ID.; ID.; ID.; ELEMENT OF PERSONAL CULTIVATION OF THE LAND OR WITH AID OF HIS FARM
HOUSEHOLD; ABSENT IN CASE AT BAR. The element of personal cultivation of the land, or with the aid
of his farm household, essential in establishing a landlord-tenant or a lessor-lessee relationship, is absent in
the relationship between Su and Zamoras (Co v. IAC, 162 SCRA 390; Graza v. CA, 163 SCRA 39), for
Zamoras did not cultivate any part of Sus plantation either by himself or with the help of his household.
4. ID.; EMPLOYER-EMPLOYEE RELATIONSHIP; ESTABLISHED IN CASE AT BAR. The following
circumstances are indicative of an employer-employee relationship between the parties. 1. Zamoras was

selected and hired by Su as overseer of the coconut plantation. 2. His duties were specified by Su. 3. Su
controlled and supervised the performance of his duties. He determined to whom Zamoras should sell the
copra produced from the plantation. 4. Su paid Zamoras a salary of P2,400 per month plus one-third of the
copra sales every two months as compensation for managing the plantation.
DECISION
The issue in this petition is whether, upon the established facts, the petitioner was an employee or tenant of
the private respondents.
The petitioner, Victoriano Zamoras, was hired by the respondent, Roque Su, Jr., in 1957 as overseer of his
coconut land in Asenario, Dapitan City. Zamoras was charged with the task of having the land titled in Sus
name, and of assigning portions to be worked by tenants, supervising the cleaning, planting, care and
cultivation of the land, the harvesting of coconuts and selling of the copra. As compensation, Su paid Zamoras
a salary of P2,400 per month plus one-third (1/3) of the proceeds of the sales of copra which normally
occurred every two months. Another one-third of the proceeds went to the tenants and the other third to Su.
This system of sharing was regularly observed up to September, 1981. As the coconut plantation yielded an
average harvest of 21,000 nuts worth P18,900, based on the current market price of P3 per kilo, Zamoras
share amounted to P6,300 every two months.
In May, 1981, Su informed Zamoras in writing that he obtained a loan from the other respondent, Anita Su
Hortellano, and that he authorized her to harvest the coconuts from his property "while the loan was
outstanding" (p. 8, Rollo). Su sent Zamoras a letter dated May 29, 1981 informing him that he was being laidoff temporarily until Su could obtain a loan from the Development Bank of the Philippines with which to pay
Anita. However, Zamoras was not allowed anymore to work as overseer of the plantation. Without his
knowledge and consent, Hortellano harvested the coconuts without giving him his one third share of the copra
sales.
On August 8, 1983, Zamoras filed in the Regional Arbitration Branch of the Ministry of Labor and Employment
in Zamboanga City a complaint against Roque Su, Jr. and Anita Su Hortellano for illegal termination and
breach of contract with damages of not less than P75,600 as his uncollected share of the copra sales from
September 15, 1981 to August 1983.
The officer-in-charge of the NLRC Sub-Regional Office in Dipolog City who investigated the case submitted
the following findings which were adopted by the Labor Arbiter:
"The record would show that the respondent, Atty. Roque Su, Jr., is a resident of 976-A Gerardo Avenue
Extension, Lahug, Cebu City and at the same time an employee in the government up to the present, while
the land wherein the complainant herein was employed by the respondent as overseer of the land since 1957
up to and until his termination from the service sometime in September 1981 without just cause or causes
duly authorized by law and after due process. That to prove that complainant was the overseer of the land
owned by the respondent are the sworn declaration of the three witnesses, namely: Vicente Amor, Narcisa
Arocha, and Wilfredo Bernaldes who are presently working as tenants of the Respondent. That the three
witnesses testified that they knew the complainant personally who has been working as overseer of the land
because it was thru him, the complainant, that they were allowed to work and/or occupy the land as tenants
ever since up to the present. In fact, they further declared that they do not know personally the owner of the
land and besides, they have not seen personally the said owner as their dealing were directly done thru the
complainant. That they always received their share of the produce from the complainant for every two months
up to 1981.
x

"It is very clear in the evidence of record that complainant was an employee of the Respondent. This fact is

41

even admitted by the respondent in his answer by way of controverting the claim of the complainant." (pp. 4445, Rollo.)

landlord and tenant (Antonio Castro v. CA and De la Cruz, G.R. L-34613, January 26, 1989; Tiongson v. CA,
130 SCRA 482; Guerrero v. CA, 142 SCRA 138).

On July 30, 1986, the Labor Arbiter rendered a decision holding that Zamoras, as overseer of the
respondents plantation, was a regular employee whose services were necessary and desirable to the usual
trade or business of his employer. The Labor Arbiter held that the dismissal of Zamoras was without just
cause, hence, illegal. The private respondents were ordered to reinstate him to his former position as
overseer of the plantation and to pay him backwages equivalent to P31,975.83 in the event that he opted not
to be reinstated or that his reinstatement was not feasible.

The element of personal cultivation of the land, or with the aid of his farm household, essential in establishing
a landlord-tenant or a lessor-lessee relationship, is absent in the relationship between Su and Zamoras (Co v.
IAC, 162 SCRA 390; Graza v. CA, 163 SCRA 39), for Zamoras did not cultivate any part of Sus plantation
either by himself or with the help of his household.

The private respondents appealed to the National Labor Relations Commission, alleging that the Labor Arbiter
erred: 1aw library
1. in disregarding respondents evidence (a financial report showing the yearly copra sales from 1973 to
1977), proving that complainants one-third share of the copra sales amounted to P5,985.16 only and not
P6,300 per harvest;

On the other hand, the following circumstances are indicative of an employer-employee relationship between
them: 1aw library
1. Zamoras was selected and hired by Su as overseer of the coconut plantation.
2. His duties were specified by Su.
3. Su controlled and supervised the performance of his duties. He determined to whom Zamoras should sell
the copra produced from the plantation.

2. in not holding that the complainant can no longer be reinstated for he is already dead; and
3. in not finding that no employer-employee relationship existed between the parties.
On September 16, 1988, the NLRC rendered a decision reversing the Labor Arbiter. It held that "the right to
control test used in determining the existence of an employer-employee relationship is unavailing in the
instant case and that what exists between the parties is a landlord-tenant relationship" (p. 32, Rollo), because
such functions as introducing permanent improvements on the land, assigning portions to tenants, supervising
the cleaning, planting, care and cultivation of the plants, and deciding where and to whom to sell the copra are
attributes of a landlord-tenant relationship, hence, jurisdiction over the case rests with the Court of Agrarian
Relations.
Zamoras filed this petition, assailing the NLRCs decision.
There is merit in the petition.

4. Su paid Zamoras a salary of P2,400 per month plus one-third of the copra sales every two months as
compensation for managing the plantation.
Since Zamoras was an employee, not a tenant of Su, it is the NLRC, not the Court of Agrarian Relations, that
has jurisdiction to try and decide Zamoras complaint for illegal dismissal (Art. 217, Labor Code; Manila
Mandarin Employees Union v. NLRC, 154 SCRA 368; Jacqueline Industries Dunhill Bags Industries, Et. Al. v.
NLRC, Et Al., 69 SCRA 242).
WHEREFORE, the assailed decision is reversed and a new one is entered, declaring Zamoras to be an
employee of respondent Roque Su, Jr. and that his dismissal was illegal and without lawful cause. He is
entitled to reinstatement with backwages, but because he is dead and may no longer be reinstated, the
private respondents are ordered to pay to his heirs the backwages due him, as well as his share of the copra
sales from the plantation for a period of three (3) years from his illegal dismissal in September, 1981, plus
separation pay in lieu of reinstatement. Costs against the private respondents.

