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G.R. No.

163782
March 24, 2006
LIGHT RAIL TRANSIT AUTHORITY, Petitioner,
vs.
PERFECTO H. VENUS, JR., BIENVENIDO P. SANTOS, JR., RAFAEL C. ROY, NANCY C. RAMOS, SALVADOR A. ALFON, NOEL R.
SANTOS, MANUEL A. FERRER, SALVADOR G. ALINAS, RAMON D. LOFRANCO, AMADOR H.POLICARPIO, REYNALDO B.
GENER, and BIENVENIDO G. ARPILLEDA, Respondents.
x-----------------------------x
G.R. No. 163881
March 24, 2006
METRO TRANSIT ORGANIZATION, INC., Petitioner,
vs.
COURT OF APPEALS, PERFECTO H. VENUS, JR., BIENVENIDO P. SANTOS, JR., RAFAEL C. ROY, NANCY C. RAMOS,
SALVADOR A. ALFON, NOEL R. SANTOS, MANUEL A. FERRER, SALVADOR G. ALINAS, RAMON D. LOFRANCO, AMADOR H.
POLICARPIO, and REYNALDO B. GENER, Respondents.
DECISION
PUNO, J.:
Before us are the consolidated petitions of Light Rail Transit Authority (LRTA) and Metro Transit Organization, Inc. (METRO), seeking the reversal
of the Decision of the Court of Appeals directing them to reinstate private respondent workers to their former positions without loss of seniority and
other rights and privileges, and ordering them to jointly and severally pay the latter their full back wages, benefits, and moral damages. The LRTA
and METRO were also ordered to jointly and severally pay attorneys fees equivalent to ten percent (10%) of the total money judgment.
Petitioner LRTA is a government-owned and controlled corporation created by Executive Order No. 603, Series of 1980, as amended, to construct
and maintain a light rail transit system and provide the commuting public with an efficient, economical, dependable and safe transportation.
Petitioner METRO, formerly Meralco Transit Organization, Inc., was a qualified transportation corporation duly organized in accordance with the
provisions of the Corporation Code, registered with the Securities and Exchange Commission, and existing under Philippine laws.
It appears that petitioner LRTA constructed a light rail transit system from Monumento in Kalookan City to Baclaran in Paraaque, Metro Manila. To
provide the commuting public with an efficient and dependable light rail transit system, petitioner LRTA, after a bidding process, entered into a ten
(10)-year Agreement for the Management and Operation of the Metro Manila Light Rail Transit System from June 8, 1984 until June 8, 1994 with
petitioner METRO.1The Agreement provided, among others, that
1. Effective on the COMMENCEMENT DATE, METRO shall accept and take over from the AUTHORITY [LRTA] the management,
maintenance and operation of the commissioned and tested portion of the [Light Rail Transit] System x x x [par. 2.02];
2. The AUTHORITY [LRTA] shall pay METRO the MANAGEMENT FEE as follows x x x [par. 5.01];
3. In rendering these services, METRO shall apply its best skills and judgment, in attaining the objectives of the [Light Rail Transit]
System in accordance with accepted professional standards. It shall exercise the required care, diligence and efficiency in the discharge of
its duties and responsibilities and shall work for the best interest of the [Light Rail Transit] System and the AUTHORITY [LRTA] [par.
2.03];
4. METRO shall be free to employ such employees and officers as it shall deem necessary in order to carry out the requirements of [the]
Agreement. Such employees and officers shall be the employees of METRO and not of the AUTHORITY [LRTA]. METRO shall prepare a
compensation schedule and the corresponding salaries and fringe benefits of [its] personnel in consultation with the AUTHORITY [LRTA]
[par. 3.05];
5. METRO shall likewise hold the AUTHORITY [LRTA] free and harmless from any and all fines, penalties, losses and liabilities and
litigation expenses incurred or suffered on account of and by reason of death, injury, loss or damage to passengers and third persons,
including the employees and representatives of the AUTHORITY [LRTA], except where such death, injury, loss or damage is attributable
to a defect or deficiency in the design of the system or its equipment [par. 3.06].
Pursuant to the above Agreement, petitioner METRO hired its own employees, including herein private respondents. Petitioner METRO thereafter
entered into a collective bargaining agreement with Pinag-isang Lakas ng Manggagawa sa METRO, Inc. National Federation of Labor, otherwise
known as PIGLAS-METRO, INC. NFL KMU (Union), the certified exclusive collective bargaining representative of the rank-and-file employees
of petitioner METRO.
Meanwhile, on June 9, 1989, petitioners LRTA and METRO executed a Deed of Sale where petitioner LRTA purchased the shares of stocks in
petitioner METRO.2However, petitioners LRTA and METRO continued with their distinct and separate juridical personalities. Hence, when the above
ten (10)-year Agreement expired on June 8, 1994, they renewed the same, initially on a yearly basis, and subsequently on a monthly basis.
On July 25, 2000, the Union filed a Notice of Strike with the National Conciliation and Mediation Board National Capital Region against petitioner
METRO on account of a deadlock in the collective bargaining negotiation. On the same day, the Union struck. The power supply switches in the
different light rail transit substations were turned off. The members of the Union picketed the various substations. They completely paralyzed the
operations of the entire light rail transit system. As the strike adversely affected the mobility of the commuting public, then Secretary of Labor
Bienvenido E. Laguesma issued on that same day an assumption of jurisdiction order 3directing all the striking employees "to return to work
immediately upon receipt of this Order and for the Company to accept them back under the same terms and conditions of employment prevailing
prior to the strike."4
In their memorandum,5Department of Labor and Employment Sheriffs Feliciano R. Orihuela, Jr., and Romeo P. Lemi reported to Sec. Laguesma that
they tried to personally serve the Order of assumption of jurisdiction to the Union through its officials and members on July 26, 2000, but the latter
refused to receive the same. The sheriffs thus posted the Order in the different stations/terminals of the light rail transit system. Further, the Order of
assumption of jurisdiction was published on the July 27, 2000 issues of the Philippine Daily Inquirer6and thePhilippine Star.7
Despite the issuance, posting, and publication of the assumption of jurisdiction and return to work order, the Union officers and members, including
herein private respondent workers, failed to return to work. Thus, effective July 27, 2000, private respondents, Perfecto Venus, Jr., Bienvenido P.
Santos, Jr., Rafael C. Roy, Nancy C. Ramos, Salvador A. Alfon, Noel R. Santos, Manuel A. Ferrer, Salvador G. Alinas, Ramon D. Lofranco, Amador
H. Policarpio, Reynaldo B. Gener, and Bienvenido G. Arpilleda, were considered dismissed from employment.
In the meantime, on July 31, 2000, the Agreement for the Management and Operation of the Metro Manila Light Rail Transit System between
petitioners LRTA and METRO expired. The Board of Directors of petitioner LRTA decided not to renew the contract with petitioner METRO and
directed the LRTA management instead to immediately take over the management and operation of the light rail transit system to avert the mass
transportation crisis.

On October 10, 2000, private respondents Venus, Jr., Santos, Jr., and Roy filed a complaint for illegal dismissal before the National Labor Relations
Commission (NLRC) and impleaded both petitioners LRTA and METRO. Private respondents Ramos, Alfon, Santos, Ferrer, Alinas, Lofranco,
Policarpio, Gener, and Arpilleda follwed suit on December 1, 2000.
On October 1, 2001, Labor Arbiter Luis D. Flores rendered a consolidated judgment in favor of the private respondent workers 8
WHEREFORE, judgment is hereby rendered in favor of the complainants and against the respondents, as follows:
1. Declaring that the complainants were illegally dismissed from employment and ordering their reinstatement to their former positions
without loss of seniority and other rights and privileges.
2. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit Authority to jointly and severally pay the complainants
their other benefits and full backwages, which as of June 30, 2001 are as follows:
1. Perfecto H. Venus, Jr.

P247

2. Bienvenido P. Santos, Jr.

247

3. Rafael C. Roy

247

4. Nancy [C.] Ramos

254

5. Salvador A. Alfon

257

6. Noel R. Santos

221

7. Manuel A. Ferrer

250

8. Salvador G. [Alinas]

253

9. Ramon D. Lofranco

253

10. Amador H. Policarpio

256

11. Reynaldo B. Gener

255

TOTAL
3. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit Authority to jointly and severally pay each of the
complainants the amount of P50,000.00 as moral damages.
4. Ordering respondents Metro Transit Organization, Inc. and Light Rail Transit Authority to jointly and severally pay the complainants
attorneys fees equivalent to ten percent (10%) of the total money judgment.
SO ORDERED.
The complaint filed by Bienvenido G. Arpilleda, although initially consolidated with the main case, was eventually dropped for his failure to appear
and submit any document and position paper.9
On May 29, 2002, on appeal, the NLRC found that the striking workers failed to heed the return to work order and reversed and set aside the decision
of the labor arbiter. The suit against LRTA was dismissed since "LRTA is a government-owned and controlled corporation created by virtue of
Executive Order No. 603 with an original charter"10and "it ha[d] no participation whatsoever with the termination of complainants employment." 11In
fine, the cases against the LRTA and METRO were dismissed, respectively, for lack of jurisdiction and for lack of merit.
On December 3, 2002, the NLRC denied the workers Motion for Reconsideration "[t]here being no showing that the Commission committed, (and
that) the Motion for Reconsideration was based on, palpable or patent errors, and the fact that (the) said motion is not under oath."
On a petition for certiorari however, the Court of Appeals reversed the NLRC and reinstated the Decision rendered by the Labor Arbiter. Public
respondent appellate court declared the workers dismissal as illegal, pierced the veil of separate corporate personality and held the LRTA and
METRO as jointly liable for back wages.
Hence, these twin petitions for review on certiorari of the decision of public respondent appellate court filed by LRTA and METRO which this Court
eventually consolidated.
In the main, petitioner LRTA argues that it has no employer-employee relationship with private respondent workers as they were hired by petitioner
METRO alone pursuant to its ten (10)-year Agreement for the Management and Operation of the Metro Manila Light Rail Transit System with
petitioner METRO. Private respondent workers recognized that their employer was not petitioner LRTA when their certified exclusive collective
bargaining representative, the Pinag-isang Lakas ng Manggagawa sa METRO, Inc. National Federation of Labor, otherwise known as PIGLASMETRO, INC. NFL KMU, entered into a collective bargaining agreement with petitioner METRO. Piercing the corporate veil of METRO was
unwarranted, as there was no competent and convincing evidence of any wrongful, fraudulent or unlawful act on the part of METRO, and, more so,
on the part of LRTA.
Petitioner LRTA further contends that it is a government-owned and controlled corporation with an original charter, Executive Order No. 603, Series
of 1980, as amended, and thus under the exclusive jurisdiction only of the Civil Service Commission, not the NLRC.
Private respondent workers, however, submit that petitioner METRO was not only fully-owned by petitioner LRTA, but all aspects of its operations
and administration were also strictly controlled, conducted and directed by petitioner LRTA. And since petitioner METRO is a mere adjunct, business
conduit, and alter ego of petitioner LRTA, their respective corporate veils must be pierced to satisfy the money claims of the illegally dismissed
private respondent employees.
We agree with petitioner LRTA. Section 2 (1), Article IX B, 1987 Constitution, expressly provides that "[t]he civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters."
Corporations with original charters are those which have been created by special law and not through the general corporation law. Thus,
in Philippine National Oil Company Energy Development Corporation v. Hon. Leogrado, we held that "under the present state of the law, the
test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the manner of its creation such that
government corporations created by special charter are subject to its provisions while those incorporated under the general Corporation Law are not
within its coverage."12There should be no dispute then that employment in petitioner LRTA should be governed only by civil service rules, and not

P2,746

the Labor Code and beyond the reach of the Department of Labor and Employment, since petitioner LRTA is a government-owned and controlled
corporation with an original charter, Executive Order No. 603, Series of 1980, as amended.
In contrast, petitioner METRO is covered by the Labor Code despite its later acquisition by petitioner LRTA. InLumanta v. National Labor
Relations Commission,13this Court ruled that labor law claims against government-owned and controlled corporations without original charter fall
within the jurisdiction of the Department of Labor and Employment and not the Civil Service Commission. Petitioner METRO was originally
organized under the Corporation Code, and only became a government-owned and controlled corporation after it was acquired by petitioner LRTA.
Even then, petitioner METRO has no original charter, hence, it is the Department of Labor and Employment, and not the Civil Service Commission,
which has jurisdiction over disputes arising from the employment of its workers. Consequently, the terms and conditions of such employment are
governed by the Labor Code and not by the Civil Service Rules and Regulations.
We therefore hold that the employees of petitioner METRO cannot be considered as employees of petitioner LRTA. The employees hired by METRO
are covered by the Labor Code and are under the jurisdiction of the Department of Labor and Employment, whereas the employees of petitioner
LRTA, a government-owned and controlled corporation with original charter, are covered by civil service rules. Herein private respondent workers
cannot have the best of two worlds, e.g., be considered government employees of petitioner LRTA, yet allowed to strike as private employees under
our labor laws. Department of Justice Opinion No. 108, Series of 1999, issued by then Secretary of Justice Serafin R. Cuevas on whether or not
employees of petitioner METRO could go on strike is persuasive
We believe that METRO employees are not covered by the prohibition against strikes applicable to employees embraced in the Civil Service. It is not
disputed, but in fact conceded, that METRO employees are not covered by the Civil Service. This being so, METRO employees are not covered by
the Civil Service law, rules and regulations but are covered by the Labor Code and, therefore, the rights and prerogatives granted to private
employees thereunder, including the right to strike, are available to them.
Moreover, as noted by Secretary Benjamin E. Diokno, of the Department of Budget and Management, in his letter dated February 22, 1999, the
employees of METRO are not entitled to the government amelioration assistance authorized by the President pursuant to Administrative Order No.
37 for government employees, because the employees of METRO are not government employees since Metro, Inc. "could not be considered as
GOCC as defined under Section 3 (b) of E.O. 518 x x x x"14
Indeed, there was never an intention to consider the employees of petitioner METRO as government employees of petitioner LRTA as well neither
from the beginning, nor until the end. Otherwise, they could have been easily converted from being employees in the private sector and absorbed as
government employees covered by the civil service when petitioner LRTA acquired petitioner METRO in 1989. The stubborn fact is that they
remained private employees with rights and prerogatives granted to them under the Labor Code, including the right to strike, which they exercised
and from which the instant dispute arose.
We likewise hold that it is inappropriate to pierce the corporate veil of petitioner METRO. In Del Rosario v. National Labor Relations
Commission, we ruled that "[u]nder the law a corporation is bestowed juridical personality, separate and distinct from its stockholders. But when the
juridical personality of the corporation is used to defeat public convenience, justify wrong, protect fraud or defend crime, the corporation shall be
considered as a mere association of persons, and its responsible officers and/or stockholders shall be held individually liable. For the same reasons, a
corporation shall be liable for the obligations of a stockholder, or a corporation and its successor-in-interest shall be considered as one and the
liability of the former shall attach to the latter. But for the separate juridical personality of a corporation to be disregarded, the wrongdoing must be
clearly and convincingly established. It cannot be presumed."15In Del Rosario, we also held that the "substantial identity of the incorporators of the
two corporations does not necessarily imply fraud."16
In the instant case, petitioner METRO, formerly Meralco Transit Organization, Inc., was originally owned by the Manila Electric Company and
registered with the Securities and Exchange Commission more than a decade before the labor dispute. It then entered into a ten-year agreement with
petitioner LRTA in 1984. And, even if petitioner LRTA eventually purchased METRO in 1989, both parties maintained their separate and distinct
juridical personality and allowed the agreement to proceed. In 1990, this Court, in Light Rail Transit Authority v. Commission on Audit, even
upheld the validity of the said agreement.17Consequently, the agreement was extended beyond its ten-year period. In 1995, METROs separate
juridical identity was again recognized when it entered into a collective bargaining agreement with the workers union. All these years, METROs
distinct corporate personality continued quiescently, separate and apart from the juridical personality of petitioner LRTA.
The labor dispute only arose in 2000, after a deadlock occurred during the collective bargaining between petitioner METRO and the workers union.
This alone is not a justification to pierce the corporate veil of petitioner METRO and make petitioner LRTA liable to private respondent workers.
There are no badges of fraud or any wrongdoing to pierce the corporate veil of petitioner METRO.
On this point, the Department of Justice Opinion No. 108, Series of 1999, issued by then Secretary of Justice Serafin R. Cuevas is once again
apropos:
Anent the issue of piercing the corporate veil, it was held in Concept Builders, Inc. v. NLRC (G.R. No. 108734, May 29, 1996, 257 SCRA 149, 159)
that the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows:
"1. Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice
in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of
its own;
2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive
legal duty, or dishonest and unjust act in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
The absence of any one of these elements prevents piercing the corporate veil. In applying the instrumentality or alter ego doctrine, the courts are
concerned with reality and not form, with how the corporation operated and the individual defendants relationship to that operation."
Here, the records do not show that control was used to commit a fraud or wrong. In fact, it appears that piercing the corporate veil for the purpose of
delivery of public service, would lead to a confusing situation since the outcome would be that Metro will be treated as a mere alter ego of LRTA, not
having a separate corporate personality from LRTA, when dealing with the issue of strike, and a separate juridical entity not covered by the Civil
Service when it comes to other matters. Under the Constitution, a government corporation is either one with original charter or one without original
charter, but never both.18
In sum, petitioner LRTA cannot be held liable to the employees of petitioner METRO.
With regard the issue of illegal dismissal, petitioner METRO maintains that private respondent workers were not illegally dismissed but should be
deemed to have abandoned their jobs after defying the assumption of jurisdiction and return-to-work order issued by the Labor Secretary. Private
respondent workers, on the other hand, submit that they could not immediately return to work as the light rail transit system had ceased its operations.
We find for the private respondent workers. In Batangas Laguna Tayabas Bus Co. v. National Labor Relations Commission, 19 we said that the fiveday period for the strikers to obey the Order of the Secretary of Justice and return to work was not sufficient as "some of them may have left Metro

Manila and did not have enough time to return during the period given by petitioner, which was only five days." 20 In Batangas Laguna Tayabas Bus
Co.,21we further held
The contention of the petitioner that the private respondents abandoned their position is also not acceptable. An employee who forthwith takes steps
to protest his lay-off cannot by any logic be said to have abandoned his work.
For abandonment to constitute a valid cause for termination of employment, there must be a deliberate, unjustified refusal of the employee to resume
his employment. This refusal must be clearly established. As we stressed in a recent case, mere absence is not sufficient; it must be accompanied by
overt acts unerringly pointing to the fact that the employee simply does not want to work anymore.
In the instant case, private respondent workers could not have defied the return-to-work order of the Secretary of Labor simply because they were
dismissed immediately, even before they could obey the said order. The records show that the assumption of jurisdiction and return-to-work order
was issued by Secretary of Labor Bienvenido E. Laguesma on July 25, 2000. The said order was served and posted by the sheriffs of the Department
of Labor and Employment the following day, on July 26, 2000. Further, the said order of assumption of jurisdiction was duly published on July 27,
2000, in the Philippine Daily Inquirer and the Philippine Star. On the same day also, on July 27, 2000, private respondent workers were dismissed.
Neither could they be considered as having abandoned their work. If petitioner METRO did not dismiss the strikers right away, and instead accepted
them back to work, the management agreement between petitioners LRTA and METRO could still have been extended and the workers would still
have had work to return to.
IN VIEW WHEREOF, the Decision of public respondent Court of Appeals is AFFIRMED insofar as it holds Metro Transit Organization, Inc. liable
for the illegal dismissal of private respondents and orders it to pay them their benefits and full back wages and moral damages. Further, Metro Transit
Organization, Inc. is ordered to pay attorneys fees equivalent to ten percent (10%) of the total money judgment. The petition of the Light Rail Transit
Authority is GRANTED, and the complaint filed against it for illegal dismissal is DISMISSED for lack of merit.
SO ORDERED.
G.R. No. 94372
June 21, 1991
SAMAHANG MANGGAGAWA NG RIZAL PARK and DOMINGO ENRIQUEZ, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL PARK DEVELOPMENT COMMITTEE,respondents.
Merito R. Fernandez for petitioners.