The NLRCs conclusion that a landlord-tenant relationship existed between Su and Zamoras is not supported
by the evidence which shows that Zamoras was hired by Su not as a tenant but as overseer of his coconut
plantation. As overseer, Zamoras hired the tenants and assigned their respective portions which they
cultivated under Zamoras supervision. The tenants dealt directly with Zamoras and received their one-third
share of the copra produce from him. The evidence also shows that Zamoras, aside from doing administrative
work for Su, regularly managed the sale of copra processed by the tenants. There is no evidence that
Zamoras cultivated any portion of Sus land personally or with the aid of his immediate farm household. In fact
the respondents never raised the issue of tenancy in their answer.

SO ORDERED.

Under Section 5 (a) of R.A. No. 1199, a tenant is "a person who by himself, or with the aid available from
within his immediate household, cultivates the land belonging to or possessed by another, with the latters
consent for purposes of production, sharing the produce with the landholder or for a price certain or
ascertainable in produce or in money or both, under the leasehold tenancy system" (Matienzo v. Servidad,
107 SCRA 276). Agricultural tenancy is defined as "the physical possession by a person of land devoted to
agriculture, belonging to or legally possessed by another for the purpose of production through the labor of the
former and of the members of his immediate farm household in consideration of which the former agrees to
share the harvest with the latter or to pay a price certain or ascertainable, whether in produce or in money, or
both" (Sec. 3, R.A. No. 1199; 50 O.G. 4655-56; Miguel Carag v. CA, Et Al., 151 SCRA 44).

Not every loss incurred or expected to be incurred by employers can justify retrenchment. They must
prove, among others, that the losses are substantial and that the retrenchment is reasonably necessary to
avert those losses.

The essential requisites of a tenancy relationship are: (1) the parties are the landholder and the tenant; (2) the
subject is the agricultural holding; (3) there is consent between the parties; (4) the purpose is agricultural

G. R. No. 148532 - April 14, 2004

EMCO PLYWOOD CORPORATION, Petitioners, vs. PERFERIO ABELGASRespondents.

The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the December 21, 2000
Decision2and the June 20, 2001 Resolution3 of the Court of Appeals4 (CA) in CA-GR SP No. 51967. The
assailed Decision disposed as follows:

42

"WHEREFORE, the petition for certiorari is GRANTED and the challenged Orders of the National Labor
Relations Commission are hereby declared NULL and VOID.
"Considering that, as borne out of the records, EMCOs attempted retrenchment of the [respondents] was
legally ineffective, EMCO is ordered to REINSTATE [respondents] with full backwages, inclusive of
allowances and other benefits or their monetary equivalent, computed from the time their compensation was
withheld from them up to the time of their actual reinstatement. Where reinstatement is no longer possible
because the position they had previously filled are no longer in existence, EMCO shall paybackwages,
inclusive of allowances and other benefits, computed from the time their employment was terminated up to
the time the decision herein becomes final, and, in lieu of reinstatement, separation payequivalent to onemonths pay for every year of service including the putative period for which backwages are payable. In all
these cases, the payments received by [respondents] and for which they executed quitclaims shall be
deducted from the backwages and separation pay due to them. Costs against the [petitioners]." 5
The assailed Resolution denied petitioners Motion for Partial Reconsideration.
The Facts

"Per EMCOs notice to the DOLE, one hundred four (104) workers were proposed for inclusion in its
retrenchment program. As it turned out, though, EMCO terminated two hundred fifty (250) workers. Among
them were herein [respondents].
"[Respondents] received their separation pay in the amount of four thousand eight hundred fifteen pesos
(P4,815.00) each. Deductions were, nevertheless, made by EMCO purportedly for the attorneys fees payable
to [respondents] lawyer, for the latters effort in purportedly renegotiating, sometime in 1993, the three peso
(P3.00) increase in the wages of [respondents], as now contained in the Collective Bargaining Agreement.
"Upon receipt of their separation pay, [respondents] were made to sign quitclaims, which read:
TO WHOM IT MAY CONCERN:
I, ________________of legal age and a resident of _______________________, for and in consideration of
the amount of (P___________), the receipt of which, in full, is hereby acknowledged, forever discharge and
release x x x EMCO PLYWOOD CORPORATION and all its officers men agents and corporate assigns from
any and all forms of actions/suits, debts, sums of money, unpaid wages, overtime pay allowances, overtime
pay or an other liability of any nature by reason of my employment which has ceased by this date.

The factual antecedents of the case are summarized by the CA as follows:

Done this _________________, at Magallanes, Agusan del Norte.
"[Respondents], the retrenched employees of [petitioner] seek the review and reversal of the resolutions of
the National Labor Relations Commission (NLRC), dated February 11, 1997 and March 25, 1997,
respectively.
"The first resolution dismissed [respondents] appeal for lack of merit and affirmed the decision of the Labor
Arbiter, dated July 24, 1996, which, in turn, dismissed [respondents] complaint against EMCO and the latters
general manager, [petitioner] Jimmy N. Lim (Lim), for illegal dismissal, damages and attorneys fees. The
second resolution assailed by the [respondents] consists of the NLRCs denial of their motion for
reconsideration of the earlier mentioned February 11, 1997 resolution.
"EMCO is a domestic corporation engaged in the business of wood processing, operating through its sawmill
and plymill sections where [respondents] used to be assigned as regular workers.

"About two (2) years later, [respondents], through their labor union, lodged a compliant against EMCO for
illegal dismissal, damages and attorneys fees.
"In the main, [respondents] questioned the validity of their retrenchment and the sufficiency of the separation
pay received by them.
"EMCO countered by interposing the defense of lack of cause of action, contending that [respondents], by
signing the quitclaims in favor of EMCO, had, in fact, waived whatever claims they may have against the
latter.
"Finding for EMCO, the Labor Arbiter dismissed [respondents] complaint.

"On January 20, 1993 and of March 2, 1993, EMCO, represented by Lim, informed the Department of Labor
and Employment (DOLE) of its intention to retrench some of its workers. The intended retrenchment was
grounded on purported financial difficulties occasioned by alleged lack of raw materials, frequent
machinery breakdown, low market demand and expiration of permit to operate its sawmill department.
A memorandum was thereafter issued by EMCO, addressed to all its foremen, section heads, supervisors and
department heads, with the following instructions:

"[Respondents] subsequent appeal to the NLRC was dismissed for lack of merit and the decision of the Labor
Arbiter was affirmed. Notably, the NLRC glossed over the issue of whether [respondents] were validly
retrenched, and anchored its dismissal of the appeal on the effect of [respondents] waivers or quitclaims, to
quote:

1) Retrench some of your workers based on the following guidelines:

The pivotal issue brought to fore is whether or not the quitclaims/waivers executed by [respondents] are valid
and binding. The other issues raised by [respondents] are either related to mere technicality, or are merely
ancillary or dependent on the main issue.

a) Old Age (58 years and above except positions that are really skilled);
b) Performance (Attitude, Attendance, Quality/ Quantity of Work[)];
2) Schedule the unspent VL/SL of your men without necessary replacements. x x x

xxx-xxx-xxx
There is no doubt that the [respondents] voluntarily executed their quitclaims/waivers as manifested by the
fact that they did not promptly question their validity within a reasonable time. It took them two (2) years to
challenge and dispute the validity of the waivers by claiming belatedly that they were either forced or misled

43

into signing the same. Clearly, this case was instituted by [respondents] to unduly exact more payment of
separation benefits from [petitioner] at the expense of fairness and justice.

Whether or not respondent Court of Appeals seriously erred in reversing the factual findings of both the Labor
Arbiter and the NLRC that petitioners had substantially complied with the requisites for a valid retrenchment?

"In passing, the NLRC likewise affirmed EMCOs deductions of attorneys fees from the separation pay
received by the [respondents].
"A motion for reconsideration of the afore-quoted resolution was filed by [respondents] on March 10, 1997, but
was denied by the NLRC, purportedly, for lack of merit and for having been filed out of time." 6(Citations
omitted)
Ruling of the Court of Appeals
The CA held that the evidence was insufficient to justify a ruling in favor of EMCO, which had not complied
with the one-month prior notice requirement under the Labor Code. The appellate court added that the
corporation had not served on the employees the required notice of termination. It opined that the
Memorandum, having merely provided the guidelines on the conduct of the intended lay-off, did not constitute
such notice. Furthermore, the Memorandum was not addressed to the workers, but to the foremen, the
department supervisors and the section heads. Moreover, there was no proper notice to DOLE. The
corporation terminated the services of 250 employees but included only 104 of them in the list it filed with
DOLE. EMCOs argument that the 146 unlisted employees had voluntarily resigned was brushed aside by the
appellate court.

"II.
Whether or not respondent Court manifestly erred in reversing the factual findings of both the Labor Arbiter
and the NLRC that private respondents had voluntarily executed their respective Quitclaims?
"III.
Whether or not respondent Court may, in a petition for certiorari under Rule 65 of the Rules of Court, correct
the evaluation of evidence made by both the Labor Arbiter and the NLRC, and thereafter substitute its own
findings for those of the Labor Arbiter and the NLRC?"8
Simply put, petitioners are insisting on the validity of the retrenchment and the enforceability of the Quitclaims.
They are also questioning whether or not the appellate court may disturb the findings of the labor arbiter and
the NLRC.
This Courts Ruling
The Petition has no merit.

The CA also held that before EMCO resorted to retrenchment, the latter had failed to adduce evidence of its
losses and to prove that it had undertaken measures to prevent the occurrence of its alleged actual or
impending losses.
Moreover, the CA ruled that the corporation had not paid the legally prescribed separation pay, which was
equal to one-month pay or at least one-half month pay for every year of service, whichever was higher.
Deducting attorneys fees from the supposed separation pay of the employees was held to be in clear violation
of the law. Such fees should have been charged against the funds of their union.
The appellate court further held that the cause of action of the employees had not yet prescribed when the
case was filed, because an action for illegal dismissal constituted an injury to their rights. The CA added that
the provision applicable to the case was Article 1146 of the New Civil Code, according to which the
prescriptive period for such causes of action was four (4) years. The Complaint, having been filed by the
employees only two years after their dismissal, had not prescribed.
All in all, the appellate court concluded that the retrenchment was illegal, because of EMCOs failure to comply
with the legal requirements.
Hence, this Petition.7
The Issues
In their Memorandum, petitioners raise these issues for our consideration:
"I.

Main Issues:
Retrenchment
Retrenchment is one of the authorized causes for the dismissal of employees. Resorted to by employers to
avoid or minimize business losses,9 it is recognized under Article 283 of the Labor Code.10
The "loss" referred to in this provision cannot be of just any kind or amount; otherwise, a company could
easily feign excuses to suit its whims and prejudices or to rid itself of unwanted employees. The Court has laid
down the following standards that a company must meet to justify retrenchment and to guard against abuse:
"x x x Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss
purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential
in character, the bonafide nature of the retrenchment would appear to be seriously in question. Secondly, the
substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively
and in good faith by the employer. There should, in other words, be a certain degree of urgency for the
retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the
employees retired or otherwise laid-off. Because of the consequential nature of retrenchment, it must, thirdly,
be reasonably necessary and likely to effectively prevent the expected losses. The employer should have
taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs other than labor
costs. An employer who, for instance, lays off substantial numbers of workers while continuing to dispense fat
executive bonuses and perquisites or so-called golden parachutes, can scarcely claim to be retrenching in
good faith to avoid losses. To impart operational meaning to the constitutional policy of providing full protection
to labor, the employers prerogative to bring down labor costs by retrenching must be exercised essentially as
a measure of last resort, after less drastic means e.g., reduction of both management and rank-and-file

44

bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing
and advertising costs, etc. have been tried and found wanting.

to prove that their alleged losses were substantial, continuing and without any immediate prospect of abating;
hence, the nature of the retrenchment is seriously disputable.

"Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent
losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for
requiring this quantum of proof is readily apparent: any less exacting standard of proof would render too easy
the abuse of this ground for termination of services of employees. x x x." 11

Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however,
subject to faithful compliance with the substantive and the procedural requirements laid down by law and
jurisprudence.24 It must be exercised essentially as a measure of last resort, after less drastic means have
been tried and found wanting.

Retrenchment is only "a measure of last resort when other less drastic means have been tried and found to be
inadequate."12

The only less drastic measure that EMCO undertook was the rotation work scheme: the three-day-work per
employee per week schedule. It did not try other measures, such as cost reduction, lesser investment on raw
materials, adjustment of the work routine to avoid the scheduled power failure, reduction of the bonuses and
salaries of both management and rank-and-file, improvement of manufacturing efficiency, trimming of
marketing and advertising costs, and so on. The fact that petitioners did not resort to other such measures
seriously belies their claim that retrenchment was done in good faith to avoid losses.

To prove that the retrenchment was necessary to prevent substantial losses, petitioners present their audited
financial statements for the years 1991 and 1992.13 These statements show that EMCOs net income
ofP1,052,817.00 for 1991 decreased to P880,407.85 in 1992. They allege that this decrease was due to low
market demand, lack of raw materials, frequent breakdown of old equipment and high cost of operations. The
financial statements also demonstrate that EMCOs liability then increased from P106,507,214.14
to P123,901,838.30. Petitioners cite several cases in which this Court has held that audited financial
statements constitute the normal method of proof of the profit-and-loss performance of a company. These
statements allegedly partake the nature of public documents, because they have been audited and duly filed
with the Bureau of Internal Revenue. As such, they enjoy the presumption of regularity and validity.
Petitioners further argue that EMCO undertook preventive measures to prevent the occurrence of imminent
losses.14 To accommodate and save all its employees, it allegedly implemented a scheme in which they would
work on a rotation basis -- on at least a three-day-work per employee per week schedule. 15 This arrangement
was, however, short-lived to prevent a strike that the union and its members then threatened to stage. 16
Petitioners also contend that the 146 employees not included in the list submitted to DOLE voluntarily
resigned, not solely on the ground that the companys permit to operate its sawmill department had expired,
but also because of a period of uncertainty brought about by the aforementioned factors that allegedly justified
the retrenchment program.17
The Court is not persuaded. "Not every loss incurred or expected to be incurred by a company will justify
retrenchment. The losses must be substantial and the retrenchment must be reasonably necessary to avert
such losses."18 The employer bears the burden of proving the existence or the imminence of substantial
losses with clear and satisfactory evidence that there are legitimate business reasons justifying a
retrenchment.19 Should the employer fail to do so, the dismissal shall be deemed unjustified. 20
In the present case, petitioners have presented only EMCOs audited financial statements for the years 1991
and 1992. As already stated, these show that their net income of P1,052,817.00 for 1991 decreased
to P880,407.85 in 1992. Somerville Stainless Steel Corporation v. NLRC21 held that the presentation of the
companys financial statements for a particular year was inadequate to overcome the stringent requirement of
the law. According to the Court, "[t]he failure of petitioner to show its income or loss for the immediately
preceding years or to prove that it expected no abatement of such losses in the coming years bespeaks the
weakness of its cause. The financial statement for 1992, by itself, x x x does not show whether its losses
increased or decreased. Although [the employer] posted a loss for 1992, it is also possible that such loss was
considerably less than those previously incurred, thereby indicating the companys improving condition." 22