CRUZ, J.:
The petitioners were dismissed by the National Park Development Committee, private respondent herein, on the supercilious ground that their
continued employment was "not compatible with the rules of the New Society." That was in 1972, shortly after the imposition of martial law. When
the petitioners complained to the Department of Labor, their dismissal was sustained by the Labor Arbiter. This was not surprising because the year
was 1976 and martial law was still in force.
What is surprising is this. When his decision was appealed to the NLRC, the public respondent also affirmed the dismissal albeit on a different
ground. This was on June 29, 1990, long after the New Society had been banished and discredited. The Freedom Constitution had already called for
the eradication of "all iniquitous vestiges of the previous regime."1
The petitioners were employees of the private respondent, then under the chairmanship of Imelda Marcos and the vice-chairmanship of the late
Teodoro F. Valencia. Sometime in August 1972, the petitioner union proposed negotiations for the adoption of a collective bargaining agreement but
the proposal was ignored. The union then filed a notice of strike with the Bureau of Labor Relations on September 6, 1972, on the grounds of refusal
of management to bargain collectively, refusal to recognize the union, and discrimination of union members. The conference scheduled by the Bureau
for the following day could not even be held because the private respondent did not send a representative.
On September 16, 1972, petitioner Corazon Alparicio was dismissed. This was followed on October 3, and 4, 1972, with the unceremonious
separation also of the other individual petitioners. The uniform reason given was the incompatibility of their continued employment with the rules of
the New Society. A sample letter read as follows:
Republic of the Philippines
Office of the President
NATIONAL PARKS DEVELOPMENT COMMITTEE
Rizal Park, Manila
October 3, 1972
Date
Mr. Modesto Deunida
Driver Truck In-Charge
Rizal Park
Sir/Madam:
This notice terminates your services, effective immediately. Your continued employment under the NATIONAL PARKS
DEVELOPMENT COMMITTEE or in any of its projects is not compatible with the rules of the New Society.
For immediate compliance and guidance.
(SGD.) JESUS B. ALVAREZ, JR.
Director
The proceedings were delayed when the private respondent submitted that the complaint should be resolved by the Office of the President, resulting
in the elevation of the matter to Malacaang. The case was returned to the public respondent on the finding that it fell under the jurisdiction of the
NLRC pursuant to P.D. No. 21, promulgated on October 14, 1972.2
The Labor Arbiter dismissed the case, holding that P.D. No. 21 was not applicable, the dismissals having been made before its effectivity date. His
decision was duly appealed to the NLRC, but action on the appeal was also delayed, and further still when the records of the case were among those
burned in the fire at the NLRC building on December 13, 1983. According to the NLRC, it took some time before they could be reconstituted. 3
In its own decision,4 the reorganized NLRC still saw fit to sustain the dismissals made by the private respondent and declared as follows:
A perusal of the evidence adduced shows that the charge of unfair labor practice allegedly committed by the respondent has not been
sufficiently proven. It is well settled that a charge for unfair labor practice must be proven by clear and convincing evidence, which is
miserably wanting in this case.

The NLRC assumed all the time that it had jurisdiction over the case. So apparently have the petitioners in the petition now before us as the said
decision is challenged only for grave abuse of discretion in upholding the invalid dismissals. The Solicitor General has moved for dismissal, but not
on jurisdictional grounds.
In recent decisions, this Court has held that the National Parks Development Committee is a government agency whose employees are covered by the
civil service rules and not the Labor Code.
In Perlas vs. People of the Philippines,5 we held that the Sandiganbayan had jurisdiction over the acting director of the Committee who was under
prescription for estafa, thus:
The National Parks Development Committee was created originally as an Executive Committee on January 14, 1963, for the development
of the Quezon Memorial, Luneta and other national parks (Executive Order No. 30). It was later designated as the National Parks
Development Committee (NPDC) on February 7, 1974 (E.O. No. 69). On January 9, 1966, Imelda R. Marcos and Teodoro F. Valencia were
designated Chairman and Vice-Chairman respectively (E O. No. 3). Despite an attempt to transfer it to the Bureau of Forest Development,
Department of Natural Resources, on December 1, 1975 (Letter of Implementation No. 39, issued pursuant to PD No. 830, dated November
27, 1975, the NPDC has remained under the Office of the President (E.O. No. 709 dated July 27, 1981).
Affirming that finding, we said in Republic vs. Court of Appeals 6 as follows:
Since NPDC is a government agency, its employees are covered by civil service rules and regulations (Sec. 2, Article IX, 1987
Constitution). Its employees are civil service employees (Sec. 14, Executive Order No. 180).
While NPDC employees are allowed under the 1987 Constitution to organize and join unions of their choice, there is as yet no law
permitting them to strike. In case of a labor dispute between the employees and the government. Section 15 of Executive Order No. 180
dated June 1, 1987 provides that the Public Sector Labor Management Council, not the Department of Labor and Employment, shall hear
the dispute. Clearly, the Court of Appeals and the lower court erred in holding that the labor dispute between the NPDC and the members of
the NPDSA is cognizable by the Department of Labor and Employment.
Nevertheless, considering that this case has been pending since 1972 and all the evidence needed to resolve it is before us, and more so because the
issue presents no special difficulty, the Court feels it should be decided now, without going through the correct procedural formalities that anyway
will result in the same conclusion.
Accordingly, we rule directly as follows.
A mere reading of the termination notice will readily show that the dismissals were not for cause and that the reason given was prima facie invalid.
The general statement that the employment of the petitioners was not consonant with the rules of the New Society was a preposterous justification.
There was no indication of the specific rules supposedly violated nor was there a showing, assuming the said rules had been pinpointed, of how or
when they had been breached by the dismissed employees. Neither was it established that the employees were informed of the charges against them
or that they were given an opportunity to be heard in their defense.
Such cavalier treatment of the employees could have been permitted under the so-called New Society but cannot be countenanced now under the
restored democracy. It is truly amazing that it was sustained by the present NLRC and no less astonishing that it is now defended by the Office of the
Solicitor General. That office suggests that the burden of proof was on the petitioners, as complainants, to show that their dismissal was illegal. This
is incorrect; that office has it backwards. It is settled that in cases of dismissal, it is the employer who must prove its validity, not the employee who
must prove its invalidity.
It must be borne in mind that the basic principle in termination cases is that the burden of proof rests upon the employer to show that the
dismissal is for just cause and failure to do so would necessarily mean that the dismissal is not justified and, therefore the employee is
entitled to be reinstated in accordance with the mandate of Article 280 of the New Labor Code. 7
By simply saying that the continued employment of the petitioners was not consistent with the rules of the New Society, the private respondent failed
to discharge the burden of proving that the employees deserved to be dismissed. In sustaining the dismissals despite their undisguised arbitrariness,
the NLRC committed grave abuse of discretion correctable by the extraordinary writ of certiorari under Rule 65 of the Rules of Court.
The insolence of the Marcos government should have been corrected by now, after more than five years since the people power revolution that
banished the deposed President and with him, it was hoped then, all the oppressions of his discredited regime.1wphi1 It seems, however, that the
effects of past arrogance have not yet completely disappeared and, worse, are still being affirmed and stoutly defended now by the new government.
The Court will not allow this.
WHEREFORE, the petition is GRANTED. The decision of the NLRC dated June 29, 1990, is REVERSED. The private respondent is ordered to
REINSTATE all the individual petitioners without loss of seniority rights and to pay them five years back salaries. 8
SO ORDERED.
G.R. No. 80767
April 22, 1991
BOY SCOUTS OF THE PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FORTUNATO ESGUERRA, ROBERTO MALABORBOR, ESTANISLAO MISA,
VICENTE EVANGELISTA, and MARCELINO GARCIA, respondents.
Julio O. Lopez for petitioner.

FELICIANO, J.:
This Petition for Certiorari is directed at (1) the Decision,1 dated 27 February 1987, and (2) the Resolution2 dated 16 October 1987, both issued by
the National Labor Relations Commission ("NLRC") in Case No. 1637-84.
Private respondents Fortunato C. Esquerra, Roberto O. Malaborbor, Estanislao M. Misa, Vicente N. Evangelista and Marcelino P. Garcia, had all been
rank-and-file employees of petitioner Boy Scouts of the Philippines ("BSP"). At the time of termination of their services in February 1985, private
respondents were stationed at the BSP Camp in Makiling, Los Baos, Laguna.
The events which led to such termination of services are as follows:
On 19 October 1984, the Secretary-General of petitioner BSP issued Special Orders Nos. 80, 81, 83, 84 and 85 addressed separately to the five (5)
private respondents, informing them that on 20 November 1984, they were to be transferred from the BSP Camp in Makiling to the BSP Land Grant
in Asuncion, Davao del Norte. These Orders were opposed by private respondents who, on 4 November 1984, appealed the matter to the BSP
National President.

On 6 November 1984, petitioner BSP conducted a pre-transfer briefing at its National Headquarters in Manila. Private respondents were in
attendance during the briefing and they were there assured that their transfer to Davao del Norte would not involve any diminution in salary, and that
each of them would receive a relocation allowance equivalent to one (1) month's basic pay. This assurance, however, failed to persuade private
respondents to abandon their opposition to the transfer orders issued by the BSP Secretary-General.
On 13 November 1984, a complaint3
(docketed as NLRC Case No. 16-84J) for illegal transfer was filed with the then Ministry of Labor and Employment, Sub-Regional Arbitration
Branch IV, San Pablo City, Laguna. Private respondents there sought to enjoin implementation of Special Orders Nos. 80, 81, 83, 84 and 85, alleging,
among other things, that said orders were "indubitable and irrefutable action[s] prejudicial not only to [them] but to [their] families and [would]
seriously affect [their] economic stability and solvency considering the present cost of living."
On 21 November 1984 (or the day immediately following the date of scheduled transfer), the BSP Camp Manager in Makiling issued a Memorandum
requiring the five (5) private respondents to explain why they should not be charged administratively for insubordination. The Memorandum was a
direct result of the refusal by private respondents, two (2) days earlier, to accept from petitioner BSP their respective boat tickets to Davao del Norte
and their relocation allowances.
Meanwhile, in a letter of the same date, the BSP National President informed private respondents that their refusal to comply with the Special Orders
was not sufficiently justified and constituted rank disobedience. Memoranda subsequently issued by the BSP Secretary-General stressed that such
refusal as well as the explanations proffered therefor, were unacceptable and could altogether result in termination of employment with petitioner
BSP. These warnings notwithstanding, private respondents continued pertinaciously to disobey the disputed transfer orders.
Petitioner BSP consequently imposed a five-day suspension on the five (5) private respondents, in the latter part of January 1985. Subsequently, by
Special Order dated 12 February 1985 issued by the BSP Secretary-General, private respondents' services were ordered terminated effective 15
February 1985.
On 22 February 1985, private respondents amended their original complaint to include charges of illegal dismissal and unfair labor practice against
petitioner BSP.4
The Labor Arbiter thereafter proceeded to hear the complaint.
In a decision5 dated 31 July 1985, the Labor Arbiter ordered the dismissal of private respondents' complaint for lack of merit.
On 27 February 1987, however, the ruling of the Labor Arbiter was reversed by public respondent, NLRC, which held that private respondents had
been illegally dismissed by petitioner BSP. The dispositive portion of the NLRC decision read:
WHEREFORE, premises considered the Decision appealed from is hereby SET ASIDE and a new one entered ordering the respondentappellee [petitioner BSP] to reinstate the complainants-appellants [private respondents] to their former positions without loss of seniority
rights and other benefits appurtenant thereto and with full backwages from the time they were illegally dismissed from the service up to the
date of their actual reinstatement.
SO ORDERED.
The Court notes at the outset that in the Position Paper6 filed by petitioner BSP with the Labor Arbiter, it was alleged in the second paragraph thereof,
that petitioner is a "civic service, non-stock and non-profit organization, relying mostly [on] government and public support, existing under and by
virtue of Commonwealth Act No. 111, as amended, by Presidential Decree No. 460 . . . " A similar allegation was contained in the Brief for
Appellee7 and in the Petition8 and Memorandum9 filed by petitioner BSP with public respondent NLRC and this Court, respectively. The same
allegation, moreover, appeared in the Comment10 (also treated as the Memorandum) submitted to this Court by the Solicitor General on behalf of
public respondent NLRC; for their part, private respondents stated in their Appeal Memorandum 11 with the NLRC that petitioner BSP is "by mandate
of law a Public Corporation," a statement reiterated by them in their Memorandum 12 before this Court.
In a Resolution dated 9 August 1989, this Court required the parties and the Office of the Government Corporate Counsel to file a comment on the
question of whether or not petitioner BSP is in fact a government-owned or controlled corporation.
Petitioner, private respondents, the Office of the Solicitor General and the Office of the Government Corporate Counsel filed their respective
comments.
The central issue is whether or not the BSP is embraced within the Civil Service as that term is defined in Article IX (B) (2) (1) of the 1987
Constitution which reads as follows:
The Civil Service embraces all branches, subdivisions, instrumentality mentalities and agencies of the Government, including governmentowned or controlled corporations with original charters.
xxx
xxx
xxx
The answer to the central issue will determine whether or not private respondent NLRC had jurisdiction to render the Decision and Resolution which
are here sought to be nullified.
The responses of the parties, on the one hand, and of the Office of the Solicitor General and the Office of the Government Corporate Counsel, upon
the other hand, in compliance with the Resolution of this Court of 9 August 1989, present a noteworthy uniformity. Petitioner BSP and private
respondents submit substantially the same view "that the BSP is a purely private organization". In contrast, the Solicitor General and the Government
Corporate Counsel take much the same position, that is, that the BSP is a "public corporation' or a "quasi-public corporation" and, as well, a
"government controlled corporation." Petitioner BSP's compliance with our Resolution invokes the following provisions of its Constitution and Bylaws:
The Boy Scouts of the Philippines declares that it is an independent, voluntary, non-political, non-sectarian and non-governmental
organization, with obligations towards nation building and with international orientation.
The BSP, petitioner stresses, does not receive any monetary or financial subsidy from the Government whether on the national or local
level.13 Petitioner declares that it is a "purely private organization" directed and controlled by its National Executive Board the members of which are,
it is said, all "voluntary scouters," including seven (7) Cabinet Secretaries. 14
Private respondents submitted a supplementary memorandum arguing that while petitioner BSP was created as a public corporation, it had lost that
status when Section 2 of Commonwealth Act No. 111 as amended by P.D. No. 460 conferred upon it the powers which ordinary private corporations
organized under the Corporation Code have:
Sec. 2. The said corporation shall have perpetual succession with power to sue and be sued; to hold such real and personal estate as shall be
necessary for corporate purposes, and to receive real and personal property by gift, devise, or bequest; to adopt a seal, and to alter or
destroy the same at pleasure; to have offices and conduct its business and affairs in the City of Manila and in the several provinces; to make
and adopt by-laws, rules and regulations not inconsistent with the laws of the Philippines, and generally to do all such acts and things
(including the establishment of regulations for the election of associates and successors: as may be necessary to carry into effect the
provisions of the Act and promote the purposes of said corporation.

Private respondents also point out that the BSP is registered as a private employer with the Social Security System and that all its staff members and
employees are covered by the Social Security Act, indicating that the BSP had lost its personality or standing as a public corporation. It is further
alleged that the BSP's assets and liabilities, official transactions and financial statements have never been subjected to audit by the government
auditing office, i.e., the Commission on Audit, being audited rather by the private auditing firm of Sycip Gorres Velayo and Co. Private respondents
finally state that the appointments of BSP officers and staff were not approved or confirmed by the Civil Service Commission.
The views of the Office of the Solicitor General and the Office of the Government Corporate Counsel on the above issue appeared to be generally
similar. The Solicitor General's Office, although it had appeared for the NLRC and filed a Comment on the latter's behalf on the merits of the Petition
for Certiorari, submitted that the BSP is a government-owned or controlled corporation, having been created by virtue of Commonwealth Act No.
111 entitled "An Act to Create a Public Corporation to be known as the Boy Scouts of the Philippines and to Define its Powers and Purposes." The
Solicitor General stressed that the BSP was created in order to "promote, through organization, and cooperation with other agencies the ability of
boys to do things for themselves and others, to train them in scoutcraft, and to teach them patriotism, courage, self-reliance, and kindred virtues,
using the methods which are now in common use by boy scouts."5 He further noted that the BSP's objectives and purposes are "solely of a benevolent
character and not for pecuniary profit by its members. 16 The Solicitor General also underscored the extent of government participation in the BSP
under its charter as reflected in the composition of its governing body:
The governing body of the said corporation shall consist of a National Executive Board composed of (a) thePresident of the Philippines or
his representative; (b) the charter and life members of the Boy Scouts of the Philippines; (c) the Chairman of the Board of Trustees of the
Philippine Scouting Foundation; (d) the Regional Chairman of the Scout Regions of the Philippines; (e) the Secretary of Education and
Culture, the Secretary of Social Welfare, the Secretary of National Defense, the Secretary of Labor, the Secretary of Finance, the Secretary
of Youth and Sports, and the Secretary of local Government and Community Development; (f) an equal number of individuals from the
private sector; (g) the National President of the Girl Scouts of the Philippines; (h) one Scout of Senior age from each Scout Region to
represent the boy membership; and (i) three representatives of the cultural minorities. Except for the Regional Chairman who shall be
elected by the Regional Scout Councils during their annual meetings, and the Scouts of their respective regions, all members of the
National Executive Board shall be either by appointment or cooption, subject to ratification and confirmation by the Chief Scout, who shall
be the Head of State. . . .17 (Emphasis supplied)
The Government Corporate Counsel, like the Solicitor General, describes the BSP as a "public corporation" but, unlike the Solicitor General,
suggests that the BSP is more of a "quasi corporation" than a "public corporation." The BSP, unlike most public corporations which are created for a
political purpose, is not vested with political or governmental powers to be exercised for the public good or public welfare in connection with the
administration of civil government. The Government Corporate Counsel submits, more specifically, that the BSP falls within the ambit of the term
"government-owned or controlled corporation" as defined in Section 2 of P.D. No. 2029 (approved on 4 February 1986) which reads as follows:
A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing governmental or proprietary
functions, which is directly chartered by special law or if organized under the general corporation law is owned or controlled by the
government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its
outstanding capital stock or its outstanding voting capital stock.
xxx
xxx
xxx
(Emphasis supplied)
Examining the relevant statutory provisions and the arguments outlined above, the Court considers that the following need to be considered in
arriving at the appropriate legal characterization of the BSP for purposes of determining whether its officials and staff members are embraced in the
Civil Service. Firstly, BSP's functions as set out in its statutory charter do have a public aspect. BSP's functions do relate to the fostering of the public
virtues of citizenship and patriotism and the general improvement of the moral spirit and fiber of our youth. The social value of activities like those to
which the BSP dedicates itself by statutory mandate have in fact, been accorded constitutional recognition. Article II of the 1987 Constitution
includes in the "Declaration of Principles and State Policies," the following:
Sec. 13. The State recognizes the vital role of the youth in nation-building and shall promote and protect their physical, moral, spiritual,
intellectual, and social well-being. It shall inculcate in the youth patriotism and nationalism, and encourage their involvement in public and
civic affairs.
At the same time, BSP's sanctions do not relate to the governance of any part of territory of the Philippines; BSP is not a public corporation in the
same sense that municipal corporations or local governments are public corporations. BSP's functions can not also be described as proprietary
functions in the same sense that the functions or activities of government-owned or controlled corporations like the National Development Company
or the National Steel Corporation can be described as proprietary or "business-like" in character. Nevertheless, the public character of BSP's functions
and activities must be conceded, for they pertain to the educational, civic and social development of the youth which constitutes a very substantial
and important part of the nation.
The second aspect that the Court must take into account relates to the governance of the BSP. The composition of the National Executive Board of
the BSP includes, as noted from Section 5 of its charter quoted earlier, includes seven (7) Secretaries of Executive Departments. The seven (7)
Secretaries (now six [6] in view of the abolition of the Department of Youth and Sports and merger thereof into the Department of Education, Culture
and Sports) by themselves do not constitute a majority of the members of the National Executive Board. We must note at the same time that the
appointments of members of the National Executive Board, except only the appointments of the Regional Chairman and Scouts of Senior age from
the various Scout Regions, are subject to ratification and confirmation by the Chief Scout, who is the President of the Philippines. Vacancies to the
Board are filled by a majority vote of the remaining members thereof, but again subject to ratification and confirmation by the Chief Scout. 18 We
must assume that such confirmation or ratification involves the exercise of choice or discretion on the part of ratifying or confirming power. It does
appears therefore that there is substantial governmental (i.e., Presidential) participation or intervention in the choice of the majority of the members
of the National Executive Board of the BSP.
The third aspect relates to the character of the assets and funds of the BSP. The original assets of the BSP were acquired by purchase or gift or other
equitable arrangement with the Boy Scouts of America, of which the BSP was part before the establishment of the Commonwealth of the Philippines.
The BSP charter, however, does not indicate that such assets were public or statal in character or had originated from the Government or the State.
According to petitioner BSP, its operating funds used for carrying out its purposes and programs, are derived principally from membership dues paid
by the Boy Scouts themselves and from property rentals. In this respect, the BSP appears similar to private non-stock, non-profit corporations,
although its charter expressly envisages donations and contributions to it from the Government and any of its agencies and instrumentalities. 19 We
note only that BSP funds have not apparently heretofore been regarded as public funds by the Commission on Audit, considering that such funds
have not been audited by the Commission.