Defective Notice
For a valid termination due to retrenchment, the law requires that written notices of the intended retrenchment
be served by the employer on the worker and on the Department of Labor and Employment at least one (1)
month before the actual date of the retrenchment.25 The purpose of this requirement is to give employees
some time to prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain
the verity of the alleged cause of termination.26
There is no showing that such notice was served on the employees in the present case. Petitioners argue that
on January 20, 1993, Petitioner Jimmy Lim gave the DOLE a formal notice of the intended retrenchment and
furnished the EMCO Labor Association and its general membership copies of the notice by posting it on the
bulletin boards of their respective departments. On March 2, 1993, EMCO sent DOLE another written notice.
The next day, Lim sent a Memorandum to the foremen, the section heads, the supervisors and the
department heads instructing them to retrench some of the workers based on certain guidelines. Petitioners
aver that the Memorandum also served as a written notice to all the employees concerned. Clearly, it is not
the notice contemplated by law. The written notice should have been served on the employees themselves,
not on their supervisors.
The Notice sent to DOLE was defective, because it stated that EMCO would terminate the services of 104 of
its workers. The corporation, however, actually dismissed 250. Petitioners aver that the 146 employees not
listed in the Notice sent to DOLE voluntarily resigned; hence, the latter were not retrenched. This assertion
does not deserve any consideration. Petitioners reiterate that those workers voluntarily resigned because of
the atmosphere of uncertainty, which occurred after the Sawmill Department had been temporarily shut off in
February 1993. The renewal of the permit on March 31, 1993, however, removed the alleged shroud of
uncertainty.
Moreover, resignation is the voluntary act of employees who are compelled by personal reasons to dissociate
themselves from their employment. It must be done with the intention of relinquishing an office, accompanied
by the act of abandonment.27 Therefore, it would have been illogical for respondents to resign and then file a
Complaint for illegal dismissal. Resignation is inconsistent with the filing of the Complaint. 28
Propriety of Separation Benefits

The Court further held therein that "[i]n the analysis of financial statements, (o)ne particular percentage of
relationship may not be too significant in itself ; that is, it may not suffice to point out those unfavorable
characteristics of the company that would require immediate or even drastic action." 23 Petitioners have failed

Article 283 of the Labor Code provides for the proper separation benefits in this wise:

45

"Article 283. x x x In case of retrenchment to prevent losses x x x, the separation pay shall be equivalent to
one (1) month pay or at least one half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1) whole year."
The appellate court aptly ruled that petitioners had not complied with this statutory requirement. They
deducted the amount of attorneys fees that had allegedly accrued as a result of the renegotiations for a new
collective bargaining agreement.29 Without denying that they deducted those fees, petitioners argue that the
deduction was made with the prior approval of respondents. 30

These rulings are applicable to the case at bar. Because the retrenchment was illegal and of no effect, the
Quitclaims were therefore not voluntarily entered into by respondents. Their consent was similarly vitiated by
mistake or fraud. The law looks with disfavor upon quitclaims and releases by employees pressured into
signing by unscrupulous employers minded to evade legal responsibilities.38
As a rule, deeds of release or quitclaim cannot bar employees from demanding benefits to which they are
legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits would not
amount to estoppel.39 The amounts already received by the present respondents as consideration for signing
the Quitclaims should, however, be deducted from their respective monetary awards.

This contention is untenable. The Labor Code prohibits such arrangement in this wise:
Third Issue:
"Article 222. APPEARANCES AND FEES. x x x
The Office of Certiorari
xxx-xxx-xxx
(b) No attorneys fees, negotiation fees or similar charges of any kind arising from any collective bargaining
negotiations or conclusion of the collective bargaining agreement shall be imposed on any individual member
of the contracting union: Provided, however, That attorneys fees may be charged against union funds in an
amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary
shall be null and void."
The obligation to pay attorneys fees belongs to the union and cannot be shunted to the individual workers as
their direct responsibility. The law has made clear that any agreement to the contrary shall be null and void ab
initio.31Thus, petitioners deduction of attorneys fees from respondents separation pay has no basis in law.

Petitioners aver that in a special civil action for certiorari, the appellate court is limited to reviewing only
questions related to jurisdiction or grave abuse of discretion. As in the present case, however, the lower
tribunals factual findings will not be upheld where there is a showing that such findings were totally devoid of
support, or that the judgment was based on a misapprehension of facts. 40
WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against
petitioners.
SO ORDERED.
x

Second Issue:
Validity of the Quitclaims
Petitioners argue that the Quitclaims signed by respondents enjoy the presumption of regularity, and that the
latter had the burden of proving that their consent had been vitiated. 32 They further maintain that aside from
Eddie de la Cruz, the other respondents did not submit their respective supporting affidavits detailing how
their individual consents had been obtained. Allegedly, such documents do not constitute the clear and
convincing evidence required under the law to overturn the validity of quitclaims.33
We hold that the labor arbiter and the NLRC erred in concluding that respondents had voluntarily signed the
Waivers and Quitclaim Deeds. Contrary to this assumption, the mere fact that respondents were not physically
coerced or intimidated does not necessarily imply that they freely or voluntarily consented to the terms
thereof.34Moreover, petitioners, not respondents, have the burden of proving that the Quitclaims were
voluntarily entered into.35
Furthermore, in Trendline Employees Association-Southern Philippines Federation of Labor (TEA-SPFL) v.
NLRC36 andPhilippine Carpet Employees Association v. Philippine Carpet Manufacturing Corporation, 37 similar
retrenchments were found to be illegal, as the employers had failed to prove that they were actually suffering
from poor financial conditions. In these cases, the Quitclaims were deemed illegal, as the employees
consents had been vitiated by mistake or fraud.

[G.R. No. 100658. March 2, 1993.]

WYETH-SUACO LABORATORIES, INC., Petitioners, v. NATIONAL LABOR RELATIONS
COMMISSIONRespondents.
SYLLABUS
1. LABOR LAWS AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; QUITCLAIM; FROWNED
UPON AS CONTRARY TO PUBLIC POLICY; REASON THEREFORE; WHEN VALID; WHEN PROPERLY
SET ASIDE. A quitclaim executed in favor of a company by an employee amounts to a valid and binding
compromise agreement between them (Samaniego v. NLRC, 198 SCRA 111 [1991]). Article 227 of the Labor
Code provides that any compromise settlement voluntarily agreed upon with the assistance of the Bureau of
Labor Relations or the regional office of the DOLE, shall be final and binding upon the parties and the NLRC
or any court "shall not assume jurisdiction over issues involved therein except in case of non-compliance
thereof or it there is prima facie evidence that the settlement was obtained through fraud, misrepresentation,
or coercion." While Santos was not an ordinary employee and, therefore, the assistance of any DOLE official
was not entirely necessary when he executed the release and quitclaim affidavit, the circumstances of this
case call for a holding that he should still be given the difference between what he had received and that
which he would have received through the retrenchment package, a privilege granted and extended to all
employees of ALPI. Quitclaims are commonly frowned upon as contrary to public policy and they are
ineffective to bar claims for the full measure of the workers legal rights (Lopez Sugar Corporation v. FFW, 189
SCRA 179 [1990]). The reason for this is because the employer and the employee do not stand on the same
footing, such that quitclaims usually take the form of contracts of adherence, not of choice (Cario v. ACCFA,