While the BSP may be seen to be a mixed type of entity, combining aspects of both public and private entities, we believe that considering the
character of its purposes and its functions, the statutory designation of the BSP as "a public corporation" and the substantial participation of the
Government in the selection of members of the National Executive Board of the BSP, the BSP, as presently constituted under its charter, is a
government-controlled corporation within the meaning of Article IX. (B) (2) (1) of the Constitution.
We are fortified in this conclusion when we note that the Administrative Code of 1987 designates the BSP as one of the attached agencies of the
Department of Education, Culture and Sports ("DECS"). 20 An "agency of the Government" is defined as referring to any of the various units of the
Government including a department, bureau, office, instrumentality, government-owned or-controlled corporation, or local government or distinct
unit therein.21 "Government instrumentality" is in turn defined in the 1987 Administrative Code in the following manner:
Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special
functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational
autonomy usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled
corporations.22 (Emphasis supplied)
The same Code describes a "chartered institution" in the following terms:
Chartered institution refers to any agency organized or operating under a special charter, and vested by law with functions relating to
specific constitutional policies or objectives. This term includes the state universities and colleges, and the monetary authority of the
State.23 (Emphasis supplied)
We believe that the BSP is appropriately regarded as "a government instrumentality" under the 1987 Administrative Code.
It thus appears that the BSP may be regarded as both a "government controlled corporation with an original charter" and as an "instrumentality" of
the Government within the meaning of Article IX (B) (2) (1) of the Constitution. It follows that the employees of petitioner BSP are embraced within
the Civil Service and are accordingly governed by the Civil Service Law and Regulations.
It remains only to note that even before the effectivity of the 1987 Constitution employees of the BSP already fell within the scope of the Civil
Service. In National Housing Corporation v. Juco,24 decided in 1985, the Court, speaking through Mr. Justice Gutierrez, held:
There should no longer be any question at this time that employees of government-owned or controlled corporations are governed by the
civil service law and civil service rules and regulations.
Section 1, Article XII-B of the [19731 Constitution specifically provides:
The Civil Service embraces every branch, agency, subdivision and instrumentality of the Government, including every government-owned
or controlled corporation. . . .
The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:
A Civil Service embracing all branches and subdivisions of the Government shall be provided by law.1wphi1
The inclusion of "government-owned or controlled corporations" within the embrace of the civil service shows a deliberate effort of the
framers to plug an earlier loophole which allowed government-owned or controlled corporations to avoid the full consequences of the all
encompassing coverage of the civil service system. The same explicit intent is shown by the addition of "agency" and "instrumentality" to
branches and subdivisions of the Government. All offices and firms of the government are covered. The amendments introduced in 1973
are not idle exercises or meaningless gestures. They carry the strong message that civil service coverage is broad and all-embracing insofar
as employment in the government in any of its governmental or corporate arms is concerned. 25
The complaint in NLRC Case No. 1637-84 having been filed on 13 November 1984, when the 1973 Constitution was still in force, our ruling
in Juco applies in the case at bar.26
In view of the foregoing, we hold that both the Labor Arbiter and public respondent NLRC had no jurisdiction over the complaint filed by private
respondents in NLRC Case No. 1637-84; neither labor agency had before it any matter which could validly have been passed upon by it in the
exercise of original or appellate jurisdiction. The appealed Decision and Resolution in this case, having been rendered without jurisdiction, vested no
rights and imposed no liabilities upon any of the parties here involved. That neither party had expressly raised the issue of jurisdiction in the
pleadings poses no obstacle to this ruling of the Court, which may motu proprio take cognizance of the issue of existence or absence of jurisdiction
and pass upon the same.27
ACCORDINGLY, the Decision of the Labor Arbiter dated 31 July 1985, and the Decision dated 27 February 1987 and Resolution dated 16 October
1987, issued by public respondent NLRC, in NLRC Case No. 1637-84, are hereby SET ASIDE. All other orders and resolutions rendered in this case
by the Labor Arbiter and the NLRC are likewise SET ASIDE. No pronouncement as to costs.
Fernan, C.J., Gutierrez, Jr., Bidin and Davide Jr., JJ., concur.
G.R. No. 78909 June 30, 1989
MATERNITY CHILDREN'S HOSPITAL, represented by ANTERA L. DORADO, President, petitioner,
vs.
THE HONORABLE SECRETARY OF LABOR AND THE REGIONAL DlRECTOR OF LABOR, REGION X,respondents.
MEDIALDEA, J.:
This is a petition for certiorari seeking the annulment of the Decision of the respondent Secretary of Labor dated September 24, 1986, affirming with
modification the Order of respondent Regional Director of Labor, Region X, dated August 4, 1986, awarding salary differentials and emergency cost
of living allowances (ECOLAS) to employees of petitioner, and the Order denying petitioner's motion for reconsideration dated May 13, 1987, on the
ground of grave abuse of discretion.
Petitioner is a semi-government hospital, managed by the Board of Directors of the Cagayan de Oro Women's Club and Puericulture Center, headed
by Mrs. Antera Dorado, as holdover President. The hospital derives its finances from the club itself as well as from paying patients, averaging 130
per month. It is also partly subsidized by the Philippine Charity Sweepstakes Office and the Cagayan De Oro City government.
Petitioner has forty-one (41) employees. Aside from salary and living allowances, the employees are given food, but the amount spent therefor is
deducted from their respective salaries (pp. 77-78, Rollo).
On May 23, 1986, ten (10) employees of the petitioner employed in different capacities/positions filed a complaint with the Office of the Regional
Director of Labor and Employment, Region X, for underpayment of their salaries and ECOLAS, which was docketed as ROX Case No. CW-71-86.
On June 16, 1986, the Regional Director directed two of his Labor Standard and Welfare Officers to inspect the records of the petitioner to ascertain
the truth of the allegations in the complaints (p. 98, Rollo). Payrolls covering the periods of May, 1974, January, 1985, November, 1985 and May,
1986, were duly submitted for inspection.

On July 17, 1986, the Labor Standard and Welfare Officers submitted their report confirming that there was underpayment of wages and ECOLAs of
all the employees by the petitioner, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, deficiency on wage and ecola as verified and confirmed per review of the respondent payrolls
and interviews with the complainant workers and all other information gathered by the team, it is respectfully recommended to
the Honorable Regional Director, this office, that Antera Dorado, President be ORDERED to pay the amount of SIX HUNDRED
FIFTY FOUR THOUSAND SEVEN HUNDRED FIFTY SIX & 01/100 (P654,756.01), representing underpayment of wages and
ecola to the THIRTY SIX (36) employees of the said hospital as appearing in the attached Annex "F" worksheets and/or whatever
action equitable under the premises. (p. 99, Rollo)
Based on this inspection report and recommendation, the Regional Director issued an Order dated August 4, 1986, directing the payment of
P723,888.58, representing underpayment of wages and ECOLAs to all the petitioner's employees, the dispositive portion of which reads:
WHEREFORE, premises considered, respondent Maternity and Children Hospital is hereby ordered to pay the above-listed
complainants the total amount indicated opposite each name, thru this Office within ten (10) days from receipt thereof.
Thenceforth, the respondent hospital is also ordered to pay its employees/workers the prevailing statutory minimum wage and
allowance.
SO ORDERED. (p. 34, Rollo)
Petitioner appealed from this Order to the Minister of Labor and Employment, Hon. Augusto S. Sanchez, who rendered a Decision on September 24,
1986, modifying the said Order in that deficiency wages and ECOLAs should be computed only from May 23, 1983 to May 23, 1986, the dispositive
portion of which reads:
WHEREFORE, the August 29, 1986 order is hereby MODIFIED in that the deficiency wages and ECOLAs should only be
computed from May 23, 1983 to May 23, 1986. The case is remanded to the Regional Director, Region X, for recomputation
specifying the amounts due each the complainants under each of the applicable Presidential Decrees. (p. 40, Rollo)
On October 24, 1986, the petitioner filed a motion for reconsideration which was denied by the Secretary of Labor in his Order dated May 13, 1987,
for lack of merit (p. 43 Rollo).
The instant petition questions the all-embracing applicability of the award involving salary differentials and ECOLAS, in that it covers not only the
hospital employees who signed the complaints, but also those (a) who are not signatories to the complaint, and (b) those who were no longer in the
service of the hospital at the time the complaints were filed.
Petitioner likewise maintains that the Order of the respondent Regional Director of Labor, as affirmed with modifications by respondent Secretary of
Labor, does not clearly and distinctly state the facts and the law on which the award was based. In its "Rejoinder to Comment", petitioner further
questions the authority of the Regional Director to award salary differentials and ECOLAs to private respondents, (relying on the case of Encarnacion
vs. Baltazar, G.R. No. L-16883, March 27, 1961, 1 SCRA 860, as authority for raising the additional issue of lack of jurisdiction at any stage of the
proceedings, p. 52, Rollo), alleging that the original and exclusive jurisdiction over money claims is properly lodged in the Labor Arbiter, based on
Article 217, paragraph 3 of the Labor Code.
The primary issue here is whether or not the Regional Director had jurisdiction over the case and if so, the extent of coverage of any award that
should be forthcoming, arising from his visitorial and enforcement powers under Article 128 of the Labor Code. The matter of whether or not the
decision states clearly and distinctly statement of facts as well as the law upon which it is based, becomes relevant after the issue on jurisdiction has
been resolved.
This is a labor standards case, and is governed by Art. 128-b of the Labor Code, as amended by E.O. No. 111. Labor standards refer to the minimum
requirements prescribed by existing laws, rules, and regulations relating to wages, hours of work, cost of living allowance and other monetary and
welfare benefits, including occupational, safety, and health standards (Section 7, Rule I, Rules on the Disposition of Labor Standards Cases in the
Regional Office, dated September 16, 1987). 1 Under the present rules, a Regional Director exercises both visitorial and enforcement power over
labor standards cases, and is therefore empowered to adjudicate money claims, provided there stillexists an employer-employee relationship, and the
findings of the regional office is not contested by the employer concerned.
Prior to the promulgation of E.O. No. 111 on December 24, 1986, the Regional Director's authority over money claims was unclear. The complaint in
the present case was filed on May 23, 1986 when E.O. No. 111 was not yet in effect, and the prevailing view was that stated in the case of Antonio
Ong, Sr. vs. Henry M. Parel, et al., G.R. No. 76710, dated December 21, 1987, thus:
. . . the Regional Director, in the exercise of his visitorial and enforcement powers under Article 128 of the Labor Code, has no
authority to award money claims, properly falling within the jurisdiction of the labor arbiter. . . .
. . . If the inspection results in a finding that the employer has violated certain labor standard laws, then the regional director must
order the necessary rectifications. However, this does not include adjudication of money claims, clearly within the ambit of the
labor arbiter's authority under Article 217 of the Code.
The Ong case relied on the ruling laid down in Zambales Base Metals Inc. vs. The Minister of Labor, et al., (G.R. Nos. 73184-88, November 26,
1986, 146 SCRA 50) that the "Regional Director was not empowered to share in the original and exclusive jurisdiction conferred on Labor Arbiters
by Article 217."
We believe, however, that even in the absence of E. O. No. 111, Regional Directors already had enforcement powers over money claims, effective
under P.D. No. 850, issued on December 16, 1975, which transferred labor standards cases from the arbitration system to the enforcement system.
To clarify matters, it is necessary to enumerate a series of rules and provisions of law on the disposition of labor standards cases.
Prior to the promulgation of PD 850, labor standards cases were an exclusive function of labor arbiters, under Article 216 of the then Labor Code
(PD No. 442, as amended by PD 570-a), which read in part:
Art. 216. Jurisdiction of the Commission. The Commission shall have exclusive appellate jurisdiction over all cases decided
by the Labor Arbiters and compulsory arbitrators.
The Labor Arbiters shall have exclusive jurisdiction to hear and decide the following cases involving all workers whether
agricultural or non-agricultural.
xxx xxx xxx
(c) All money claims of workers, involving non-payment or underpayment of wages, overtime compensation,
separation pay, maternity leave and other money claims arising from employee-employer relations, except
claims for workmen's compensation, social security and medicare benefits;
(d) Violations of labor standard laws;
xxx xxx xxx
(Emphasis supplied)

The Regional Director exercised visitorial rights only under then Article 127 of the Code as follows:
ART. 127. Visitorial Powers. The Secretary of Labor or his duly authorized representatives, including, but not restricted, to the
labor inspectorate, shall have access to employers' records and premises at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to question any employee and investigate any fact, condition or matter which
may be necessary to determine violations or in aid in the enforcement of this Title and of any Wage Order or regulation issued
pursuant to this Code.
With the promulgation of PD 850, Regional Directors were given enforcement powers, in addition to visitorial powers. Article 127, as amended,
provided in part:
SEC. 10. Article 127 of the Code is hereby amended to read as follows:
Art. 127. Visitorial and enforcement powers.
xxx xxx xxx
(b) The Secretary of Labor or his duly authorized representatives shall have the power to
order and administer, after due notice and hearing,compliance with the labor standards
provisions of this Code based on the findings of labor regulation officers or industrial
safety engineers made in the course of inspection, and to issue writs of execution to the
appropriate authority for the enforcement of their order.
xxx xxx xxx
Labor Arbiters, on the other hand, lost jurisdiction over labor standards cases. Article 216, as then amended by PD 850, provided in part:
SEC. 22. Article 216 of the Code is hereby amended to read as follows:
Art. 216. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have exclusive
jurisdiction to hear and decide the following cases involving all workers, whether agricultural or nonagricultural:
xxx xxx xxx
(3) All money claims of workers involving non-payment or underpayment of wages,
overtime or premium compensation, maternity or service incentive leave, separation pay
and other money claims arising from employer-employee relations, except claims for
employee's compensation, social security and medicare benefits and as otherwise
provided in Article 127 of this Code.
xxx xxx xxx
(Emphasis supplied)
Under the then Labor Code therefore (PD 442 as amended by PD 570-a, as further amended by PD 850), there were three adjudicatory units: The
Regional Director, the Bureau of Labor Relations and the Labor Arbiter. It became necessary to clarify and consolidate all governing provisions on
jurisdiction into one document. 2 On April 23, 1976, MOLE Policy Instructions No. 6 was issued, and provides in part (on labor standards cases) as
follows:
POLICY INSTRUCTIONS NO. 6
TO: All Concerned
SUBJECT: DISTRIBUTION OF JURISDICTION OVER LABOR CASES
xxx xxx xxx
1. The following cases are under the exclusive original jurisdiction of the Regional Director.
a) Labor standards cases arising from violations of labor standard lawsdiscovered in the
course of inspection or complaints where employer-employee relations still exist;
xxx xxx xxx
2. The following cases are under the exclusive original jurisdiction of the Conciliation Section of the
Regional Office:
a) Labor standards cases where employer-employee relations no longer exist;
xxx xxx xxx
6. The following cases are certifiable to the Labor Arbiters:
a) Cases not settled by the Conciliation Section of the Regional Office, namely:
1) labor standard cases where employer-employee relations no longer exist;
xxx xxx xxx
(Emphasis supplied)
MOLE Policy Instructions No. 7 (undated) was likewise subsequently issued, enunciating the rationale for, and the scope of, the enforcement power
of the Regional Director, the first and second paragraphs of which provide as follows:
POLICY INSTRUCTIONS NO. 7
TO: All Regional Directors
SUBJECT: LABOR STANDARDS CASES
Under PD 850, labor standards cases have been taken from the arbitration system and placed under the enforcement system,
except where a) questions of law are involved as determined by the Regional Director, b) the amount involved exceeds
P100,000.00 or over 40% of the equity of the employer, whichever is lower, c) the case requires evidentiary matters not disclosed
or verified in the normal course of inspection, or d) there is no more employer-employee relationship.
The purpose is clear: to assure the worker the rights and benefits due to him under labor standards laws without having to go
through arbitration. The worker need not litigate to get what legally belongs to him. The whole enforcement machinery of the
Department of Labor exists to insure its expeditious delivery to him free of charge. (Emphasis supplied)
Under the foregoing, a complaining employee who was denied his rights and benefits due him under labor standards law need not litigate. The
Regional Director, by virtue of his enforcement power, assured "expeditious delivery to him of his rights and benefits free of charge", provided of
course, he was still in the employ of the firm.
After PD 850, Article 216 underwent a series of amendments (aside from being re-numbered as Article 217) and with it a corresponding change in
the jurisdiction of, and supervision over, the Labor Arbiters:

1. PD 1367 (5-1-78) gave Labor Arbiters exclusive jurisdiction over unresolved issues in collective
bargaining, etc., and those cases arising from employer-employee relationsduly indorsed by the Regional
Directors. (It also removed his jurisdiction over moral or other damages) In other words, the Labor Arbiter
entertained cases certified to him. (Article 228, 1978 Labor Code.)
2. PD 1391 (5-29-78) all regional units of the National Labor Relations Commission (NLRC) were
integrated into the Regional Offices Proper of the Ministry of Labor; effectively transferring direct
administrative control and supervision over the Arbitration Branch to the Director of the Regional Office of
the Ministry of Labor. "Conciliable cases" which were thus previously under the jurisdiction of the defunct
Conciliation Section of the Regional Office for purposes of conciliation or amicable settlement, became
immediately assignable to the Arbitration Branch for joint conciliation and compulsory arbitration. In
addition, the Labor Arbiter had jurisdiction even over termination and labor-standards cases that may be
assigned to them for compulsory arbitration by the Director of the Regional Office. PD 1391 merged
conciliation and compulsory arbitration functions in the person of the Labor Arbiter. The procedure governing
the disposition of cases at the Arbitration Branch paralleled those in the Special Task Force and Field
Services Division, with one major exception: the Labor Arbiter exercised full and untrammelled authority in
the disposition of the case, particularly in the substantive aspect, his decisions and orders subject to review
only on appeal to the NLRC. 3
3. MOLE Policy Instructions No. 37 Because of the seemingly overlapping functions as a result of PD
1391, MOLE Policy Instructions No. 37 was issued on October 7, 1978, and provided in part:
POLICY INSTRUCTIONS NO. 37
TO: All Concerned
SUBJECT: ASSIGNMENT OF CASES TO LABOR ARBITERS
Pursuant to the provisions of Presidential Decree No. 1391 and to insure speedy disposition of labor cases,
the following guidelines are hereby established for the information and guidance of all concerned.
1. Conciliable Cases.
Cases which are conciliable per se i.e., (a) labor standards cases where employer-employee relationship no
longer exists; (b) cases involving deadlock in collective bargaining, except those falling under P.D. 823, as
amended; (c) unfair labor practice cases; and (d) overseas employment cases, except those involving overseas
seamen, shall be assigned by the Regional Director to the Labor Arbiter for conciliation and arbitration
without coursing them through the conciliation section of the Regional Office.
2. Labor Standards Cases.
Cases involving violation of labor standards laws where employer- employee relationshipstill exists shall be
assigned to the Labor Arbiters where:
a) intricate questions of law are involved; or
b) evidentiary matters not disclosed or verified in the normal course of inspection by
labor regulations officers are required for their proper disposition.
3. Disposition of Cases.
When a case is assigned to a Labor Arbiter, all issues raised therein shall be resolved by him including those
which are originally cognizable by the Regional Director to avoid multiplicity of proceedings. In other words,
the whole case, and not merely issues involved therein, shall be assigned to and resolved by him.
xxx xxx xxx
(Emphasis supplied)
4. PD 1691(5-1-80) original and exclusive jurisdiction over unresolved issues in collective bargaining and
money claims, which includes moral or other damages.
Despite the original and exclusive jurisdiction of labor arbiters over money claims, however, the Regional Director
nonetheless retained his enforcement power, and remained empowered to adjudicate uncontested money claims.
5. BP 130 (8-21-8l) strengthened voluntary arbitration. The decree also returned the Labor Arbiters as part
of the NLRC, operating as Arbitration Branch thereof.
6. BP 227(6-1- 82) original and exclusive jurisdiction over questions involving legality of strikes and lockouts.
The present petition questions the authority of the Regional Director to issue the Order, dated August 4, 1986, on the basis of his visitorial and
enforcement powers under Article 128 (formerly Article 127) of the present Labor Code. It is contended that based on the rulings in the Ong vs. Parel
(supra) and the Zambales Base Metals, Inc. vs. The Minister of Labor (supra) cases, a Regional Director is precluded from adjudicating money
claims on the ground that this is an exclusive function of the Labor Arbiter under Article 217 of the present Code.
On August 4, 1986, when the order was issued, Article 128(b) 4 read as follows:
(b) The Minister of Labor or his duly authorized representatives shall have the power to order and administer,
after due notice and hearing, compliance with the labor standards provisions of this Code based on the
findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to
issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where
the employer contests the findings of the labor regulations officer and raises issues which cannot be resolved
without considering evidentiary matters that are not verifiable in the normal course of inspection. (Emphasis
supplied)
On the other hand, Article 217 of the Labor Code as amended by P.D. 1691, effective May 1, 1980; Batas Pambansa Blg. 130, effective August 21,
1981; and Batas Pambansa Blg. 227, effective June 1, 1982, inter alia, provides:
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 non-agricultural:
1. Unfair labor practice cases;

2. Those that workers may file involving wages, hours of work and other terms and conditions of
employment;
3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for
employees' compensation, social security, medicare and maternity benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of this Code, including questions involving the legality of
strikes and lock-outs. (Emphasis supplied)
The Ong and Zambales cases involved workers who were still connected with the company. However, in the Ong case, the employer disputed the
adequacy of the evidentiary foundation (employees' affidavits) of the findings of the labor standards inspectors while in the Zambales case, the
money claims which arose from alleged violations of labor standards provisions were not discovered in the course of normal inspection. Thus, the
provisions of MOLE Policy Instructions Nos. 6, (Distribution of Jurisdiction Over Labor Cases) and 37 (Assignment of Cases to Labor Arbiters)
giving Regional Directors adjudicatory powers over uncontested money claims discovered in the course of normal inspection, provided an employeremployee relationship still exists, are inapplicable.
In the present case, petitioner admitted the charge of underpayment of wages to workers still in its employ; in fact, it pleaded for time to raise funds to
satisfy its obligation. There was thus no contest against the findings of the labor inspectors.
Barely less than a month after the promulgation on November 26, 1986 of the Zambales Base Metals case, Executive Order No. 111 was issued on
December 24, 1986, 5 amending Article 128(b) of the Labor Code, to read as follows:
(b) THE PROVISIONS OF ARTICLE 217 OF THIS CODE TO THE CONTRARY NOTWITHSTANDING
AND IN CASES WHERE THE RELATIONSHIP OF EMPLOYER-EMPLOYEE STILL EXISTS, the
Minister of Labor and Employment or his duly authorized representatives shall have the power to order and
administer, after due notice and hearing, compliance with the labor standards provisions of this Code AND
OTHER LABOR LEGISLATION based on the findings of labor regulation officers or industrial safety
engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the
enforcement of their orders, except in cases where the employer contests the findings of the labor regulation
officer and raises issues which cannot be resolved without considering evidentiary matters that are not
verifiable in the normal course of inspection. (Emphasis supplied)
As seen from the foregoing, EO 111 authorizes a Regional Director to order compliance by an employer with labor standards provisions of the Labor
Code and other legislation. It is Our considered opinion however, that the inclusion of the phrase, " The provisions of Article 217 of this Code to the
contrary notwithstanding and in cases where the relationship of employer-employee still exists" ... in Article 128(b), as amended, above-cited,
merelyconfirms/reiterates the enforcement adjudication authority of the Regional Director over uncontested money claims in cases where an
employer-employee relationship still exists. 6
Viewed in the light of PD 850 and read in coordination with MOLE Policy Instructions Nos. 6, 7 and 37, it is clear that it has always been the
intention of our labor authorities to provide our workers immediate access (when still feasible, as where an employer-employee relationship still
exists) to their rights and benefits, without being inconvenienced by arbitration/litigation processes that prove to be not only nerve-wracking, but
financially burdensome in the long run.
Note further the second paragraph of Policy Instructions No. 7 indicating that the transfer of labor standards cases from the arbitration system to the
enforcement system is
. . to assure the workers the rights and benefits due to him under labor standard laws, without having to go through arbitration. . .
so that
. . the workers would not litigate to get what legally belongs to him. .. ensuring delivery . . free of charge.
Social justice legislation, to be truly meaningful and rewarding to our workers, must not be hampered in its application by long-winded arbitration
and litigation. Rights must be asserted and benefits received with the least inconvenience. Labor laws are meant to promote, not defeat, social justice.
This view is in consonance with the present "Rules on the Disposition of Labor Standard Cases in the Regional Offices " 7 issued by the Secretary of
Labor, Franklin M. Drilon on September 16, 1987.
Thus, Sections 2 and 3 of Rule II on "Money Claims Arising from Complaint Routine Inspection", provide as follows:
Section 2. Complaint inspection. All such complaints shall immediately be forwarded to the Regional Director who shall refer
the case to the appropriate unit in the Regional Office for assignment to a Labor Standards and Welfare Officer (LSWO) for field
inspection. When the field inspection does not produce the desired results, the Regional Director shall summon the parties for
summary investigation to expedite the disposition of the case. . . .
Section 3. Complaints where no employer-employee relationship actually exists. Where employer-employee relationship no
longer exists by reason of the fact that it has already been severed, claims for payment of monetary benefits fall within the
exclusive and original jurisdiction of the labor arbiters. . . . (Emphasis supplied)
Likewise, it is also clear that the limitation embodied in MOLE Policy Instructions No. 7 to amounts not exceeding P100,000.00 has been dispensed
with, in view of the following provisions of pars. (b) and (c), Section 7 on "Restitution", the same Rules, thus:
xxx xxx xxx
(b) Plant-level restitutions may be effected for money claims not exceeding Fifty Thousand (P50,000.00). . . .
(c) Restitutions in excess of the aforementioned amount shall be effected at the Regional Office or at the
worksite subject to the prior approval of the Regional Director.
which indicate the intention to empower the Regional Director to award money claims in excess of P100,000.00;provided of course the employer
does not contest the findings made, based on the provisions of Section 8 thereof:
Section 8. Compromise agreement. Should the parties arrive at an agreement as to the whole or part of the dispute, said
agreement shall be reduced in writing and signed by the parties in the presence of the Regional Director or his duly authorized
representative.
E.O. No. 111 was issued on December 24, 1986 or three (3) months after the promulgation of the Secretary of Labor's decision upholding private
respondents' salary differentials and ECOLAs on September 24, 1986. The amendment of the visitorial and enforcement powers of the Regional
Director (Article 128-b) by said E.O. 111 reflects the intention enunciated in Policy Instructions Nos. 6 and 37 to empower the Regional Directors to
resolveuncontested money claims in cases where an employer-employee relationship still exists. This intention must be given weight and entitled to
great respect. As held in Progressive Workers' Union, et. al. vs. F.P. Aguas, et. al. G.R. No. 59711-12, May 29, 1985, 150 SCRA 429:

. . The interpretation by officers of laws which are entrusted to their administration is entitled to great respect. We see no reason
to detract from this rudimentary rule in administrative law, particularly when later events have proved said interpretation to be in
accord with the legislative intent. ..
The proceedings before the Regional Director must, perforce, be upheld on the basis of Article 128(b) as amended by E.O. No. 111, dated December
24, 1986, this executive order "to be considered in the nature of a curative statute with retrospective application." (Progressive Workers' Union, et al.
vs. Hon. F.P. Aguas, et al. (Supra); M. Garcia vs. Judge A. Martinez, et al., G.R. No. L- 47629, May 28, 1979, 90 SCRA 331).
We now come to the question of whether or not the Regional Director erred in extending the award to all hospital employees. We answer in the
affirmative.
The Regional Director correctly applied the award with respect to those employees who signed the complaint, as well as those who did not sign the
complaint, but were still connected with the hospital at the time the complaint was filed (See Order, p. 33 dated August 4, 1986 of the Regional
Director, Pedrito de Susi, p. 33, Rollo).
The justification for the award to this group of employees who were not signatories to the complaint is that the visitorial and enforcement powers
given to the Secretary of Labor is relevant to, and exercisable over establishments, not over the individual members/employees, because what is
sought to be achieved by its exercise is the observance of, and/or compliance by, such firm/establishment with the labor standards regulations.
Necessarily, in case of an award resulting from a violation of labor legislation by such establishment, the entire members/employees should benefit
therefrom. As aptly stated by then Minister of Labor Augusto S. Sanchez:
. . It would be highly derogatory to the rights of the workers, if after categorically finding the respondent hospital guilty of
underpayment of wages and ECOLAs, we limit the award to only those who signed the complaint to the exclusion of the majority
of the workers who are similarly situated. Indeed, this would be not only render the enforcement power of the Minister of Labor
and Employment nugatory, but would be the pinnacle of injustice considering that it would not only discriminate but also deprive
them of legislated benefits.
. . . (pp. 38-39, Rollo).
This view is further bolstered by the provisions of Sec. 6, Rule II of the "Rules on the Disposition of Labor Standards cases in the Regional Offices"
(supra) presently enforced, viz:
SECTION 6. Coverage of complaint inspection. A complaint inspection shall not be limited to the specific allegations or
violations raised by the complainants/workers but shall be a thorough inquiry into and verification of the compliance by employer
with existing labor standards and shall cover all workers similarly situated. (Emphasis supplied)
However, there is no legal justification for the award in favor of those employees who were no longer connectedwith the hospital at the time the
complaint was filed, having resigned therefrom in 1984, viz:
1. Jean (Joan) Venzon (See Order, p. 33, Rollo)
2. Rosario Paclijan
3. Adela Peralta
4. Mauricio Nagales
5. Consesa Bautista
6. Teresita Agcopra
7. Felix Monleon
8. Teresita Salvador
9. Edgar Cataluna; and
10. Raymond Manija ( p.7, Rollo)
The enforcement power of the Regional Director cannot legally be upheld in cases of separated employees. Article 129 of the Labor Code, cited by
petitioner (p. 54, Rollo) is not applicable as said article is in aid of the enforcement power of the Regional Director; hence, not applicable where the
employee seeking to be paid underpayment of wages is already separated from the service. His claim is purely a money claim that has to be the
subject of arbitration proceedings and therefore within the original and exclusive jurisdiction of the Labor Arbiter.
Petitioner has likewise questioned the order dated August 4, 1986 of the Regional Director in that it does not clearly and distinctly state the facts and
the law on which the award is based.
We invite attention to the Minister of Labor's ruling thereon, as follows:
Finally, the respondent hospital assails the order under appeal as null and void because it does not clearly and distinctly state the
facts and the law on which the awards were based. Contrary to the pretensions of the respondent hospital, we have carefully
reviewed the order on appeal and we found that the same contains a brief statement of the (a) facts of the case; (b) issues
involved; (c) applicable laws; (d) conclusions and the reasons therefor; (e) specific remedy granted (amount awarded). (p.
40, Rollo)
ACCORDINGLY, this petition should be dismissed, as it is hereby DISMISSED, as regards all persons still employed in the Hospital at the time of
the filing of the complaint, but GRANTED as regards those employees no longer employed at that time.
SO ORDERED.

G.R. No. 179652

May 8, 2009

PEOPLE'S BROADCASTING (BOMBO RADYO PHILS., INC.), Petitioner,


vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION VII,
and JANDELEON JUEZAN, Respondents.
DECISION
TINGA, J.:

The present controversy concerns a matter of first impression, requiring as it does the determination of the demarcation line between the prerogative
of the Department of Labor and Employment (DOLE) Secretary and his duly authorized representatives, on the one hand, and the jurisdiction of the
National Labor Relations Commission, on the other, under Article 128 (b) of the Labor Code in an instance where the employer has challenged the
jurisdiction of the DOLE at the very first level on the ground that no employer-employee relationship ever existed between the parties.
I.
The instant petition for certiorari under Rule 65 assails the decision and the resolution of the Court of Appeals dated 26 October 2006 and 26 June
2007, respectively, in C.A. G.R. CEB-SP No. 00855.1
The petition traces its origins to a complaint filed by Jandeleon Juezan (respondent) against Peoples Broadcasting Service, Inc. (Bombo Radyo
Phils., Inc) (petitioner) for illegal deduction, non-payment of service incentive leave, 13th month pay, premium pay for holiday and rest day and
illegal diminution of benefits, delayed payment of wages and non-coverage of SSS, PAG-IBIG and Philhealth before the Department of Labor and
Employment (DOLE) Regional Office No. VII, Cebu City.2 On the basis of the complaint, the DOLE conducted a plant level inspection on 23
September 2003. In the Inspection Report Form,3 the Labor Inspector wrote under the heading "Findings/Recommendations" "non-diminution of
benefits" and "Note: Respondent deny employer-employee relationship with the complainant- see Notice of Inspection results." In the Notice of
Inspection Results4also bearing the date 23 September 2003, the Labor Inspector made the following notations:
Management representative informed that complainant is a drama talent hired on a per drama " participation basis" hence no employer-employeeship
[sic] existed between them. As proof of this, management presented photocopies of cash vouchers, billing statement, employments of specific
undertaking (a contract between the talent director & the complainant), summary of billing of drama production etc. They (mgt.) has [sic] not control
of the talent if he ventures into another contract w/ other broadcasting industries.
On the other hand, complainant Juezans alleged violation of non-diminution of benefits is computed as follows:
@ P 2,000/15 days + 1.5 mos = P 6,000
(August 1/03 to Sept 15/03)
Note: Recommend for summary investigation or whatever action deem proper.5
Petitioner was required to rectify/restitute the violations within five (5) days from receipt. No rectification was effected by petitioner; thus, summary
investigations were conducted, with the parties eventually ordered to submit their respective position papers. 6
In his Order dated 27 February 2004,7 DOLE Regional Director Atty. Rodolfo M. Sabulao (Regional Director) ruled that respondent is an employee
of petitioner, and that the former is entitled to his money claims amounting to P203,726.30. Petitioner sought reconsideration of the Order, claiming
that the Regional Director gave credence to the documents offered by respondent without examining the originals, but at the same time he missed or
failed to consider petitioners evidence. Petitioners motion for reconsideration was denied. 8 On appeal to the DOLE Secretary, petitioner denied once
more the existence of employer-employee relationship. In its Order dated 27 January 2005, the Acting DOLE Secretary dismissed the appeal on the
ground that petitioner did not post a cash or surety bond and instead submitted a Deed of Assignment of Bank Deposit. 9
Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE Secretary disregarded the evidence it
presented and failed to give it the opportunity to refute the claims of respondent. Petitioner maintained that there is no employer-employee
relationship had ever existed between it and respondent because it was the drama directors and producers who paid, supervised and disciplined
respondent. It also added that the case was beyond the jurisdiction of the DOLE and should have been considered by the labor arbiter because
respondents claim exceeded P5,000.00.
The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an opportunity to be heard, which petitioner
had when it filed a motion for reconsideration with the DOLE Secretary. It further ruled that the latter had the power to order and enforce compliance
with labor standard laws irrespective of the amount of individual claims because the limitation imposed by Article 29 of the Labor Code had been
repealed by Republic Act No. 7730.10 Petitioner sought reconsideration of the decision but its motion was denied. 11
Before this Court, petitioner argues that the National Labor Relations Commission (NLRC), and not the DOLE Secretary, has jurisdiction over
respondents claim, in view of Articles 217 and 128 of the Labor Code. 12 It adds that the Court of Appeals committed grave abuse of discretion when
it dismissed petitioners appeal without delving on the issues raised therein, particularly the claim that no employer-employee relationship had ever
existed between petitioner and respondent. Finally, petitioner avers that there is no appeal, or any plain, speedy and adequate remedy in the ordinary
course of law available to it.