46

18 SCRA 183 [1966]). . . . Indeed, Santos resigned because of the uncertainty as to the future of ALPI. Like
the other employees, he was made to believe that the deal between the two companies was merely a merger
but it really was a projected buy-out. While "dire necessity" as a reason for signing a quitclaim is not
acceptable reason to set aside the quitclaim in the absence of a showing that the employee had been forced
to execute it, such reason gains importance if the consideration for the quitclaim is unconscionably low and
the employee has been tricked into accepting it (Veloso v. DOLE, 200 SCRA 201 [1991]).
2. REMEDIAL LAW; APPEAL; FACTUAL FINDINGS OF NLRC GENERALLY BINDING ON SUPREME
COURT; EXCEPTION. In the case at bar, both the labor arbiter and the NLRC found for private respondent
primarily because of the fact that petitioners were guilty of misrepresentation by their failure to disclose to the
ALPI employees the real nature of the negotiations and transaction between Wyeth and ALPI. The Court is
bound by this finding of fact there being no showing that neither the arbiter nor the NLRC gravely abused their
discretion or otherwise acted without jurisdiction or in excess of the same (Ilas v. NLRC, 193 SCRA 682
[1991]).

union to file a notice of strike. Consequently, the management agreed to negotiate with the union.
It was during these negotiations that the management revealed that the deal between ALPI and Wyeth-Suaco
was a buy-out of the formers assets by the latter and not a merger of the two companies as earlier
announced. The union also learned that only a few of ALPIs line production people would be retained by the
buying company. However, the unions effort to get the best bargain for its members resulted in the
retrenchment package consisting of three (3) months pay for every year of service (p. 22, Rollo).
On November 29, 1987, Santos filed a complaint against Leber, Wyeth-Suaco, and ALPI before the NLRC for
unfair labor practice, underpayment, separation pay and/or retirement/resignation benefits and illegal
constructive dismissal (NLRC-NCR Case No. 00-11-04068-87; p. 27, Rollo). In due course, Labor Arbiter
Daisy G. Cauton-Barcelona rendered a decision in favor of Santos. She found that the respondents nondisclosure of the true facts of the transaction between the two companies was a "material misrepresentation",
which, had it not been timely discovered, would have resulted in the "serious economic dislocation" of many of
ALPIs employees (p. 24, Rollo). She added:

DECISION
Sought to be annulled and set aside by petitioners are: (a) the June 29, 1989 Decision of Labor Arbiter Daisy
G. Cauton-Barcelona ordering Thomas Leber, Vice-President/General Manager of Wyeth-Suaco and Ayerst
Laboratories (Phils.), Inc. and the said company to pay Rolando V. Santos separation pay equivalent to three
(3) months salary for every year of service subject to the deduction of whatever amounts he had received in
the form of financial assistance; (b) the February 27, 1991 Resolution of the National Labor Relations
Commission (NLRC) affirming said decision; and (c) the Resolution of March 26, 1991 of the NLRC denying
the motion for reconsideration of its earlier resolution.

"Moreover, even the mere impending `merger with no definite security as to the status of ones employment
will certainly cause anxiety and worry especially during these times where the rate of unemployment is
soaring and the means of survival is becoming extremely difficult everyday. Under the obtaining situation we
find it hard to construe that the complainants resignation was indeed voluntary considering that at that time,
he was already receiving a relatively much higher pay. His resourcefulness and foresight, given such an
uncertain predicament should not be taken as a negative factor to deny him the separation benefits afforded
to those similarly situated. Otherwise, this would be rendering naught the objectives of social justice as
guaranteed by the Constitution." (p. 8, Decision; p. 25, Rollo.)

Rolando V. Santos was hired by Ayerst Laboratories (Phils.), Inc. (ALPI for brevity) in April 1974 as a medical
representative. He rose gradually from the ranks until in 1983 when he became a product manager with a
monthly salary of P9,850.00 (p. 12, Rollo).

Hence, the Arbiter ordered herein petitioners to pay Santos "separation pay in the amount equivalent to three
(3) months salary for every year of service subject to the deduction of whatever amounts already received by
him in the form of financial assistance." She also ordered petitioners to pay attorneys fees and the costs of
suit (p. 26, Rollo).

On June 5, 1987, the management committee of ALPI announced to the company employees the contents of
a telex it had received on June 3, 1987 from Area Director Richard Sperber regarding the decision "to merge
the international divisions of Wyeth and Ayerst into a single operating unit" and the new group would be called
Wyeth-Ayerst International. The telex was followed by a phone call on June 4 from Sperber assuring
"everybody that the merger (details of which will still take many months to complete) is a very positive move of
ALPI and its employees in that it will be part of a much bigger company with room for everybody." (p. 80,
Rollo).

Wyeth-Suaco and Leber appealed (p. 100, Rollo), but in the Resolution of February 27, 1991, the NLRC, per
Commissioner Domingo H. Zapanta and with the concurrence of Commissioners Edna Bonto-Perez and
Rustico L. Diokno, affirmed the decision of Labor Arbiter Barcelona. The affirmance was based on the NLRCs
findings that Santos is similarly situated as his co-employees in the managerial level who must have received
much more than the rank and file employees who had been given three months salary for every year of
service and that, therefore, the refusal of the company to pay him even three months salary for every year of
service is discriminatory (p. 16, Rollo).

The assurance notwithstanding, during the negotiations for the supposed merger, the employees were
advised to keep their options open and to look for other jobs. Faced with this uncertainty, Santos, a family
man, started looking for vacancies in other companies. Having found one in Berlimed Corporation, on August
4, 1987, Santos tendered his resignation from ALPI to take effect on August 31, 1987 (p. 27, Rollo).
Thereafter, he executed an affidavit of release and quitclaim dated October 19, 1987 discharging the company
and its representatives "from any action, claim for sum of money, or other obligations arising from all incidents
of my employment" ; acknowledging receipt of "all amounts that are now or in the future may be due me from
the Company" ; and warranting that he would not institute any action against the same company (p. 43, Rollo).
The company, in turn, gave him financial assistance amounting to P65,400.50 which is the equivalent of two
and one-half (2-1/2) months pay for every year of his 14-year service with the company or roughly one (1)
month pay for every five (5) years of service (pp. 19-20, Rollo).: virtual law library

Wyeth-Suaco and ALPI as well as Leber filed a motion for the reconsideration of said Resolution but the
NLRC denied it on March 26, 1991 (p. 10, Rollo). Hence, the petition.

In the meantime, the labor union in ALPI became restless as no word had come from the company regarding
the details of the merger. Thus, the union president sent three letters to the management committee but they
did not merit a reply. Later, however, the employees each received termination letters which prompted the

Acting on the petition, on July 24, 1991, the First Division of this Court required respondents to file their
comment. In the same Resolution, the Court issued a temporary restraining order enjoining the NLRC from
enforcing the questioned decision and resolutions effective upon approval by the Court of a bond in the
amount of P350,000.00 to be posted by petitioners within forty-eight (48) hours from notice (pp. 142 and 146,
Rollo). Counsel for petitioners received a copy of the Resolution of July 24, 1991 on July 25, 1991.
On July 27, 1991, petitioners mailed a manifestation and motion stating that they had earlier filed a bond with
the NLRC through Prudential Guarantee and Assurance, Inc. in the amount of P340,328.45 and, therefore,
posting of the P350,000.00 bond "may cause unnecessary hardship" upon them. They prayed that they be
allowed "to avail themselves of the supersedeas bond posted before the NLRC and to post additional bond
only in the amount of P9,671.55 as their compliance with the directive of this Court (pp. 175-176, Rollo). The
Court granted the prayer in the Resolution of September 2, 1991 (p. 193-a, Rollo).