On the other hand, respondent posits that the Court of Appeals did not abuse its discretion. He invokes Republic Act No. 7730, which "removes the
jurisdiction of the Secretary of Labor and Employment or his duly authorized representatives, from the effects of the restrictive provisions of Article
129 and 217 of the Labor Code, regarding the confinement of jurisdiction based on the amount of claims." 13 Respondent also claims that petitioner
was not denied due process since even when the case was with the Regional Director, a hearing was conducted and pieces of evidence were
presented. Respondent stands by the propriety of the Court of Appeals ruling that there exists an employer-employee relationship between him and
petitioner. Finally, respondent argues that the instant petition for certiorari is a wrong mode of appeal considering that petitioner had earlier filed a
Petition for Certiorari, Mandamus and Prohibition with the Court of Appeals; petitioner, instead, should have filed a Petition for Review. 14
II.
The significance of this case may be reduced to one simple questiondoes the Secretary of Labor have the power to determine the existence of an
employer-employee relationship?
To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement power of the DOLE found in Article 128 (b) of the Labor
Code, as amended by Republic Act 7730. It reads:
Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employeremployee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders
to give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The Secretary or his duly authorized representative shall issue writs of
execution to the appropriate authority for the enforcement of their orders, except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection.
(emphasis supplied)
xxx
The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into play only "in cases when the relationship of
employer-employee still exists." It also underscores the avowed objective underlying the grant of power to the DOLE which is "to give effect to the
labor standard provision of this Code and other labor legislation." Of course, a persons entitlement to labor standard benefits under the labor laws
presupposes the existence of employer-employee relationship in the first place.
The clause "in cases where the relationship of employer-employee still exists" signifies that the employer-employee relationship must have existed
even before the emergence of the controversy. Necessarily, the DOLEs power does not apply in two instances, namely: (a) where the employeremployee relationship has ceased; and (b) where no such relationship has ever existed.
The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards Cases 15 issued by the DOLE
Secretary. It reads:
Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE INSPECTION
Sec. 3. Complaints where no employer-employee relationship actually exists. Where employer-employee relationship no longer exists by reason of
the fact that it has already been severed, claims for payment of monetary benefits fall within the exclusive and original jurisdiction of the labor
arbiters. Accordingly, if on the face of the complaint, it can be ascertained that employer-employee relationship no longer exists, the case, whether
accompanied by an allegation of illegal dismissal, shall immediately be endorsed by the Regional Director to the appropriate branch of the National
Labor Relations Commission (NLRC).
In the recent case of Bay Haven, Inc. v. Abuan, 16 this Court recognized the first situation and accordingly ruled that a complainants allegation of his
illegal dismissal had deprived the DOLE of jurisdiction as per Article 217 of the Labor Code. 17
In the first situation, the claim has to be referred to the NLRC because it is the NLRC which has jurisdiction in view of the termination of the
employer-employee relationship. The same procedure has to be followed in the second situation since it is the NLRC that has jurisdiction in view of
the absence of employer-employee relationship between the evidentiary parties from the start.
Clearly the law accords a prerogative to the NLRC over the claim when the employer-employee relationship has terminated or such relationship has
not arisen at all. The reason is obvious. In the second situation especially, the existence of an employer-employee relationship is a matter which is not
easily determinable from an ordinary inspection, necessarily so, because the elements of such a relationship are not verifiable from a mere ocular
examination. The intricacies and implications of an employer-employee relationship demand that the level of scrutiny should be far above the cursory
and the mechanical. While documents, particularly documents found in the employers

office are the primary source materials, what may prove decisive are factors related to the history of the employers business operations, its current
state as well as accepted contemporary practices in the industry. More often than not, the question of employer-employee relationship becomes a
battle of evidence, the determination of which should be comprehensive and intensive and therefore best left to the specialized quasi-judicial body
that is the NLRC.
It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a determination of the existence of an
employer-employee relationship. Such prerogatival determination, however, cannot be coextensive with the visitorial and enforcement power itself.
Indeed, such determination is merely preliminary, incidental and collateral to the DOLEs primary function of enforcing labor standards provisions.
The determination of the existence of employer-employee relationship is still primarily lodged with the NLRC. This is the meaning of the clause "in
cases where the relationship of employer-employee still exists" in Art. 128 (b).
Thus, before the DOLE may exercise its powers under Article 128, two important questions must be resolved: (1) Does the employer-employee
relationship still exist, or alternatively, was there ever an employer-employee relationship to speak of; and (2) Are there violations of the Labor Code
or of any labor law?
The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the Secretary of Labor, one which
the legislative branch is entitled to impose. The rationale underlying this limitation is to eliminate the prospect of competing conclusions of the
Secretary of Labor and the NLRC, on a matter fraught with questions of fact and law, which is best resolved by the quasi-judicial body, which is the
NRLC, rather than an administrative official of the executive branch of the government. If the Secretary of Labor proceeds to exercise his visitorial
and enforcement powers absent the first requisite, as the dissent proposes, his office confers jurisdiction on itself which it cannot otherwise acquire.
The approach suggested by the dissent is frowned upon by common law. To wit:
[I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point collateral to the merits of the case
upon which the limit to its jurisdiction depends; and however its decision may be final on all particulars, making up together that subject matter
which, if true, is within its jurisdiction, and however necessary in many cases it may be for it to make a preliminary inquiry, whether some collateral
matter be or be not within the limits, yet, upon this preliminary question, its decision must always be open to inquiry in the superior court. 18
A more liberal interpretative mode, "pragmatic or functional analysis," has also emerged in ascertaining the jurisdictional boundaries of
administrative agencies whose jurisdiction is established by statute. Under this approach, the Court examines the intended function of the tribunal and
decides whether a particular provision falls within or outside that function, rather than making the provision itself the determining centerpiece of the
analysis.19 Yet even under this more expansive approach, the dissent fails.
A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized representatives was granted visitorial and enforcement
powers for the purpose of determining violations of, and enforcing, the Labor Code and any labor law, wage order, or rules and regulations issued
pursuant thereto. Necessarily, the actual existence of an employer-employee relationship affects the complexion of the putative findings that the
Secretary of Labor may determine, since employees are entitled to a different set of rights under the Labor Code from the employer as opposed to
non-employees. Among these differentiated rights are those accorded by the "labor standards" provisions of the Labor Code, which the Secretary of
Labor is mandated to enforce. If there is no employer-employee relationship in the first place, the duty of the employer to adhere to those labor
standards with respect to the non-employees is questionable.
This decision should not be considered as placing an undue burden on the Secretary of Labor in the exercise of visitorial and enforcement powers,
nor seen as an unprecedented diminution of the same, but rather a recognition of the statutory limitations thereon. A mere assertion of absence of
employer-employee relationship does not deprive the DOLE of jurisdiction over the claim under Article 128 of the Labor Code. At least a prima facie
showing of such absence of relationship, as in this case, is needed to preclude the DOLE from the exercise of its power. The Secretary of Labor
would not have been precluded from exercising the powers under Article 128 (b) over petitioner if another person with better-grounded claim of
employment than that which respondent had. Respondent, especially if he were an employee, could have very well enjoined other employees to
complain with the DOLE, and, at the same time, petitioner could ill-afford to disclaim an employment relationship with all of the people under its
aegis.
Without a doubt, petitioner, since the inception of this case had been consistent in maintaining that respondent is not its employee. Certainly, a
preliminary determination, based on the evidence offered, and noted by the Labor Inspector during the inspection as well as submitted during the
proceedings before the Regional Director puts in genuine doubt the existence of employer-employee relationship. From that point on, the prudent
recourse on the part of the DOLE should have been to refer respondent to the NLRC for the proper dispensation of his claims. Furthermore, as
discussed earlier, even the evidence relied on by the Regional Director in his order are mere self-serving declarations of respondent, and hence cannot
be relied upon as proof of employer-employee relationship.
III.

Aside from lack of jurisdiction, there is another cogent reason to to set aside the Regional Directors 27 February 2004 Order. A careful study of the
case reveals that the said Order, which found respondent as an employee of petitioner and directed the payment of respondents money claims, is not
supported by substantial evidence, and was even made in disregard of the evidence on record.
It is not enough that the evidence be simply considered. The standard is substantial evidence as in all other quasi-judicial agencies. The standard
employed in the last sentence of Article 128(b) of the Labor Code that the documentary proofs be "considered in the course of inspection" does not
apply. It applies only to issues other than the fundamental issue of existence of employer-employee relationship. A contrary rule would lead to
controversies on the part of labor officials in resolving the issue of employer-employee relationship. The onset of arbitrariness is the advent of denial
of substantive due process.
As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in cases before quasi-judicial agencies whose findings of
fact are accorded great respect and even finality. To be sure, the same findings should be supported by substantial evidence from which the said
tribunals can make its own independent evaluation of the facts. Likewise, it must not be rendered with grave abuse of discretion; otherwise, this
Court will not uphold the tribunals conclusion.20 In the same manner, this Court will not hesitate to set aside the labor tribunals findings of fact when
it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record or when there is showing of fraud or error of law. 21
At the onset, it is the Courts considered view that the existence of employer- employee relationship could have been easily resolved, or at least prima
facie determined by the labor inspector, during the inspection by looking at the records of petitioner which can be found in the work premises.
Nevertheless, even if the labor inspector had noted petitioners manifestation and documents in the Notice of Inspection Results, it is clear that he did
not give much credence to said evidence, as he did not find the need to investigate the matter further. Considering that the documents shown by
petitioner, namely: cash vouchers, checks and statements of account, summary billings evidencing payment to the alleged real employer of
respondent, letter-contracts denominated as "Employment for a Specific Undertaking," prima facie negate the existence of employer-employee
relationship, the labor inspector could have exerted a bit more effort and looked into petitioners payroll, for example, or its roll of employees, or
interviewed other employees in the premises. After all, the labor inspector, as a labor regulation officer is given "access to employers records and
premises at any time of day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and
investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any
labor law, wage order or rules and regulations pursuant thereto."22 Despite these far-reaching powers of labor regulation officers, records reveal that
no additional efforts were exerted in the course of the inspection.
The Court further examined the records and discovered to its dismay that even the Regional Director turned a blind eye to the evidence presented by
petitioner and relied instead on the self-serving claims of respondent.
In his position paper, respondent claimed that he was hired by petitioner in September 1996 as a radio talent/spinner, working from 8:00 am until 5
p.m., six days a week, on a gross rate of P60.00 per script, earning an average of P15,0000.00 per month, payable on a semi-monthly basis. He added
that the payment of wages was delayed; that he was not given any service incentive leave or its monetary commutation, or his 13th month pay; and
that he was not made a member of the Social Security System (SSS), Pag-Ibig and PhilHealth. By January 2001, the number of radio programs of
which respondent was a talent/spinner was reduced, resulting in the reduction of his monthly income from P15,000.00 to only P4,000.00, an amount
he could barely live on. Anent the claim of petitioner that no employer-employee relationship ever existed, respondent argued that that he was hired
by petitioner, his wages were paid under the payroll of the latter, he was under the control of petitioner and its agents, and it was petitioner who had
the power to dismiss him from his employment.23 In support of his position paper, respondent attached a photocopy of an identification card
purportedly issued by petitioner, bearing respondents picture and name with the designation "Spinner"; at the back of the I.D., the following is
written: " This certifies that the card holder is a duly Authorized MEDIA Representative of BOMBO RADYO PHILIPPINES THE NO.1 Radio
Network in the Country ***BASTA RADYO BOMBO***"24 Respondent likewise included a Certification which reads:
This is to certify that MR. JANDELEON JUEZAN is a program employee of PEOPLES BROADCASTING SERVICES, INC. (DYMF- Bombo
Radyo Cebu) since 1990 up to the present.
Furtherly certifies that Mr. Juezan is receiving a monthly salary of FIFTEEN THOUSAND (P15,000.00) PESOS.
This certification is issued upon the request of the above stated name to substantiate loan requirement.
Given this 18th day of April 2000, Cebu City , Philippines.
(signed)
GREMAN B. SOLANTE
Station Manager

On the other hand, petitioner maintained in its position paper that respondent had never been its employee. Attached as annexes to its position paper
are photocopies of cash vouchers it issued to drama producers, as well as letters of employment captioned "Employment for a Specific Undertaking",
wherein respondent was appointed by different drama directors as spinner/narrator for specific radio programs. 25
In his Order, the Regional Director merely made a passing remark on petitioners claim of lack of employer-employee relationshipa token
paragraphand proceeded to a detailed recitation of respondents allegations. The documents introduced by petitioner in its position paper and even
those presented during the inspection were not given an iota of credibility. Instead, full recognition and acceptance was accorded to the claims of
respondentfrom the hours of work to his monthly salary, to his alleged actual duties, as well as to his alleged "evidence." In fact, the findings are
anchored almost verbatim on the self-serving allegations of respondent.
Furthermore, respondents pieces of evidencethe identification card and the certification issued by petitioners Greman Solante are not even
determinative of an employer-employee relationship. The certification, issued upon the request of respondent, specifically stated that "MR.
JANDELEON JUEZAN is a program employee of PEOPLES BROADCASTING SERVICES, INC. (DYMF- Bombo Radyo Cebu)," it is not
therefore "crystal clear that complainant is a station employee rather than a program employee hence entitled to all the benefits appurtenant
thereto,"26 as found by the DOLE Regional Director. Respondent should be bound by his own evidence. Moreover, the classification as to whether
one is a "station employee" and "program employee," as lifted from Policy Instruction No. 40, 27 dividing the workers in the broadcast industry into
only two groups is not binding on this Court, especially when the classification has no basis either in law or in fact. 28
Even the identification card purportedly issued by petitioner is not proof of employer-employee relationship since it only identified respondent as an
"Authorized Representative of Bombo Radyo," and not as an employee. The phrase gains significance when compared vis a vis the following
notation in the sample identification cards presented by petitioner in its motion for reconsideration:
1. This is to certify that the person whose picture and signature appear hereon is an employee of Bombo Radio Philippines.
2. This ID must be worn at all times within Bombo Radyo Philippines premises for proper identification and security. Furthermore, this is
the property of Bombo Radyo Philippines and must be surrendered upon separation from the company.
HUMAN RESOURCE DEPARMENT
(Signed)
JENALIN D. PALER
HRD HEAD
Respondent tried to address the discrepancy between his identification card and the standard identification cards issued by petitioner to its employees
by arguing that what he annexed to his position paper was the old identification card issued to him by petitioner. He then presented a photocopy of
another "old" identification card, this time purportedly issued to one of the employees who was issued the new identification card presented by
petitioner.29 Respondents argument does not convince. If it were true that he is an employee of petitioner, he would have been issued a new
identification card similar to the ones presented by petitioner, and he should have presented a copy of such new identification card. His failure to
show a new identification card merely demonstrates that what he has is only his "Media" ID, which does not constitute proof of his employment with
petitioner.
It has long been established that in administrative and quasi-judicial proceedings, substantial evidence is sufficient as a basis for judgment on the
existence of employer-employee relationship. Substantial evidence, which is the quantum of proof required in labor cases, is "that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion." 30 No particular form of evidence is required to prove the
existence of such employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. 31 Hence, while
no particular form of evidence is required, a finding that such relationship exists must still rest on some substantial evidence. Moreover, the
substantiality of the evidence depends on its quantitative as well as its qualitative aspects.32
In the instant case, save for respondents self-serving allegations and self-defeating evidence, there is no substantial basis to warrant the Regional
Directors finding that respondent is an employee of petitioner. Interestingly, the Order of the Secretary of Labor denying petitioners appeal dated 27
January 2005, as well as the decision of the Court of Appeals dismissing the petition for certiorari, are silent on the issue of the existence of an
employer-employee relationship, which further suggests that no real and proper determination the existence of such relationship was ever made by
these tribunals. Even the dissent skirted away from the issue of the existence of employer-employee relationship and conveniently ignored the dearth
of evidence presented by respondent.
Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental circumstances of the instant case demand
that something more should have been proffered.33 Had there been other proofs of employment, such as respondents inclusion in petitioners payroll,
or a clear exercise of control, the Court would have affirmed the finding of employer-employee relationship. The Regional Director, therefore,

committed grievous error in ordering petitioner to answer for respondents claims. Moreover, with the conclusion that no employer-employee
relationship has ever existed between petitioner and respondent, it is crystal-clear that the DOLE Regional Director had no jurisdiction over
respondents complaint. Thus, the improvident exercise of power by the Secretary of Labor and the Regional Director behooves the court to subject
their actions for review and to invalidate all the subsequent orders they issued.
IV.
The records show that petitioners appeal was denied because it had allegedly failed to post a cash or surety bond. What it attached instead to its
appeal was the Letter Agreement 34 executed by petitioner and its bank, the cash voucher,35 and the Deed of Assignment of Bank
Deposits.36 According to the DOLE, these documents do not constitute the cash or surety bond contemplated by law; thus, it is as if no cash or surety
bond was posted when it filed its appeal.
The Court does not agree.
The provision on appeals from the DOLE Regional Offices to the DOLE Secretary is in the last paragraph of Art. 128 (b) of the Labor Code, which
reads:
An order issued by the duly authorized representative of the Secretary of Labor and Employment under this article may be appealed to the latter. In
case said order involves a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Secretary of Labor and Employment in the amount equivalent to the monetary award in the order
appealed from. (emphasis supplied)
While the requirements for perfecting an appeal must be strictly followed as they are considered indispensable interdictions against needless delays
and for orderly discharge of judicial business, the law does admit exceptions when warranted by the circumstances. Technicality should not be
allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties. 37 Thus, in some cases, the bond
requirement on appeals involving monetary awards had been relaxed, such as when (i) there was substantial compliance with the Rules; (ii) the
surrounding facts and circumstances constitute meritorious ground to reduce the bond; (iii) a liberal interpretation of the requirement of an appeal
bond would serve the desired objective of resolving controversies on the merits; or (iv) the appellants, at the very least exhibited their willingness
and/or good faith by posting a partial bond during the reglementary period. 38
A review of the documents submitted by petitioner is called for to determine whether they should have been admitted as or in lieu of the surety or
cash bond to sustain the appeal and serve the ends of substantial justice.
The Deed of Assignment reads:
DEED OF ASSIGNMENT OF BANK DEPOSIT
WITH SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That I, GREMAN B. SOLANTE in my capacity as Station Manager of DYMF Cebu City, PEOPLES BROADCASTING SERVICES, INC., a
corporation duly authorized and existing under and by virtue of the laws of the Philippines, for and in consideration of the sum of PESOS: TWO
HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) Phil. Currency, as CASH BOND
GUARANTEE for the monetary award in favor to the Plaintiff in the Labor Case docketed as LSED Case No. R0700-2003-09-CI-09, now pending
appeal.
That Respondent-Appellant do hereby undertake to guarantee available and sufficient funds covered by Platinum Savings Deposit (PSD) No. 010-800038-4 of PEOPLES BROADCASTING SERVICES, INC. in the amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN
HUNDRED TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) payable to Plaintiff-Appellee/Department of Labor and Employment Regional
Office VII at Queen City Development Bank, Cebu Branch, Sanciangko St. Cebu City.
It is understood that the said bank has the full control of Platinum Savings Deposit (PSD) No. 010-8-00038-4 from and after this date and that said
sum cannot be withdrawn by the Plaintiff-Appellee/ Department of Labor and Employment Regional Office VII until such time that a Writ of
Execution shall be ordered by the Appellate Office.

FURTHER, this Deed of Assignment is limited to the principal amount of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED
TWENTY SIX PESOS & 30/100 ONLY (P203,726.30) Phil. Currency, therefore, any interest to be earned from the said Deposit will be for the
account holder.
IN WITNESS WHEREOF, I have hereunto affixed my signature this 18th day if June, 2004, in the City of Cebu, Philippines.
PEOPLES BROADCASTING SERVICES, INC.
By:
(Signed)
GREMAN B. SOLANTE
Station Manager
As priorly mentioned, the Deed of Assignment was accompanied by a Letter Agreement between Queen City Development Bank and petitioner
concerning Platinum Savings Deposit (PSD) No. 010-8-00038-4,39 and a Cash Voucher issued by petitioner showing the amount of P203,726.30
deposited at the said bank.
Casting aside the technical imprecision and inaptness of words that mark the three documents, a liberal reading reveals the documents petitioner did
assign, as cash bond for the monetary award in favor of respondent in LSED Case NO. RO700-2003-CI-09, the amount of P203,726.30 covered by
petitioners PSD Account No. 010-8-00038-4 with the Queen City Development Bank at Sanciangko St. Cebu City, with the depositary bank
authorized to remit the amount to, and upon withdrawal by respondent and or the Department of Labor and Employment Regional Office VII, on the
basis of the proper writ of execution. The Court finds that the Deed of Assignment constitutes substantial compliance with the bond requirement.
The purpose of an appeal bond is to ensure, during the period of appeal, against any occurrence that would defeat or diminish recovery by the
aggrieved employees under the judgment if subsequently affirmed. 40 The Deed of Assignment in the instant case, like a cash or surety bond, serves
the same purpose. First, the Deed of Assignment constitutes not just a partial amount, but rather the entire award in the appealed Order. Second, it is
clear from the Deed of Assignment that the entire amount is under the full control of the bank, and not of petitioner, and is in fact payable to the
DOLE Regional Office, to be withdrawn by the same office after it had issued a writ of execution. For all intents and purposes, the Deed of
Assignment in tandem with the Letter Agreement and Cash Voucher is as good as cash. Third, the Court finds that the execution of the Deed of
Assignment, the Letter Agreement and the Cash Voucher were made in good faith, and constituted clear manifestation of petitioners willingness to
pay the judgment amount.
The Deed of Assignment must be distinguished from the type of bank certification submitted by appellants in Cordova v. Keysas Boutique, 41 wherein
this Court found that such bank certification did not come close to the cash or surety bond required by law. The bank certification in Cordova merely
stated that the employer maintains a depository account with a balance of P23,008.19, and that the certification was issued upon the depositors
request for whatever legal purposes it may serve. There was no indication that the said deposit was made specifically for the pending appeal, as in the
instant case. Thus, the Court ruled that the bank certification had not in any way ensured that the award would be paid should the appeal fail. Neither
was the appellee in the case prevented from making withdrawals from the savings account. Finally, the amount deposited was measly compared to
the total monetary award in the judgment.42
V.
Another question of technicality was posed against the instant petition in the hope that it would not be given due course. Respondent asserts that
petitioner pursued the wrong mode of appeal and thus the instant petition must be dismissed.1avvphi1.zw+ Once more, the Court is not convinced.
A petition for certiorari is the proper remedy when any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in
excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, nor any plain speedy,
and adequate remedy at law. There is "grave abuse of discretion" when respondent acts in a capricious or whimsical manner in the exercise of its
judgment as to be equivalent to lack of jurisdiction. 43
Respondent may have a point in asserting that in this case a Rule 65 petition is a wrong mode of appeal, as indeed the writ of certiorari is an
extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate jurisdiction. Nevertheless, it is settled, as a general proposition,
that the availability of an appeal does not foreclose recourse to the extraordinary remedies, such as certiorari and prohibition, where appeal is not
adequate or equally beneficial, speedy and sufficient, as where the orders of the trial court were issued in excess of or without jurisdiction, or there is
need to promptly relieve the aggrieved party from the injurious effects of the acts of an inferior court or tribunal, e.g., the court has authorized
execution of the judgment.44 This Court has even recognized that a recourse to certiorari is proper not only where there is a clear deprivation of
petitioners fundamental right to due process, but so also where other special circumstances warrant immediate and more direct action. 45

In one case, it was held that the extraordinary writ of certiorari will lie if it is satisfactorily established that the tribunal acted capriciously and
whimsically in total disregard of evidence material to or even decisive of the controversy, 46 and if it is shown that the refusal to allow a Rule 65
petition would result in the infliction of an injustice on a party by a judgment that evidently was rendered whimsically and capriciously, ignoring and
disregarding uncontroverted facts and familiar legal principles without any valid cause whatsoever. 47
It must be remembered that a wide breadth of discretion is granted a court of justice in certiorari proceedings. 48The Court has not too infrequently
given due course to a petition for certiorari, even when the proper remedy would have been an appeal, where valid and compelling considerations
would warrant such a recourse.49Moreover, the Court allowed a Rule 65 petition, despite the availability of plain, speedy or adequate remedy, in view
of the importance of the issues raised
therein.50 The rules were also relaxed by the Court after considering the public interest involved in the case; 51when public welfare and the
advancement of public policy dictates; when the broader interest of justice so requires; when the writs issued are null and void; or when the
questioned order amounts to an oppressive exercise of judicial authority.52
"The peculiar circumstances of this case warrant, as we held in Republic v. Court of Appeals, 107 SCRA 504, 524, the exercise once more of our
exclusive prerogative to suspend our own rules or to exempt a particular case from its operation as in x x Republic of the Philippines v. Court of
Appeals, et al., (83 SCRA 453, 478-480 [1978]), thus: x x The Rules have been drafted with the primary objective of enhancing fair trials and
expediting justice. As a corollary, if their applications and operation tend to subvert and defeat instead of promote and enhance it, their suspension is
justified."53
The Regional Director fully relied on the self-serving allegations of respondent and misinterpreted the documents presented as evidence by
respondent. To make matters worse, DOLE denied petitioners appeal based solely on petitioners alleged failure to file a cash or surety bond, without
any discussion on the merits of the case. Since the petition for certiorari before the Court of Appeals sought the reversal of the two aforesaid orders,
the appellate court necessarily had to examine the evidence anew to determine whether the conclusions of the DOLE were supported by the evidence
presented. It appears, however, that the Court of Appeals did not even review the assailed orders and focused instead on a general discussion of due
process and the jurisdiction of the Regional Director. Had the appellate court truly reviewed the records of the case, it would have seen that there
existed valid and sufficient grounds for finding grave abuse of discretion on the part of the DOLE Secretary as well the Regional Director. In ruling
and acting as it did, the Court finds that the Court of Appeals may be properly subjected to its certiorari jurisdiction. After all, this Court has
previously ruled that the extraordinary writ of certiorari will lie if it is satisfactorily1avvphi1
established that the tribunal had acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy. 54
The most important consideration for the allowance of the instant petition is the opportunity for the Court not only to set the demarcation between the
NLRCs jurisdiction and the DOLEs prerogative but also the procedure when the case involves the fundamental challenge on the DOLEs
prerogative based on lack of employer-employee relationship. As exhaustively discussed here, the DOLEs prerogative hinges on the existence of
employer-employee relationship, the issue is which is at the very heart of this case. And the evidence clearly indicates private respondent has never
been petitioners employee. But the DOLE did not address, while the Court of Appeals glossed over, the issue. The peremptory dismissal of the
instant petition on a technicality would deprive the Court of the opportunity to resolve the novel controversy.1avvphi1
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.
SO ORDERED.

G.R. No. 179652

March 6, 2012

PEOPLE'S BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.), Petitioner,


vs.
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION VII,
and JANDELEON JUEZAN, Respondents.
RESOLUTION
VELASCO, JR., J.:

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.
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 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:
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 employer-employee 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 employer-employee 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 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 employer-employee relationship. No procedure
was laid down where the DOLE would only make a preliminary finding, that the power was primarily held by the NLRC. The law did not say that the
DOLE would first seek the 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.1avvphi1 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 enforcement power, subject to judicial review, not review by the NLRC.
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 employer-employee 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 the MODIFICATION 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
employer-employee relationship, to the exclusion of the NLRC.
SO ORDERED.

G.R. No. 124382

August 16, 1999

PASTOR DIONISIO V. AUSTRIA, petitioner,


vs.
HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL PHILIPPINE UNION MISSION
CORPORATION OF THE SEVENTH-DAY ADVENTISTS, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR
L. ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE,
PORFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE
BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO LOBITANA, respondents.
KAPUNAN, J.:
Subject of the instant petition for certiorari under Rule 65 of the Rules of Court is the Resolution1 of public respondent National Labor Relations
Commission (the "NLRC"), rendered on 23 January 1996, in NLRC Case No. V-0120-93, entitled "Pastor Dionisio V. Austria vs. Central Philippine
Union Mission Corporation of Seventh Day Adventists, et al.," which dismissed the case for illegal dismissal filed by the petitioner against private
respondents for lack of jurisdiction.1wphi1.nt
Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists (hereinafter referred to as the "SDA") is a religious
corporation duly organized and existing under Philippine law and is represented in this case by the other private respondents, officers of the SDA.
Petitioner, on the other hand, was a Pastor of the SDA until 31 October 1991, when his services were terminated.
The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight (28) years from 1963 to 1991. 2 He began his work
with the SDA on 15 July 1963 as a literature evangelist, selling literature of the SDA over the island of Negros. From then on, petitioner worked his
way up the ladder and got promoted several times. In January, 1968, petitioner became the Assistant Publishing Director in the West Visayan Mission
of the SDA. In July, 1972, he was elevated to the position of Pastor in the West Visayan Mission covering the island of Panay, and the provinces of
Romblon and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989, petitioner was promoted as District Pastor of the Negros
Mission of the SDA and was assigned at Sagay, Balintawak and Toboso, Negros Occidental, with twelve (12) churches under his jurisdiction. In
January, 1991, petitioner was transferred to Bacolod City. He held the position of district pastor until his services were terminated on 31 October
1991.
On various occasions from August up to October, 1991, petitioner received several communications 3 from Mr. Eufronio Ibesate, the treasurer of the
Negros Mission asking him to admit accountability and responsibility for the church tithes and offerings collected by his wife, Mrs. Thelma Austria,
in his district which amounted to P15,078.10, and to remit the same to the Negros Mission.
In his written explanation dated 11 October 1991, 4 petitioner reasoned out that he should not be made accountable for the unremitted collections since
it was private respondents Pastor Gideon Buhat and Mr. Eufronio Ibesate who authorized his wife to collect the tithes and offerings since he was very
sick to do the collecting at that time.
Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor Buhat, the president of the Negros Mission. During said
call, petitioner tried to persuade Pastor Buhat to convene the Executive Committee for the purpose of settling the dispute between him and the private
respondent, Pastor David Rodrigo. The dispute between Pastor Rodrigo and petitioner arose from an incident in which petitioner assisted his friend,

Danny Diamada, to collect from Pastor Rodrigo the unpaid balance for the repair of the latter's motor vehicle which he failed to pay to
Diamada.5 Due to the assistance of petitioner in collecting Pastor Rodrigo's debt, the latter harbored ill-feelings against petitioner. When news
reached petitioner that Pastor Rodrigo was about to file a complaint against him with the Negros Mission, he immediately proceeded to the office of
Pastor Buhat on the date abovementioned and asked the latter to convene the Executive Committee. Pastor Buhat denied the request of petitioner
since some committee members were out of town and there was no quorum. Thereafter, the two exchanged heated arguments. Petitioner then left the
office of Pastor Buhat. While on his way out, petitioner overheard Pastor Buhat saying, "Pastor daw inisog na ina iya (Pador you are talking
tough)."6 Irked by such remark, petitioner returned to the office of Pastor Buhat, and tried to overturn the latter's table, though unsuccessfully, since it
was heavy. Thereafter, petitioner banged the attach case of Pastor Buhat on the table, scattered the books in his office, and threw the
phone.7 Fortunately, private respondents Pastors Yonilo Leopoldo and Claudio Montao were around and they pacified both Pastor Buhat and
petitioner.
On 17 October 1991, petitioner received a letter8 inviting him and his wife to attend the Executive Committee meeting at the Negros Mission
Conference Room on 21 October 1991, at nine in the morning. To be discussed in the meeting were the non-remittance of church collection and the
events that transpired on 16 October 1991. A fact-finding committee was created to investigate petitioner. For two (2) days, from October 21 and 22,
the fact-finding committee conducted an investigation of petitioner. Sensing that the result of the investigation might be one-sided, petitioner
immediately wrote Pastor Rueben Moralde, president of the SDA and chairman of the fact-finding committee, requesting that certain members of the
fact-finding committee be excluded in the investigation and resolution of the case. 9 Out of the six (6) members requested to inhibit themselves from
the investigation and decision-making, only two (2) were actually excluded, namely: Pastor Buhat and Pastor Rodrigo. Subsequently, on 29 October
1991, petitioner received a letter of dismissal10 citing misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and
habitual neglect of duties, and commission of an offense against the person of employer's duly authorized representative, as grounds for the
termination of his services.
Reacting against the adverse decision of the SDA, petitioner filed a complaint 11 on 14 November 1991, before the Labor Arbiter for illegal dismissal
against the SDA and its officers and prayed for reinstatement with backwages and benefits, moral and exemplary damages and other labor law
benefits.
On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of petitioner, the dispositive portion of which reads thus:
WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE
SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its officers, respondents herein, are hereby ordered to immediately reinstate
complainant Pastor Dionisio Austria to his former position as Pastor of Brgy. Taculing, Progreso and Banago, Bacolod City, without loss of
seniority and other rights and backwages in the amount of ONE HUNDRED FIFTEEN THOUSAND EIGHT HUNDRED THIRTY
PESOS (P115,830.00) without deductions and qualificatioons.
Respondent CPUMCSDA is further ordered to pay complainant the following:
A. 13th month pay P 21,060.00
B. Allowance P 4,770.83
C. Service Incentive
Leave Pay P 3,461.85
D. Moral Damages P 50,000.00
E. Exemplary
Damages P 25,000.00
F. Attorney's Fee P 22,012.27
SO ORDERED.12
The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor Labor Relations Commission, Fourth Division, Cebu
City. In a decision, dated 26 August 1994, the NLRC vacated the findings of the Labor Arbiter. The decretal portion of the NLRC decision states:

WHEREFORE, the Decision appealed from is hereby VACATED and a new one ENTERED dismissing this case for want of merit.
SO ORDERED.13
Petitioner filed a motion for reconsideration of the above-named decision. On 18 July 1995, the NLRC issued a Resolution reversing its original
decision. The dispositive portion of the resolution reads:
WHEREFORE, premises considered, Our decision dated August 26, 1994 is VACATED and the decision of the Labor Arbiter dated
February 15, 1993 is REINSTATED.
SO ORDERED.14
In view of the reversal of the original decision of the NLRC, the SDA filed a motion for reconsideration of the above resolution. Notable in the
motion for reconsideration filed by private respondents is their invocation, for the first time on appeal, that the Labor Arbiter has no jurisdiction over
the complaint filed by petitioner due to the constitutional provision on the separation of church and state since the case allegedly involved an
ecclesiastical affair to which the State cannot interfere.
The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the argument posed by private respondents and,
accordingly, dismissed the complaint of petitioner. The dispositive portion of the NLRC resolution dated 23 January 1996, subject of the present
petition, is as follows:
WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby granted. Accordingly, this case is hereby
DISMISSED for lack of jurisdiction.
SO ORDERED.15
Hence, the recourse to this Court by petitioner.
After the filing of the petition, the Court ordered the Office of the Solicitor General (the "OSG") to file its comment on behalf of public respondent
NLRC. Interestingly, the OSG filed a manifestation and motion in lieu of comment 16 setting forth its stand that it cannot sustain the resolution of the
NLRC. In its manifestation, the OSG submits that the termination of petitioner from his employment may be questioned before the NLRC as the
same is secular in nature, not ecclesiastical. After the submission of memoranda of all the parties, the case was submitted for decision.
The issues to be resolved in this petition are:
1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint filed by petitioner against the SDA;
2) Whether or not the termination of the services of petitioner is an ecclesiastical affair, and, as such, involves the separation of church and
state; and
3) Whether or not such termination is valid.
The first two issues shall be resolved jointly, since they are related.
Private respondents contend that by virtue of the doctrine of separation of church and state, the Labor Arbiter and the NLRC have no jurisdiction to
entertain the complaint filed by petitioner. Since the matter at bar allegedly involves the discipline of a religious minister, it is to be considered a
purely ecclesiastical affair to which the State has no right to interfere.
The contention of private respondents deserves scant consideration. The principle of separation of church and state finds no application in this case.
The rationale of the principle of the separation of church and state is summed up in the familiar saying, "Strong fences make good-neighbors." 17 The
idea advocated by this principle is to delineate the boundaries between the two institutions and thus avoid encroachments by one against the other
because of a misunderstanding of the limits of their respective exclusive jurisdictions. 18 The demarcation line calls on the entities to "render therefore
unto Ceasar the things that are Ceasar's and unto God the things that are God's." 19 While the state is prohibited from interfering in purely
ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters. 20

The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from taking cognizance of the same. An ecclesiastical
affair is "one that concerns doctrine, creed, or form of worship of the church, or the adoption and enforcement within a religious association of
needful laws and regulations for the government of the membership, and the power of excluding from such associations those deemed unworthy of
membership.21 Based on this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to matters of
faith, religious doctrines, worship and governance of the congregation. To be concrete, examples of this so-called ecclesiastical affairs to which the
State cannot meddle are proceedings for excommunication, ordinations of religious ministers, administration of sacraments and other activities with
attached religious significance. The case at bar does not even remotely concern any of the abovecited examples. While the matter at hand relates to
the church and its religious minister it does not ipso facto give the case a religious significance. Simply stated, what is involved here is the
relationship of the church as an employer and the minister as an employee. It is purely secular and has no relation whatsoever with the practice of
faith, worship or doctrines of the church. In this case, petitioner was not ex-communicated or expelled from the membership of the SDA but was
terminated from employment. Indeed, the matter of terminating an employee, which is purely secular in nature, is different from the ecclesiastical act
of expelling a member from the religious congregation.
As pointed out by the OSG in its memorandum, the grounds invoked for petitioner's dismissal, namely: misappropriation of denominational funds,
willful breach of trust, serious misconduct, gross and habitual neglect of duties and commission of an offense against the person of his employer's
duly authorized representative, are all based on Article 282 of the Labor Code which enumerates the just causes for termination of employment. 22 By
this alone, it is palpable that the reason for petitioner's dismissal from the service is not religious in nature. Coupled with this is the act of the SDA in
furnishing NLRC with a copy of petitioner's letter of termination. As aptly stated by the OSG, this again is an eloquent admission by private
respondents that NLRC has jurisdiction over the case. Aside from these, SDA admitted in a certification 23 issued by its officer, Mr. Ibesate, that
petitioner has been its employee for twenty-eight (28) years. SDA even registered petitioner with the Social Security System (SSS) as its employee.
As a matter of fact, the worker's records of petitioner have been submitted by private respondents as part of their exhibits. From all of these it is clear
that when the SDA terminated the services of petitioner, it was merely exercising its management prerogative to fire an employee which it believes to
be unfit for the job. As such, the State, through the Labor Arbiter and the NLRC, has the right to take cognizance of the case and to determine
whether the SDA, as employer, rightfully exercised its management prerogative to dismiss an employee. This is in consonance with the mandate of
the Constitution to afford full protection to labor.
Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to include religious corporations, such as
the SDA, in its coverage. Article 278 of the Labor Code on post-employment states that "the provisions of this Title shall apply to all establishments
or undertakings, whether for profit or not." Obviously, the cited article does not make any exception in favor of a religious corporation. This is made
more evident by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment
and Retirement, categorically includes religious institutions in the coverage of the law, to wit:
Sec. 1. Coverage. This Rule shall apply to all establishments and undertakings, whether operated for profit or not, including educational,
medical, charitable and religious institutions and organizations, in cases of regular employment with the exception of the Government and
its political subdivisions including government-owned or controlled corporations. 24
With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of church and state to avoid its
responsibilities as an employer under the Labor Code.
Finally, as correctly pointed out by petitioner, private respondents are estopped from raising the issue of lack of jurisdiction for the first time on
appeal. It is already too late in the day for private respondents to question the jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully
participated in the trials and hearings of the case from start to finish. The Court has already ruled that the active participation of a party against whom
the action war brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial body where the action is pending, is
tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later on
impugning the court or body's jurisdiction.25 Thus, the active participation of private respondents in the proceedings before the Labor Arbiter and the
NLRC mooted the question on jurisdiction.
The jurisdictional question now settled, we shall now proceed to determine whether the dismissal of petitioner was valid.
At the outset, we note that as a general rule, findings of fact of administrative bodies like the NLRC are binding upon this Court. A review of such
findings is justified, however, in instances when the findings of the NLRC differ from those of the labor arbiter, as in this case. 26 When the findings of
NLRC do not agree with those of the Labor Arbiter, this Court must of necessity review the records to determine which findings should be preferred
as more comfortable to the evidentiary facts. 27
We turn now to the crux of the matter. In termination cases, the settled rule is that the burden of proving that the termination was for a valid or
authorized cause rests on the employer.28 Thus, private respondents must not merely rely on the weaknesses of petitioner's evidence but must stand on
the merits of their own defense.