47

Petitioners, however, failed to post the additional bond of P9,671.55 within the period which expired on
December 3, 1992. The Court thus required petitioners counsel to show cause why they should not "be
disciplinarily dealt with or held in contempt for such failure and to comply with the directive .. to post additional
bond." (p. 237, Rollo). Petitioners finally complied with the directive and posted the increased bond of
P350,000.00 to cover the two-year period between July 14, 1990 and July 14, 1992 (pp. 239 and 241, Rollo).
Thereafter, petitioners explained that the delay in posting the additional bond was due to their "difficulty in
making arrangements for the form which the bond is to take" (pp. 262-263, Rollo).
The Court is faced herein with the issue of whether or not an employee who had resigned three months prior
to the purchase of his employers assets by another company may still be entitled to the separation pay
subsequently awarded to the other employees of the same company who had not resigned even if at the time
of such award he had been employed and lucratively compensated by a third company.
A touchstone to the resolution of this issue is the effect of the release and quitclaim affidavit he had executed
after resigning from ALPI.
A quitclaim executed in favor of a company by an employee amounts to a valid and binding compromise
agreement between them (Samaniego v. NLRC, 198 SCRA 111 [1991]). Article 227 of the Labor Code
provides that any compromise settlement voluntarily agreed upon with the assistance of the Bureau of Labor
Relations or the regional office of the DOLE, shall be final and binding upon the parties and the NLRC or any
court "shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if
there is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion."
library

two consecutive years (1986 and 1987); (b) two plagues for best art work; and (c) the Honorable Mention
Award at the 1985 UTAK Awards. He was the Salesman of the Year in 1979-1980 and the second placer for
the same award in 1976-1977. These awards were capped in April 1987 by the UTAK Grand Award (Rollo, p.
30). red
Although these awards were bestowed upon him as an individual, they also indirectly gave recognition to ALPI
as an employer. That Santos resigned when he felt that the company he had worked for was floundering as it
was in a way seeking a crutch for its survival should not be taken against him. Indeed, the employees of ALPI
were advised by management to keep their options open and to begin to scout for other employment. Given
such circumstances, Santos cannot be blamed for grabbing the first acceptable offer in another company.
Equity and justice, therefore, demand that Santos untainted record of service to ALPI for fourteen years
should be justly compensated by giving him at least the same retrenchment package as that given to the other
employees.
PREMISES CONSIDERED, the petition is hereby DISMISSED and the questioned Decision of the Labor
Arbiter and the Resolutions of the NLRC AFFIRMED. The temporary restraining order issued on July 24, 1991
is lifted.
SO ORDERED.
x

While Santos was not an ordinary employee and, therefore, the assistance of any DOLE official was not
entirely necessary when he executed the release and quitclaim affidavit, the circumstances of this case call
for a holding that he should still be given the difference between what he had received and that which he
would have received through the retrenchment package, a privilege granted and extended to all employees of
ALPI.
Quitclaims are commonly frowned upon as contrary to public policy and they are ineffective to bar claims for
the full measure of the workers legal rights (Lopez Sugar Corporation v. FFW, 189 SCRA 179 [1990]). The
reason for this is because the employer and the employee do not stand on the same footing, such that
quitclaims usually take the form of contracts of adherence, not of choice (Cario v. ACCFA, 18 SCRA 183
[1966]).
In the case at bar, both the labor arbiter and the NLRC found for private respondent primarily because of the
fact that petitioners were guilty of misrepresentation by their failure to disclose to the ALPI employees the real
nature of the negotiations and transaction between Wyeth and ALPI. The Court is bound by this finding of fact
there being no showing that neither the arbiter nor the NLRC gravely abused their discretion or otherwise
acted without jurisdiction or in excess of the same (Ilas v. NLRC, 193 SCRA 682 [1991]).
Indeed, Santos resigned because of the uncertainty as to the future of ALPI. Like the other employees, he
was made to believe that the deal between the two companies was merely a merger but it really was a
projected buy-out. While "dire necessity" as a reason for signing a quitclaim is not acceptable reason to set
aside the quitclaim in the absence of a showing that the employee had been forced to execute it, such reason
gains importance if the consideration for the quitclaim is unconscionably low and the employee has been
tricked into accepting it (Veloso v. DOLE, 200 SCRA 201 [1991]).
The consideration of compassionate justice cited by the labor arbiter in her decision which petitioners belittle
as lacking in statutory basis (Petition, p. 5), in fact finds meaning in this case. Santos was no ordinary
employee. He was the recipient of (a) the UTAK Award given by the Drug Association of the Philippines for

G.R. No. 130866. September 16, 1998

ST. MARTIN FUNERAL HOME, Petitioner, v. NATIONAL LABOR RELATIONS MARTINEZ, COMMISSION
and BIENVENIDO ARICAYOS, Respondents.
DECISION
The present petition for certiorari stemmed from a complaint for illegal dismissal filed by herein private
respondent before the National Labor Relations Commission (NLRC), Regional Arbitration Branch No. III, in
San Fernando, Pampanga. Private respondent alleges that he started working as Operations Manager of
petitioner St. Martin Funeral Home on February 6, 1995. However, there was no contract of employment
executed between him and petitioner nor was his name included in the semi-monthly payroll. On January 22,
1996, he was dismissed from his employment for allegedly misappropriatingP38,000.00 which was intended
for payment by petitioner of its value added tax (VAT) to the Bureau of Internal Revenue
(BIR).1crlwvirtualibrry
Petitioner on the other hand claims that private respondent was not its employee but only the uncle of Amelita
Malabed, the owner of petitioner St. Martins Funeral Home. Sometime in 1995, private respondent, who was
formerly working as an overseas contract worker, asked for financial assistance from the mother of Amelita.

48

Since then, as an indication of gratitude, private respondent voluntarily helped the mother of Amelita in
overseeing the business.
In January 1996, the mother of Amelita passed away, so the latter she took over the management of the
business. She then discovered that there were arrears in the payment of taxes and other government fees,
although the records purported to show that the same were already paid. Amelita then made some changes in
the business operation and private respondent and his wife were no longer allowed to participate in the
management thereof. As a consequence, the latter filed a complaint charging that petitioner had illegally
terminated his employment.2crlwvirtualibrry
Based on the position papers of the parties, the labor arbiter rendered a decision in favor of petitioner on
October 25, 1996 declaring that no employer-employee relationship existed between the parties and,
therefore, his office had no jurisdiction over the case.3crlwvirtualibrry
Not satisfied with the said decision, private respondent appealed to the NLRC contending that the labor arbiter
erred (1) in not giving credence to the evidence submitted by him; (2) in holding that he worked as a volunteer
and not as an employee of St. Martin Funeral Home from February 6, 1995 to January 23, 1996, or a period of
about one year; and (3) in ruling that there was no employer-employee relationship between him and
petitioner.4crlwvirtualibrry