The issue being the legality of petitioner's dismissal, the same must be measured against the requisites for a valid dismissal, namely: (a) the employee
must be afforded due process, i.e., he must be given an opportunity to be heard and to defend himself, and; (b) the dismissal must be for a valid cause
as provided in Article 282 of the Labor Code.29 Without the concurrence of this twin requirements, the termination would, in the eyes of the law, be
illegal.30
Before the services of an employee can be validly terminated, Article 277 (b) of the Labor Code and Section 2, Rule XXIII, Book V of the Rules
Implementing the Labor Code further require the employer to furnish the employee with two (2) written notices, to wit: (a) a written notice served on
the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side;
and, (b) a written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been
established to justify his termination.
The first notice, which may be considered as the proper charge, serves to apprise the employee of the particular acts or omissions for which his
dismissal is sought.31 The second notice on the other hand seeks to inform the employee of the employer's decision to dismiss him. 32 This decision,
however, must come only after the employee is given a reasonable period from receipt of the first notice within which to answer the charge and
ample opportunity to be heard and defend himself with the assistance of a representative, if he so desires. 33 This is in consonance with the express
provision of the law on the protection to labor and the broader dictates of procedural due process. 34 Non-compliance therewith is fatal because these
requirements are conditions sine quanon before dismissal may be validly effected.35
Private respondent failed to substantially comply with the above requirements. With regard to the first notice, the letter, 36 dated 17 October 1991,
which notified petitioner and his wife to attend the meeting on 21 October 1991, cannot be construed as the written charge required by law. A perusal
of the said letter reveals that it never categorically stated the particular acts or omissions on which petitioner's impending termination was grounded.
In fact, the letter never even mentioned that petitioner would be subject to investigation. The letter merely mentioned that petitioner and his wife were
invited to a meeting wherein what would be discussed were the alleged unremitted church tithes and the events that transpired on 16 October 1991.
Thus, petitioner was surprised to find out that the alleged meeting turned out to be an investigation. From the tenor of the letter, it cannot be
presumed that petitioner was actually on the verge of dismissal. The alleged grounds for the dismissal of petitioner from the service were only
revealed to him when the actual letter of dismissal was finally issued. For this reason, it cannot be said that petitioner was given enough opportunity
to properly prepare for his defense. While admittedly, private respondents complied with the second requirement, the notice of termination, this does
not cure the initial defect of lack of the proper written charge required by law.
In the letter of termination,37 dated 29 October 1991, private respondents enumerated the following as grounds for the dismissal of petitioner, namely:
misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of an
offense against the person of employer's duly authorized representative. Breach of trust and misappropriation of denominational funds refer to the
alleged failure of petitioner to remit to the treasurer of the Negros Mission tithes, collections and offerings amounting to P15,078.10 which were
collected by his wife, Mrs. Thelma Austria, in the churches under his jurisdiction. On the other hand, serious misconduct and commission of an
offense against the person of the employer's duly authorized representative pertain to the 16 October 1991 incident wherein petitioner allegedly
committed an act of violence in the office of Pastor Gideon Buhat. The final ground invoked by private respondents is gross and habitual neglect of
duties allegedly committed by petitioner.
We cannot sustain the validity of dismissal based on the ground of breach of trust. Private respondents allege that they have lost their confidence in
petitioner for his failure, despite demands, to remit the tithes and offerings amounting to P15,078.10, which were collected in his district. A careful
study of the voluminous records of the case reveals that there is simply no basis for the alleged loss of confidence and breach of trust. Settled is the
rule that under Article 282 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally, knowingly and
purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. 38 It must rest on
substantial grounds and not on the employer's arbitrariness, whims, caprices or suspicion; otherwise the employee would eternally remain at the
mercy of the employer.39 It should be genuine and not simulated.40 This ground has never been intended to afford an occasion for abuse, because of its
subjective nature. The records show that there were only six (6) instances when petitioner personally collected and received from the church
treasurers the tithes, collections, and donations for the church. 41 The stenographic notes on the testimony of Naomi Geniebla, the Negros Mission
Church Auditor and a witness for private respondents, show that Pastor Austria was able to remit all his collections to the treasurer of the Negros
Mission.42
Though private respondents were able to establish that petitioner collected and received tithes and donations several times, they were notable to
establish that petitioner failed to remit the same to the Negros Mission, and that he pocketed the amount and used it for his personal purpose. In fact,
as admitted by their own witness, Naomi Geniebla, petitioner remitted the amounts which he collected to the Negros Mission for which
corresponding receipts were issued to him. Thus, the allegations of private respondents that petitioner breached their trust have no leg to stand on.
In a vain attempt to support their claim of breach of trust, private respondents try to pin on petitioner the alleged non-remittance of the tithes collected
by his wife. This argument deserves little consideration. First of all, as proven by convincing and substantial evidence consisting of the testimonies of
the witnesses for private respondents who are church treasurers, it was Mrs. Thelma Austria who actually collected the tithes and donations from
them, and, who failed to remit the same to the treasurer of the Negros Mission. The testimony of these church treasurers were corroborated and

confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA. Hence, in the absence of conspiracy and collusion, which private respondents failed
to demonstrate, between petitioner and his wife, petitioner cannot be made accountable for the alleged infraction committed by his wife. After all,
they still have separate and distinct personalities. For this reason, the Labor Arbiter found it difficult to see the basis for the alleged loss of confidence
and breach of trust. The Court does not find any cogent reason, therefore, to digress from the findings of the Labor Arbiter which is fully supported
by the evidence on record.
With respect to the grounds of serious misconduct and commission of an offense against the person of the employer's duly authorized representative,
we find the same unmeritorious and, as such, do not warrant petitioner's dismissal from the service.
Misconduct has been defined as improper or wrong conduct. It is the transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. 43 For misconduct to be considered serious it must
be of such grave and aggravated character and not merely trivial or unimportant. 44 Based on this standard, we believe that the act of petitioner in
banging the attach case on the table, throwing the telephone and scattering the books in the office of Pastor Buhat, although improper, cannot be
considered as grave enough to be considered as serious misconduct. After all, as correctly observed by the Labor Arbiter, though petitioner committed
damage to property, he did not physically assault Pastor Buhat or any other pastor present during the incident of 16 October 1991. In fact, the alleged
offense committed upon the person of the employer's representatives was never really established or proven by private respondents. Hence, there is
no basis for the allegation that petitioner's act constituted serious misconduct or that the same was an offense against the person of the employer's
duly authorized representative. As such, the cited actuation of petitioner does not justify the ultimate penalty of dismissal from employment. While
the Constitution does condone wrongdoing by the employee, it nevertheless urges a moderation of the sanctions that may be applied to him in light of
the many disadvantages that weigh heavily on him like an albatross on his neck. 45 Where a penalty less punitive would suffice, whatever missteps
may have been committed by the worker ought not be visited with a consequence so severe such as dismissal from employment. 46 For the foregoing
reasons, we believe that the minor infraction committed by petitioner does not merit the ultimate penalty of dismissal.
The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect of duties, does not require an exhaustive
discussion. Suffice it to say that all private respondents had were allegations but not proof. Aside from merely citing the said ground, private
respondents failed to prove culpability on the part of petitioner. In fact, the evidence on record shows otherwise. Petitioner's rise from the ranks
disclose that he was actually a hard-worker. Private respondents' evidence, 47 which consisted of petitioner's Worker's Reports, revealed how petitioner
travelled to different churches to attend to the faithful under his care. Indeed, he labored hard for the SDA, but, in return, he was rewarded with a
dismissal from the service for a non-existent cause.
In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated from service without just or lawful cause. Having
been illegally dismissed, petitioner is entitled to reinstatement to his former position without loss of seniority right 48 and the payment of full
backwages without any deduction corresponding to the period from his illegal dismissal up to actual reinstatement. 46
WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of public respondent National Labor Relations Commission,
rendered on 23 January 1996, is NULLIFIED and SET ASIDE. The Decision of the Labor Arbiter, dated 15 February 1993, is REINSTATED and
hereby AFFIRMED.1wphi1.nt
SO ORDERED.

Austria v. NLRC
G.R. No. 124382

August 16, 1999

KTA: Relationship of the church as an employer and the minister as an employee is purely secular in nature because it has no relation with the practice of faith, worship
or doctrines of the church, such affairs are governed by labor laws. The Labor Code applies to all establishments, whether religious or not.
Facts:
The Seventh Day Adventists(SDA) is a religious corporation under Philippine law. The petitioner was a pastor of the SDA for 28 years from 1963 until 1991, when his
services were terminated.
On various occasions from August to October 1991, Austria received several communications form Ibesate, the treasurer of the Negros Mission, asking him to admit
accountability and responsibility for the church tithes and offerings collected by his wife, Thelma Austria, in his district and to remit the same to the Negros Mission.
The petitioner answered saying that he should not be made accountable since it was Pastor Buhat and Ibesate who authorized his wife to collect the tithes and offerings
since he was very ill to be able to do the collecting.
A fact-finding committee was created to investigate. The petitioner received a letter of dismissal citing:
1) Misappropriation of denominational funds;
2) Willful breach of trust;
3) Serious misconduct;
4) Gross and habitual neglect of duties; and
5) Commission of an offense against the person of employer's duly authorized representative as grounds for the termination of his services.
Petitioner filed a complaint with the Labor Arbiter for illegal dismissal, and sued the SDA for reinstatement and backwages plus damages. Decision was rendered in
favor of petitioner.

SDA appealed to the NLRC. Decision was rendered in favor of respondent.


Issue:
1. Whether or not the termination of the services of the petitioner is an ecclesiastical affair, and, as such, involves the separation of church and state.
2. Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint filed by petitioner against the SDA.
Held/Ratio:
1. No. The matter at hand relates to the church and its religious ministers but what is involved here is the relationship of the church as an employer and the minister as
an employee, which is purely secular because it has no relationship with the practice of faith, worship or doctrines. The grounds invoked for petitioners dismissal are
all
based
on
Art.
282
of
Labor
Code.
2. Yes. SDA was exercising its management prerogative (not religious prerogative) to fire an employee which it believes is unfit for the job. It would have been a
different case if Austria was expelled or excommunicated from the SDA.

G.R. No. 144767

March 21, 2002

DILY DANY NACPIL, petitioner,


vs.
INTERNATIONAL BROADCASTING CORPORATION, respondent.
KAPUNAN, J.:
This is a petition for review on certiorari under Rule 45, assailing the Decision of the Court of Appeals dated November 23, 1999 in CA-G.R. SP No.
527551 and the Resolution dated August 31, 2000 denying petitioner Dily Dany Nacpil's motion for reconsideration. The Court of Appeals reversed
the decisions promulgated by the Labor Arbiter and the National Labor Relations Commission (NLRC), which consistently ruled in favor of
petitioner.
Petitioner states that he was Assistant General Manager for Finance/Administration and Comptroller of private respondent Intercontinental
Broadcasting Corporation (IBC) from 1996 until April 1997. According to petitioner, when Emiliano Templo was appointed to replace IBC President
Tomas Gomez III sometime in March 1997, the former told the Board of Directors that as soon as he assumes the IBC presidency, he would terminate
the services of petitioner. Apparently, Templo blamed petitioner, along with a certain Mr. Basilio and Mr. Gomez, for the prior mismanagement of
IBC. Upon his assumption of the IBC presidency, Templo allegedly harassed, insulted, humiliated and pressured petitioner into resigning until the
latter was forced to retire. However, Templo refused to pay him his retirement benefits, allegedly because he had not yet secured the clearances from
the Presidential Commission on Good Government and the Commission on Audit. Furthermore, Templo allegedly refused to recognize petitioner's
employment, claiming that petitioner was not the Assistant General Manager/Comptroller of IBC but merely usurped the powers of the Comptroller.
Hence, in 1997, petitioner filed with the Labor Arbiter a complaint for illegal dismissal and non-payment of benefits.1wphi1.nt
Instead of filing its position paper, IBC filed a motion to dismiss alleging that the Labor Arbiter had no jurisdiction over the case. IBC contended that
petitioner was a corporate officer who was duly elected by the Board of Directors of IBC; hence, the case qualifies as an intra-corporate dispute
falling within the jurisdiction of the Securities and Exchange Commission (SEC). However, the motion was denied by the Labor Arbiter in an Order
dated April 22, 1998.2
On August 21, 1998, the Labor Arbiter rendered a Decision stating that petitioner had been illegally dismissed. The dispositive portion thereof reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the complainant and against all the respondents,
jointly and severally, ordering the latter:
1. To reinstate complainant to his former position without diminution of salary or loss of seniority rights, and with full backwages
computed from the time of his illegal dismissal on May 16, 1997 up to the time of his actual reinstatement which is tentatively
computed as of the date of this decision on August 21, 1998 in the amount of P1,231,750.00 (i.e., P75,000.00 a month x 15.16
months = P1,137,000.00 plus 13th month pay equivalent to 1/12 of P 1,137,000.00 = P94,750.00 or the total amount of P
1,231,750.00). Should complainant be not reinstated within ten (10) days from receipt of this decision, he shall be entitled to
additional backwages until actually reinstated.
2. Likewise, to pay complainant the following:
a) P 2 Million as and for moral damages;
b) P500,000.00 as and for exemplary damages; plus and (sic)
c) Ten (10%) percent thereof as and for attorney's fees.

SO ORDERED.3
IBC appealed to the NLRC, but the same was dismissed in a Resolution dated March 2, 1999, for its failure to file the required appeal bond in
accordance with Article 223 of the Labor Code. 4 IBC then filed a motion for reconsideration that was likewise denied in a Resolution dated April 26,
1999.5
IBC then filed with the Court of Appeals a petition for certiorari under Rule 65, which petition was granted by the appellate court in its Decision
dated November 23, 1999. The dispositive portion of said decision states:
WHEREFORE, premises considered, the petition for Certiorari is GRANTED. The assailed decisions of the Labor Arbiter and the NLRC
are REVERSED and SET ASIDE and the complaint is DISMISSED without prejudice.
SO ORDERED.6
Petitioner then filed a motion for reconsideration, which was denied by the appellate court in a Resolution dated August 31, 2000.
Hence, this petition.
Petitioner Nacpil submits that:
I.
THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER WAS APPOINTED BY RESPONDENT'S BOARD OF
DIRECTORS AS COMPTROLLER. THIS FINDING IS CONTRARY TO THE COMMON, CONSISTENT POSITION AND
ADMISSION OF BOTH PARTIES. FURTHER, RESPONDENT'S BY-LAWS DOES NOT INCLUDE COMPTROLLER AS ONE OF ITS
CORPORATE OFFICERS.
II.
THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE CASE WHEN IT SUBSTITUTED THE NATIONAL LABOR
RELATIONS COMMISSION'S DECISION TO APPLY THE APPEAL BOND REQUIREMENT STRICTLY IN THE INSTANT CASE.
THE ONLY ISSUE FOR ITS DETERMINATION IS WHETHER NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN DOING
THE SAME.7
The issue to be resolved is whether the Labor Arbiter had jurisdiction over the case for illegal dismissal and non-payment of benefits filed by
petitioner. The Court finds that the Labor Arbiter had no jurisdiction over the same.
Under Presidential Decree No. 902-A (the Revised Securities Act), the law in force when the complaint for illegal dismissal was instituted by
petitioner in 1997, the following cases fall under the exclusive of the SEC:
a) Devices or 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 of the stockholders, partners, members of associations
or organizations registered with the Commission;
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 appointment of directors, trustees, officers, or managers of such corporations, partnerships or
associations;
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 Committee created pursuant to this decree. (Emphasis supplied.)