When the issue was raised in an early case on the argument that this Court has no jurisdiction to review the
decisions of the NLRC, and formerly of the Secretary of Labor, since there is no legal provision for appellate
review thereof, the Court nevertheless rejected that thesis. It held that 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; that the purpose of judicial review is to keep the administrative agency within its
jurisdiction and protect the substantial rights of the parties; and that it is that part of the checks and balances
which restricts the separation of powers and forestalls arbitrary and unjust adjudications. 11crlwvirtualibrry
Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court, the remedy of the
aggrieved party is to timely file a motion for reconsideration as a precondition for any further or subsequent
remedy,12 and then seasonably avail of the special civil action of certiorari under Rule 65, 13 for which said Rule
has now fixed the reglementary period of sixty days from notice of the decision. Curiously, although the 10day period for finality of the decision of the NLRC may already have lapsed as contemplated in Section 223 of
the Labor Code, it has been held that 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
65.14crlwvirtualibrry
Turning now to the matter of judicial review of NLRC decisions, B.P. No. 129 originally provided as follows:
SEC. 9. Jurisdiction. - The Intermediate Appellate Court shall exercise:

On June 13, 1997, the NLRC rendered a resolution setting aside the questioned decision and remanding the
case to the labor arbiter for immediate appropriate proceedings. 5Petitioner then filed a motion for
reconsideration which was denied by the NLRC in its resolution dated August 18, 1997 for lack of
merit,6 hence the present petition alleging that the NLRC committed grave abuse of
discretion.7crlwvirtualibrry
Before proceeding further into the merits of the case at bar, the Court feels that it is now exigent and
opportune to reexamine the functional validity and systemic practicability of the mode of judicial review it has
long adopted and still follows with respect to decisions of the NLRC. The increasing number of labor disputes
that find their way to this Court and the legislative changes introduced over the years into the provisions of
Presidential Decree (P.D.) No. 442 (The Labor Code of the Philippines and Batas Pambansa Blg. (B.P. No.)
129 (The Judiciary Reorganization Act of 1980) now stridently call for and warrant a reassessment of that
procedural aspect.
We prefatorily delve into the legal history of the NLRC. It was first established in the Department of Labor by
P.D. No. 21 on October 14, 1972, and its decisions were expressly declared to be appealable to the Secretary
of Labor and, ultimately, to the President of the Philippines.
On May 1, 1974, P.D. No. 442 enacted the Labor Code of the Philippines, the same to take effect six months
after its promulgation.8 Created and regulated therein is the present NLRC which was attached to the
Department of Labor and Employment for program and policy coordination only.9 Initially, Article 302 (now,
Article 223) thereof also granted an aggrieved party the remedy of appeal from the decision of the NLRC to
the Secretary of Labor, but P.D. No. 1391 subsequently amended said provision and abolished such appeals.
No appellate review has since then been provided for.
Thus, to repeat, under the present state of the law, there is no provision for appeals from the decision of the
NLRC.10 The present Section 223, as last amended by Section 12 of R.A. No. 6715, instead merely provides
that the Commission shall decide all cases within twenty days from receipt of the answer of the appellee, and
that such decision shall be final and executory after ten calendar days from receipt thereof by the parties.

(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto,
and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction;
(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts; and
(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders, or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards, or commissions, except those
falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, 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 Intermediate Appellate Court shall have the power to try cases and conduct hearings, receive evidence
and perform any and all acts necessary to resolve factual issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant and conduct new trials or further proceedings.
These provisions shall not apply to decisions and interlocutory orders issued under the Labor Code of the
Philippines and by the Central Board of Assessment Appeals.15crlwvirtualibrry
Subsequently, and as it presently reads, this provision was amended by R.A. No. 7902 effective March 18,
1995, to wit:
SEC. 9. Jurisdiction. - The Court of Appeals shall exercise:
(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto,
and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction;
(2) Exclusive original jurisdiction over actions for annulment of judgments of Regional Trial Courts; and

49

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of
Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, 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.
The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform
any and all acts necessary to resolve factual issues raised in cases falling within its original and appellate
jurisdiction, including the power to grant and conduct new trials or further proceedings. Trials or hearings in
the Court of Appeals must be continuous and must be completed within, three (3) months, unless extended by
the Chief Justice.
It will readily be observed that, aside from the change in the name of the lower appellate court, 16 the following
amendments of the original provisions of Section 9 of B.P. No. 129 were effected by R.A. No. 7902, viz.:
1. The last paragraph which excluded its application to the Labor Code of the Philippinesand the Central
Board of Assessment Appeals was deleted and replaced by a new paragraph granting the Court of Appeals
limited powers to conduct trials and hearings in cases within its jurisdiction.
2. The reference to the Labor Code in that last paragraph was transposed to paragraph (3) of the section,
such that the original exclusionary clause therein now provides 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. (Italics
supplied)

the Judiciary Act of 1948. These cases can, of course, be properly excluded from the exclusive appellate
jurisdiction of the Court of Appeals. However, because of the aforementioned amendment by transposition,
also supposedly excluded are cases falling within the appellate jurisdiction of the Supreme Court in
accordance with the Labor Code. This is illogical and impracticable, and Congress could not have intended
that procedural gaffe, since there are no cases in the Labor Code the decisions, resolutions, orders or awards
wherein are within the appellate jurisdiction of the Supreme Court or of any other court for that matter.
A review of the legislative records on the antecedents of R.A. No. 7902 persuades us that there may have
been an oversight in the course of the deliberations on the said Act or an imprecision in the terminology used
therein. In fine, Congress did intend to provide for judicial review of the adjudications of the NLRC in labor
cases by the Supreme Court, but there was an inaccuracy in the term used for the intended mode of review.
This conclusion which we have reluctantly but prudently arrived at has been drawn from the considerations
extant in the records of Congress, more particularly on Senate Bill No. 1495 and the Reference Committee
Report on S. No. 1495/H. No. 10452.18crlwvirtualibrry
In sponsoring Senate Bill No. 1495, Senator Raul S. Roco delivered his sponsorship speech 19 from which we
reproduce the following excerpts:
The Judiciary Reorganization Act, Mr. President, Batas Pambansa Blg. 129, reorganized the Court
of Appeals and at the same time expanded its jurisdiction and powers. Among others, its appellate
jurisdiction was expanded to cover not only final judgment of Regional Trial Courts, but also all final
judgment(s), decisions, resolutions, orders or awards of quasi-judicial agencies, instrumentalities,
boards and commissions, except those falling within the appellate jurisdiction of the Supreme Court
in accordance with the Constitution, the provisions of BP Blg. 129 and of subparagraph 1 of the
third paragraph and subparagraph 4 of Section 17 of the Judiciary Act of 1948.

3. Contrarily, however, specifically added to and included among the quasi-judicial agencies over which the
Court of Appeals shall have exclusive appellate jurisdiction are the Securities and Exchange Commission, the
Social Security Commission, the Employees Compensation Commission and the Civil Service Commission.

Mr. President, the purpose of the law is to ease the workload of the Supreme Court by the transfer
of some of its burden of review of factual issues to the Court of Appeals. However, whatever
benefits that can be derived from the expansion of the appellate jurisdiction of the Court of Appeals
was cut short by the last paragraph of Section 9 of Batas Pambansa Blg. 129 which excludes from
its coverage the decisions and interlocutory orders issued under the Labor Code of the
Philippines and by the Central Board of Assessment Appeals.

This, then, brings us to a somewhat perplexing impass, both in point of purpose and terminology. As earlier
explained, our mode of judicial review over decisions of the NLRC has for some time now been understood to
be by a petition for certiorari under Rule 65 of the Rules of Court. This is, of course, a special original action
limited to the resolution of jurisdictional issues, that is, lack or excess of jurisdiction and, in almost all cases
that have been brought to us, grave abuse of discretion amounting to lack of jurisdiction.

Among the highest number of cases that are brought up to the Supreme Court arelabor
cases. Hence, Senate Bill No. 1495 seeks to eliminate the exceptions enumerated in Section
9 and, additionally, extends the coverage of appellate review of the Court of Appeals in the
decision(s) of the Securities and Exchange Commission, the Social Security Commission, and the
Employees Compensation Commission to reduce the number of cases elevated to the Supreme
Court. (Emphases and corrections ours)

It will, however, be noted that paragraph (3), Section 9 of B.P. No. 129 now grants
exclusive appellate jurisdiction to the Court of Appeals over all final adjudications of the Regional Trial Courts
and the quasi-judicial agencies generally or specifically referred to therein except, among others, those falling
within the appellate jurisdiction of the Supreme Court in accordance with x x x the Labor Code of the
Philippines under Presidential Decree No. 442, as amended, x x x. This would necessarily contradict what has
been ruled and said all along that appeal does not lie from decisions of the NLRC. 17Yet, under such excepting
clause literally construed, the appeal from the NLRC cannot be brought to the Court of Appeals, but to this
Court by necessary implication.
The same exceptive clause further confuses the situation by declaring that the Court of Appeals has no
appellate jurisdiction over decisions falling within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the provisions of B.P. No. 129, and those specified cases in Section 17 of

xxx
Senate Bill No. 1495 authored by our distinguished Colleague from Laguna provides the ideal
situation of drastically reducing the workload of the Supreme Court without depriving the litigants of
the privilege of review by an appellate tribunal.
In closing, allow me to quote the observations of former Chief Justice Teehankee in 1986 in the
Annual Report of the Supreme Court:
x x x Amendatory legislation is suggested so as to relieve the Supreme Court of the
burden of reviewing these cases which present no important issues involved beyond
the particular fact and the parties involved, so that the Supreme Court may wholly

50

devote its time to cases of public interest in the discharge of its mandated task as the
guardian of the Constitution and the guarantor of the peoples basic rights and
additional task expressly vested on it now to determine whether or not there has been
a grave abuse of discretion amounting to lack of jurisdiction on the part of any branch
or instrumentality of the Government.
We used to have 500,000 cases pending all over the land, Mr. President. It has been cut down to
300,000 cases some five years ago. I understand we are now back to 400,000 cases. Unless we
distribute the work of the appellate courts, we shall continue to mount and add to the number of
cases pending.
In view of the foregoing, Mr. President, and by virtue of all the reasons we have submitted, the
Committee on Justice and Human Rights requests the support and collegial approval of our
Chamber.
xxx
Surprisingly, however, in a subsequent session, the following Committee Amendment was introduced by the
said sponsor and the following proceedings transpired: 20
Senator Roco. On page 2, line 5, after the line Supreme Court in accordance with the
Constitution, add the phrase THE LABOR CODE OF THE PHILIPPINES UNDER P.D. 442, AS
AMENDED. So that it becomes clear, Mr. President, that issues arising from the Labor Code will
still be appealable to the Supreme Court.
The President. Is there any objection? (Silence) Hearing none, the amendment is approved.
Senator Roco. On the same page, we move that lines 25 to 30 be deleted. This was also discussed with our
Colleagues in the House of Representatives and as we understand it, as approved in the House, this was also
deleted, Mr. President.

The Court is, therefore, of the considered opinion that ever since appeals from the NLRC to the Supreme
Court were eliminated, the legislative intendment was that the special civil action of certiorari was and still is
the proper vehicle for judicial review of decisions of the NLRC. The use of the word appeal in relation thereto
and in the instances we have noted could have been a lapsus plumae because appeals by certiorari and the
original action for certiorari are both modes of judicial review addressed to the appellate courts. The important
distinction between them, however, and with which the Court is particularly concerned here is that the special
civil action of certiorari is within the concurrent original jurisdiction of this Court and the Court of
Appeals;23 whereas to indulge in the assumption that appeals by certiorari to the Supreme Court are allowed
would not subserve, but would subvert, the intention of Congress as expressed in the sponsorship speech on
Senate Bill No. 1495.
Incidentally, it was noted by the sponsor therein that some quarters were of the opinion that recourse from the
NLRC to the Court of Appeals as an initial step in the process of judicial review would be circuitous and would
prolong the proceedings. On the contrary, as he commendably and realistically emphasized, that procedure
would be advantageous to the aggrieved party on this reasoning:
On the other hand, Mr. President, to allow these cases to be appealed to the Court of Appeals
would give litigants the advantage to have all the evidence on record be reexamined and
reweighed after which the findings of facts and conclusions of said bodies are correspondingly
affirmed, modified or reversed.
Under such guarantee, the Supreme Court can then apply strictly the axiom that factual findings of
the Court of Appeals are final and may not be reversed on appeal to the Supreme Court. A perusal
of the records will reveal appeals which are factual in nature and may, therefore, be dismissed
outright by minute resolutions.24crlwvirtualibrry
While we do not wish to intrude into the Congressional sphere on the matter of the wisdom of a law, on this
score we add the further observations that there is a growing number of labor cases being elevated to this
Court which, not being a trier of fact, has at times been constrained to remand the case to the NLRC for
resolution of unclear or ambiguous factual findings; that the Court of Appeals is procedurally equipped for that
purpose, aside from the increased number of its component divisions; and that there is undeniably an
imperative need for expeditious action on labor cases as a major aspect of constitutional protection to labor.

The President. Is there any objection? (Silence) Hearing none, the amendment is approved.
Senator Roco. There are no further Committee amendments, Mr. President.
Senator Romulo. Mr. President, I move that we close the period of Committee amendments.
The President. Is there any objection? (Silence) Hearing none, the amendment is approved. (Italics supplied)
xxx
Thereafter, since there were no individual amendments, Senate Bill No. 1495 was passed on second reading
and being a certified bill, its unanimous approval on third reading followed. 21; Record of the Senate, Vol. V, No.
63, pp. 180-181.21 The Conference Committee Report on Senate Bill No. 1495 and House Bill No. 10452,
having theretofore been approved by the House of Representatives, the same was likewise approved by the
Senate on February 20, 1995,22 inclusive of the dubious formulation on appeals to the Supreme Court earlier
discussed.

Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals from the NLRC to the
Supreme Court are interpreted and hereby declared to mean and refer to petitions for certiorari under Rule 65.
Consequently, all such petitions should henceforth be initially filed in the Court of Appeals in strict observance
of the doctrine on the hierarchy of courts as the appropriate forum for the relief desired.
Apropos to this directive that resort to the higher courts should be made in accordance with their hierarchical
order, this pronouncement in Santiago vs. Vasquez, et al.25 should be taken into account:
One final observation. We discern in the proceedings in this case a propensity on the part of
petitioner, and, for that matter, the same may be said of a number of litigants who initiate recourses
before us, to disregard the hierarchy of courts in our judicial system by seeking relief directly from
this Court despite the fact that the same is available in the lower courts in the exercise of their
original or concurrent jurisdiction, or is even mandated by law to be sought therein. This practice
must be stopped, not only because of the imposition upon the precious time of this Court but also
because of the inevitable and resultant delay, intended or otherwise, in the adjudication of the case
which often has to be remanded or referred to the lower court as the proper forum under the rules
of procedure, or as better equipped to resolve the issues since this Court is not a trier of facts. We,
therefore, reiterate the judicial policy that this Court will not entertain direct resort to it unless the

51

redress desired cannot be obtained in the appropriate courts or where exceptional and compelling
circumstances justify availment of a remedy within and calling for the exercise of our primary
jurisdiction.
WHEREFORE, under the foregoing premises, the instant petition for certiorari is hereby REMANDED, and all
pertinent records thereof ordered to be FORWARDED, to the Court of Appeals for appropriate action and
disposition consistent with the views and ruling herein set forth, without pronouncement as to costs.
SO ORDERED.

52