The Court has consistently held that there are two elements to be considered in determining whether the SEC has jurisdiction over the controversy, to
wit: (1) the status or relationship of the parties; and (2) the nature of the question that is the subject of their controversy. 8
Petitioner argues that he is not a corporate officer of the IBC but an employee thereof since he had not been elected nor appointed as Comptroller and
Assistant Manager by the IBC's Board of Directors. He points out that he had actually been appointed as such on January 11, 1995 by the IBC's
General Manager, Ceferino Basilio. In support of his argument, petitioner underscores the fact that the IBC's By-Laws does not even include the
position of comptroller in its roster of corporate officers. 9 He therefore contends that his dismissal is a controversy falling within the jurisdiction of
the labor courts.10
Petitioner's argument is untenable. Even assuming that he was in fact appointed by the General Manager, such appointment was subsequently
approved by the Board of Directors of the IBC.11 That the position of Comptroller is not expressly mentioned among the officers of the IBC in the
By-Laws is of no moment, because the IBC's Board of Directors is empowered under Section 25 of the Corporation Code 12 and under the
corporation's By-Laws to appoint such other officers as it may deem necessary. The By-Laws of the IBC categorically provides:
XII. OFFICERS
The officers of the corporation shall consist of a President, a Vice-President, a Secretary-Treasurer, a General Manager, and such other
officers as the Board of Directors may from time to time does fit to provide for. Said officers shall be elected by majority vote of the
Board of Directors and shall have such powers and duties as shall hereinafter provide (Emphasis supplied). 13
The Court has held that in most cases the "by-laws may and usually do provide for such other officers,"14 and that where a corporate office is not
specifically indicated in the roster of corporate offices in the by-laws of a corporation, the board of directors may also be empowered under the bylaws to create additional officers as may be necessary.15
An "office" has been defined as a creation of the charter of a corporation, while an "officer" as a person elected by the directors or stockholders. On
the other hand, an "employee" occupies no office and is generally employed not by action of the directors and stockholders but by the managing
officer of the corporation who also determines the compensation to be paid to such employee. 16
As petitioner's appointment as comptroller required the approval and formal action of the IBC's Board of Directors to become valid, 17 it is clear
therefore holds that petitioner is a corporate officer whose dismissal may be the subject of a controversy cognizable by the SEC under Section 5(c) of
P.D. 902-A which includes controversies involving both election and appointment of corporate directors, trustees, officers, and managers. 18 Had
petitioner been an ordinary employee, such board action would not have been required.
Thus, the Court of Appeals correctly held that:
Since complainant's appointment was approved unanimously by the Board of Directors of the corporation, he is therefore considered a
corporate officer and his claim of illegal dismissal is a controversy that falls under the jurisdiction of the SEC as contemplated by Section 5
of P.D. 902-A. The rule is that dismissal or non-appointment of a corporate officer is clearly an intra-corporate matter and jurisdiction over
the case properly belongs to the SEC, not to the NLRC. 19
As to petitioner's argument that the nature of his functions is recommendatory thereby making him a mere managerial officer, the Court has
previously held that the relationship of a person to a corporation, whether as officer or agent or employee is not determined by the nature of the
services performed, but instead by the incidents of the relationship as they actually exist. 20
It is likewise of no consequence that petitioner's complaint for illegal dismissal includes money claims, for such claims are actually part of the
perquisites of his position in, and therefore linked with his relations with, the corporation. The inclusion of such money claims does not convert the
issue into a simple labor problem. Clearly, the issues raised by petitioner against the IBC are matters that come within the area of corporate affairs
and management, and constitute a corporate controversy in contemplation of the Corporation Code. 21
Petitioner further argues that the IBC failed to perfect its appeal from the Labor Arbiter's Decision for its non-payment of the appeal bond as required
under Article 223 of the Labor Code, since compliance with the requirement of posting of a cash or surety bond in an amount equivalent to the
monetary award in the judgment appealed from has been held to be both mandatory and jurisdictional. 22 Hence, the Decision of the Labor Arbiter had
long become final and executory and thus, the Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction in
giving due course to the IBC's petition for certiorari, and in deciding the case on the merits.
The IBC's failure to post an appeal bond within the period mandated under Article 223 of the Labor Code has been rendered immaterial by the fact
that the Labor Arbiter did not have jurisdiction over the case since as stated earlier, the same is in the nature of an intra-corporate controversy. The
Court has consistently held that where there is a finding that any decision was rendered without jurisdiction, the action shall be dismissed. Such

defense can be interposed at any time, during appeal or even after final judgment. 23 It is a well-settled rule that jurisdiction is conferred only by the
Constitution or by law. It cannot be fixed by the will of the parties; it cannot be acquired through, enlarged or diminished by, any act or omission of
the parties.24
Considering the foregoing, the Court holds that no error was committed by the Court of Appeals in dismissing the case filed before the Labor Arbiter,
without prejudice to the filing of an appropriate action in the proper court. 1wphi1.nt
It must be noted that under Section 5.2 of the Securities Regulation Code (Republic Act No. 8799) which was signed into law by then President
Joseph Ejercito Estrada on July 19, 2000, the SEC's jurisdiction over all cases enumerated in Section 5 of P.D. 902-A has been transferred to the
Regional Trial Courts.25
WHEREFORE, the petition is hereby DISMISSED and the Decision of the Court of Appeals in CA-G.R. SP No. 52755 is AFFIRMED.
SO ORDERED.

G.R. No. 142244

November 18, 2002

ATLAS FARMS, INC., petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION,
JAIME O. DELA PEA and MARCIAL I. ABION, respondents.
DECISION
QUISUMBING, J.:
Petitioner seeks the reversal of the decision1 dated January 10, 2000 of the Court of Appeals in CA-G.R. SP No. 52780, dismissing its petition for
certiorari against the NLRC, as well as the resolution 2 dated February 24, 2000, denying its motion for reconsideration.
The antecedent facts of the case, as found by the Court of Appeals, 3 are as follows:
Private respondent Jaime O. dela Pea was employed as a veterinary aide by petitioner in December 1975. He was among several employees
terminated in July 1989. On July 8, 1989, he was re-hired by petitioner and given the additional job of feedmill operator. He was instructed to train
selected workers to operate the feedmill.
On March 13, 1993,4 Pea was allegedly caught urinating and defecating on company premises not intended for the purpose. The farm manager of
petitioner issued a formal notice directing him to explain within 24 hours why disciplinary action should not be taken against him for violating
company rules and regulations. Pea refused, however, to receive the formal notice. He never bothered to explain, either verbally or in writing,
according to petitioner. Thus, on March 20, 1993, a notice of termination with payment of his monetary benefits was sent to him. He duly
acknowledged receipt of his separation pay of P13,918.67.
From the start of his employment on July 8, 1989, until his termination on March 20, 1993, Pea had worked for seven days a week, including
holidays, without overtime, holiday, rest day pay and service incentive leave. At the time of his dismissal from employment, he was receiving P180
pesos daily wage, or an average monthly salary ofP5,402.
Co-respondent Marcial I. Abion5 was a carpenter/mason and a maintenance man whose employment by petitioner commenced on October 8, 1990.
Allegedly, he caused the clogging of the fishpond drainage resulting in damages worth several hundred thousand pesos when he improperly disposed
of the cut grass and other waste materials into the ponds drainage system. Petitioner sent a written notice to Abion, requiring him to explain what
happened, otherwise, disciplinary action would be taken against him. He refused to receive the notice and give an explanation, according to
petitioner. Consequently, the company terminated his services on October 27, 1992. He acknowledged receipt of a written notice of dismissal, with
his separation pay.
Like Pea, Abion worked seven days a week, including holidays, without holiday pay, rest day pay, service incentive leave pay and night shift
differential pay. When terminated on October 27, 1992, Abion was receiving a monthly salary of P4,500.

Pea and Abion filed separate complaints for illegal dismissal that were later consolidated. Both claimed that their termination from service was due
to petitioners suspicion that they were the leaders in a plan to form a union to compete and replace the existing management-dominated union.
On November 9, 1993, the labor arbiter dismissed their complaints on the ground that the grievance machinery in the collective bargaining agreement
(CBA) had not yet been exhausted. Private respondents availed of the grievance process, but later on refiled the case before the NLRC in Region IV.
They alleged "lack of sympathy" on petitioners part to engage in conciliation proceedings.
Their cases were consolidated in the NLRC. At the initial mandatory conference, petitioner filed a motion to dismiss, on the ground of lack of
jurisdiction, alleging private respondents themselves admitted that they were members of the employees union with which petitioner had an existing
CBA. This being the case, according to petitioner, jurisdiction over the case belonged to the grievance machinery and thereafter the voluntary
arbitrator, as provided in the CBA.
In a decision dated January 30, 1996, the labor arbiter dismissed the complaint for lack of merit, finding that the case was one of illegal dismissal and
did not involve the interpretation or implementation of any CBA provision. He stated that Article 217 (c) of the Labor Code 6 was inapplicable to the
case. Further, the labor arbiter found that although both complainants did not substantiate their claims of illegal dismissal, there was proof that private
respondents voluntarily accepted their separation pay and petitioners financial assistance.
Thus, private respondents brought the case to the NLRC, which reversed the labor arbiters decision. Dissatisfied with the NLRC ruling, petitioner
went to the Court of Appeals by way of a petition for review on certiorari under Rule 65, seeking reinstatement of the labor arbiters decision. The
appellate court denied the petition and affirmed the NLRC resolution with some modifications, thus:
WHEREFORE, the petition is DENIED. The resolution in NLRC CA No. 010520-96 is AFFIRMED with the following modifications:
1) The private respondents can not be reinstated, due to their acceptance of the separation pay offered by the petitioner;
2) The private respondents are entitled to their full back wages; and,
3) The amount of the separation pay received by private respondents from petitioner shall not be deducted from their full back wages.
Costs against petitioner.
SO ORDERED.7
Petitioner forthwith filed its motion for reconsideration, which was denied in a resolution dated February 24, 2000, which reads:
Acting on the Motion for Reconsideration filed by petitioner[s] which drew an opposition from private respondents, the Court resolved to DENY the
aforesaid motion for reconsideration, as the issues raised therein have been passed upon by the Court in its questioned decision and no substantial
arguments were presented to warrant its reversal, let alone modification.
SO ORDERED.8
In this petition now before us, petitioner alleges that the appellate court erred in:
I. DENYING THE PETITION FOR CERTIORARI AND IN EFFECT AFFIRMING THE RULINGS OF THE PUBLIC RESPONDENT NLRC
THAT THE PRIVATE RESPONDENTS WERE ILLEGALLY DISMISSED;
II. RULING THAT THE PRIVATE RESPONDENTS ARE ENTITLED TO SEPARATION PAY AND FULL BACKWAGES;
III. RULING THAT PETITIONER IS LIABLE FOR COSTS OF SUIT.9
Petitioner contends that the dismissal of private respondents was for a just and valid cause, pursuant to the provisions of the companys rules and
regulations. It also alleges lack of jurisdiction on the part of the labor arbiter, claiming that the cases should have been resolved through the grievance
machinery, and eventually referred to voluntary arbitration, as prescribed in the CBA.
For their part, private respondents contend that they were illegally dismissed from employment because management discovered that they intended to
form another union, and because they were vocal in asserting their rights. In any case, according to private respondents, the petition involves factual
issues that cannot be properly raised in a petition for review on certiorari under Rule 45 of the Revised Rules of Court. 10

In fine, there are three issues to be resolved: 1) whether private respondents were legally and validly dismissed; 2) whether the labor arbiter and the
NLRC had jurisdiction to decide complaints for illegal dismissal; and 3) whether petitioner is liable for costs of the suit.
The first issue primarily involves questions of fact, which can serve as basis for the conclusion that private respondents were legally and validly
dismissed. The burden of proving that the dismissal of private respondents was legal and valid falls upon petitioner. The NLRC found that petitioner
failed to substantiate its claim that both private respondents committed certain acts that violated company rules and regulations, 11 hence we find no
factual basis to say that private respondents dismissal was in order. We see no compelling reason to deviate from the NLRC ruling that their
dismissal was illegal, absent a showing that it reached its conclusion arbitrarily. 12Moreover, factual findings of agencies exercising quasi-judicial
functions are accorded not only respect but even finality, aside from the consideration here that this Court is not a trier of facts. 13
Anent the second issue, Article 217 of the Labor Code provides that labor arbiters have original and exclusive jurisdiction over termination disputes.
A possible exception is provided in Article 261 of the Labor Code, which provides thatThe Voluntary Arbitrator or panel of voluntary arbitrators shall have original and exclusive jurisdiction to hear and decide all unresolved grievances
arising from the interpretation or implementation of the Collective Bargaining Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding article. Accordingly, violations of a Collective Bargaining Agreement, except
those which are gross in character, shall no longer be treated as unfair labor practice and shall be resolved as grievances under the Collective
Bargaining Agreement. For purposes of this article, gross violations of Collective Bargaining Agreement shall mean flagrant and or malicious refusal
to comply with the economic provisions of such agreement.
The Commission, its Regional Offices and the Regional Directors of the Department of Labor and Employment shall not entertain disputes,
grievances or matters under the exclusive and original jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the grievance Machinery or Arbitration provided in the Collective Bargaining Agreement.
But as held in Vivero vs. CA,14 "petitioner cannot arrogate into the powers of Voluntary Arbitrators the original and exclusive jurisdiction of Labor
Arbiters over unfair labor practices, termination disputes, and claims for damages,in the absence of an express agreement between the parties in order
for Article 262 of the Labor Code [Jurisdiction over other labor disputes] to apply in the case at bar."
Moreover, per Justice Bellosillo:
It may be observed that under Policy Instruction No. 56 of the Secretary of Labor, dated 6 April 1993, "Clarifying the Jurisdiction Between Voluntary
Arbitrators and Labor Arbiters Over Termination Cases and Providing Guidelines for the Referral of Said Cases Originally Filed with the NLRC to
the NCMB," termination cases arising in or resulting from the interpretation and implementation of collective bargaining agreements and
interpretation and enforcement of company personnel policies which were initially processed at the various steps of the plant-level Grievance
Procedures under the parties collective bargaining agreements fall within the original and exclusive jurisdiction of the voluntary arbitrator pursuant
to Art. 217 (c) and Art. 261 of the Labor Code; and, if filed before the Labor Arbiter, these cases shall be dismissed by the Labor Arbiter for lack of
jurisdiction and referred to the concerned NCMB Regional Branch for appropriate action towards and expeditious selection by the parties of a
Voluntary Arbitrator or Panel of Arbitrators based on the procedures agreed upon in the CBA.
As earlier stated, the instant case is a termination dispute falling under the original and exclusive jurisdiction of the Labor Arbiter, and does not
specifically involve the application, implementation or enforcement of company personnel policies contemplated in Policy Instruction No. 56.
Consequently, Policy Instruction No. 56 does not apply in the case at bar.15 x x x
Records show, however, that private respondents sought without success to avail of the grievance procedure in their CBA. 16 On this point, petitioner
maintains that by so doing, private respondents recognized that their cases still fell under the grievance machinery. According to petitioner, without
having exhausted said machinery, the private respondents filed their action before the NLRC, in a clear act of forum-shopping. 17 However, it is worth
pointing out that private respondents went to the NLRC only after the labor arbiter dismissed their original complaint for illegal dismissal. Under
these circumstances private respondents had to find another avenue for redress. We agree with the NLRC that it was petitioner who failed to show
proof that it took steps to convene the grievance machinery after the labor arbiter first dismissed the complaints for illegal dismissal and directed the
parties to avail of the grievance procedure under Article VII of the existing CBA. They could not now be faulted for attempting to find an impartial
forum, after petitioner failed to listen to them and after the intercession of the labor arbiter proved futile. The NLRC had aptly concluded in part that
private respondents had already exhausted the remedies under the grievance procedure. 18 It erred only in finding that their cause of action was ripe for
arbitration.
In the case of Maneja vs. NLRC,19 we held that the dismissal case does not fall within the phrase "grievances arising from the interpretation or
implementation of the collective bargaining agreement and those arising from the interpretation or enforcement of company personnel policies." In
Maneja, the hotel employee was dismissed without hearing. We ruled that her dismissal was unjustified, and her right to due process was violated,

absent the twin requirements of notice and hearing. We also held that the labor arbiter had original and exclusive jurisdiction over the termination
case, and that it was error to give the voluntary arbitrator jurisdiction over the illegal dismissal case.
In Vivero vs. CA,20 private respondents attempted to justify the jurisdiction of the voluntary arbitrator over a termination dispute alleging that the
issue involved the interpretation and implementation of the grievance procedure in the CBA. There, we held that since what was challenged was the
legality of the employees dismissal for lack of cause and lack of due process, the case was primarily a termination dispute. The issue of whether
there was proper interpretation and implementation of the CBA provisions came into play only because the grievance procedure in the CBA was not
observed, after he sought his unions assistance. Since the real issue then was whether there was a valid termination, there was no reason to invoke
the need to interpret nor question an implementation of any CBA provision.
One significant fact in the present petition also needs stressing. Pursuant to Article 260 21 of the Labor Code, the parties to a CBA shall name or
designate their respective representatives to the grievance machinery and if the grievance is unsettled in that level, it shall automatically be referred to
the voluntary arbitrators designated in advance by the parties to a CBA. Consequently only disputes involving the union and the company shall be
referred to the grievance machinery or voluntary arbitrators. In these termination cases of private respondents, the union had no participation, it
having failed to object to the dismissal of the employees concerned by the petitioner. It is obvious that arbitration without the unions active
participation on behalf of the dismissed employees would be pointless, or even prejudicial to their cause.
Coming to the merits of the petition, the NLRC found that petitioner did not comply with the requirements of a valid dismissal. For a dismissal to be
valid, the employer must show that: (1) the employee was accorded due process, and (2) the dismissal must be for any of the valid causes provided
for by law.22 No evidence was shown that private respondents refused, as alleged, to receive the notices requiring them to show cause why no
disciplinary action should be taken against them. Without proof of notice, private respondents who were subsequently dismissed without hearing
were also deprived of a chance to air their side at the level of the grievance machinery. Given the fact of dismissal, it can be said that the cases were
effectively removed from the jurisdiction of the voluntary arbitrator, thus placing them within the jurisdiction of the labor arbiter. Where the dispute
is just in the interpretation, implementation or enforcement stage, it may be referred to the grievance machinery set up in the CBA, or brought to
voluntary arbitration. But, where there was already actual termination, with alleged violation of the employees rights, it is already cognizable by the
labor arbiter.23
In sum, we conclude that the labor arbiter and then the NLRC had jurisdiction over the cases involving private respondents dismissal, and no error
was committed by the appellate court in upholding their assumption of jurisdiction.
However, we find that a modification of the monetary awards is in order. As a consequence of their illegal dismissal, private respondents are entitled
to reinstatement to their former positions. But since reinstatement is no longer feasible because petitioner had already closed its shop, separation pay
in lieu of reinstatement shall be awarded. 24 A terminated employees receipt of his separation pay and other monetary benefits does not preclude
reinstatement or full benefits under the law, should reinstatement be no longer possible. 25 As held in Cario vs. ACCFA:26
Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously, do not stand on the same
footing. The employer drove the employee to the wall. The latter must have to get hold of the money. Because out of job, he had to face the harsh
necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice. One thing sure,
however, is that petitioners did not relent their claim. They pressed it. They are deemed not to have waived their rights. Renuntiato non praesumitur.
Conformably, private respondents are entitled to separation pay equivalent to one months salary for every year of service, in lieu of
reinstatement.27 As regards the award of damages, in order not to further delay the disposition of this case, we find it necessary to expressly set forth
the extent of the backwages as awarded by the appellate court. Pursuant to R.A. 6715, as amended, private respondents shall be entitled to full
backwages computed from the time of their illegal dismissal up to the date of promulgation of this decision without qualification, considering that
reinstatement is no longer practicable under the circumstances. 28
Having found private respondents dismissal to be illegal, and the labor arbiter and the NLRC duly vested with jurisdiction to hear and decide their
cases, we agree with the appellate court that petitioner should pay the costs of suit.
WHEREFORE, the petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-G.R. SP No. 52780 is AFFIRMED with the
MODIFICATION that petitioner is ordered to pay private respondents (a) separation pay, in lieu of their reinstatement, equivalent to one months
salary for every year of service, (b) full backwages from the date of their dismissal up to the date of the promulgation of this decision, together with
(c) the costs of suit.
SO ORDERED.
G.R. No. 130866 September 16, 1998

ST. MARTIN FUNERAL HOME, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION and BIENVENIDO ARICAYOS, respondents.

REGALADO, J.:
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 misappropriating P38,000.00 which was intended for payment by petitioner of its value added tax (VAT) to the Bureau of Internal Revenue
(BIR). 1
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.
Martin's 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. 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 then 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. 2
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. 3
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. 4
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. 5 Petitioner 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. 7
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.
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. 11
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 10-day
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. 14
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:
(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. 15
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
(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,
provisions of Section 9 of B.P. No. 129 were effected by R.A. No. 7902, viz.:

16

the following amendments of the original

1. The last paragraph which excluded its application to the Labor Code of the Philippines and 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." (Emphasis supplied).
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.
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.
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 . . . the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, . . . ." This would necessarily contradict what has been ruled and said all along that appeal does not lie from decisions
of the NLRC. 17 Yet, 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 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. 18
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.
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.
Among the highest number of cases that are brought up to the Supreme Court are labor 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)
xxx xxx 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:
. . . 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 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 people's 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 xxx 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 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. (Emphasis supplied).
xxx xxx 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 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.
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 ofcertiorari 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. 24
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.
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 hence forth 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 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.