G.R. No.

159832

The petitioners averred that on December 16, 1999,

due to unbearable working conditions, they were
MERCEDITA ACUA, MYRNA RAMONES, and JULIET constrained to inform management that they were
MENDEZ, Petitioners,
leaving. They booked a flight home, at their own
vs.
expense. Before they left, they were made to sign a
HON. COURT OF APPEALS and JOIN INTERNATIONAL written waiver.7 In addition, petitioners were not paid
CORPORATION
and/or
ELIZABETH
ALAON,any salary for work rendered on December 11-15,
Respondents.
1999.8
DECISION
QUISUMBING, J.:

May 5, 2006

Immediately upon arrival in the Philippines, petitioners

went to private respondents office, narrated what
happened, and demanded the return of their placement
fees and plane fare. Private respondents refused.

This petition seeks the review and reversal of the Court

of Appeals Decision1 dated January 27, 2003, in CA- On December 28, 1999, private respondents offered a
G.R. SP No. 70724, entitled Join International settlement. Petitioner Mendez received P15,080.9 The
Corporation and/or Elizabeth Alaon v. National Labornext day, petitioners Acua and Ramones went back
Relations Commission (Third Division), Mercedita Acua, and received P13,64010 and P16,200,11 respectively.
Juliet Mendez, and Myrna Ramones, setting aside the They claim they signed a waiver, otherwise they would
resolutions of the NLRC and dismissing the complaint of not be refunded.12
petitioners.
On January 14, 2000, petitioners Acua and Mendez
Petitioners are Filipino overseas workers deployed byinvoking Republic Act No. 8042,13 filed a complaint for
private respondent Join International Corporation (JIC), a illegal dismissal and non-payment/underpayment of
licensed recruitment agency, to its principal, 3D Pre- salaries
or
wages,
overtime
pay,
refund
of
Color Plastic, Inc., (3D) in Taiwan, Republic of China,transportation fare, payment of salaries/wages for 3
under a uniformly-worded employment contract for a months, moral and exemplary damages, and refund of
period of two years. Herein private respondent Elizabethplacement fee before the National Labor Relations
Alaon is the president of Join International Corporation. Commission (NLRC). Petitioner Ramones filed her
complaint on January 20, 2000.
Sometime in September 1999, petitioners filed with
private respondents applications for employmentThe Labor Arbiter ruled in favor of petitioners, declaring
abroad. They submitted their passports, NBI clearances,that Myrna Ramones, Juliet Mendez and Mercedita
medical clearances and other requirements and each Acua did not resign voluntarily from their jobs. Thus,
paid a placement fee of P14,850, evidenced by official private respondents were ordered to pay jointly and
receipts2 issued by private respondents.
severally, in Philippine Peso, at the rate of exchange
prevailing at the time of payment, the following:
After their papers were processed, petitioners claimed
they signed a uniformly-worded employment contract3 1.
MERCEDITA ACUA
with private respondents which stipulated that theya. Unexpired Portion
NT$95,000.00
were to work as machine operators with a monthly b. Salary for 4 days
2,436.92
salary of NT$15,840.00, exclusive of overtime, for a c. Overtime pay for 4 hrs. in 4 days
1,523.07
period of two years.
NT$98,960.00
On December 9, 1999, with 18 other contract workers *
they left for Taiwan. Upon arriving at the job site, a d. Refund of placement fee
PHP45,000.00
factory owned by 3D, they were made to sign another (Less: Amount received per Quitclaim) 13,640.00
contract which stated that their salary was only 31,360.00
NT$11,840.00.4 They were likewise informed that the e. Moral damages
25,000.00
dormitory which would serve as their living quarters f. Exemplary damages 40,000.00
was still under construction. They were requested to
temporarily bear with the inconvenience but were 2.
JULIET C. MENDEZ
assured that their dormitory would be completed in a a. Unexpired Portion
NT$95,000.00
short time.5
b. Salary for 4 days
2,436.92
c. Overtime pay for 4 hrs. in 4 days
1,523.07
Petitioners alleged that they were brought to a "small
room with a cement floor so dirty and smelling with foul
odor (sic)". Forty women were jampacked in the room NT$98,960.00
and each person was given a pillow. Since the ladies *
PHP45,000.00
comfort room was out of order, they had to ask d. Refund of placement fee
(Less:
Amount
received
per
Quitclaim)
15,080.0014
permission to use the mens comfort room.6 Petitioners
claim they were made to work twelve hours a day, from29,920.00
e. Moral damages
25,000.00
8:00 p.m. to 8:00 a.m.
f. Exemplary damages 40,000.00
3.

MYRNA R. RAMONES

a. Unexpired Portion
NT$95,000.00
b. Salary for 4 days
2,436.92
c. Overtime pay for 4 hrs. in 4 days
1,523.07

that the NLRC Resolution dated December 10, 2001 was

in fact received by private respondents on January 24,
2002 and not on January 4, 2002. Hence, the appeal
was properly filed within the 10-day reglementary
period.

NT$98,960.00
*
In this petition the issue left for resolution is whether
d. Refund of placement fee
PHP45,000.00
petitioners were illegally dismissed under Rep. Act No.
(Less: Amount received per Quitclaim) 16,200.00
8042, thus entitling them to benefits plus damages.
28,800.00
e. Moral damages
25,000.00
The Labor Arbiter and the NLRC found that petitioners
f. Exemplary damages 40,000.0015
The Labor Arbiter likewise ordered the payment of admitted they resigned from their jobs without force,
attorneys fees equivalent to ten percent (10%) of the coercion, intimidation and pressure from private
award which totaled NT$296,880.00 and P285,080.00respondents principal abroad.21
The other claims were dismissed for lack of merit.
According to the Labor Arbiter, while it may be true that
Private respondents thereafter appealed the decision to petitioners were not coerced into giving up their jobs,
the National Labor Relations Commission. The NLRCthe deplorable, oppressive and sub-human working
ruled that the inclusion of Alaon as party respondent in conditions drove petitioners to resign. In effect,
this case had no basis since respondent JIC, being a according to the Labor Arbiter, the petitioners did not
juridical person, has a legal personality, separate and voluntarily resign.22
distinct from its officers.16 It partially granted the
appeal and ordered that the amounts of P15,080,The NLRC also ruled that there was constructive
P13,640 and P16,200 received under the quitclaim by dismissal since working under said conditions was
Mendez, Acua and Ramones, respectively, be deductedunbearable.23
from their respective awards. They were awarded
attorneys fees equivalent to ten percent (10%) of theirAs we have held previously, constructive dismissal
awarded labor-standards claims for unpaid wages and covers the involuntary resignation resorted to when
employment
becomes
impossible,
overtime pays. No moral and exemplary damages and continued
placement fees were awarded.17 Private respondentsunreasonable or unlikely; when there is a demotion in
rank or a diminution in pay; or when a clear
motion for partial reconsideration was denied.
discrimination, insensibility or disdain by an employer
On appeal, the Court of Appeals ruled for privatebecomes unbearable to an employee.24
respondents. It set aside the resolutions dated February
26, 2002 and December 10, 2001 of the NLRC and In this case, the appellate court found that petitioners
did not deny that the accommodations were not as
dismissed the complaint of petitioners.18
homely as expected. In the petitioners memorandum,
In their petition before us, petitioners raise the following they admitted that they were told by the principal, upon
their arrival, that the dormitory was still under
issues:
construction and were requested to bear with the
temporary inconvenience and the dormitory would soon
I
be finished. We likewise note that petitioners did not
Whether or not public respondent court of appeals erred refute private respondents assertion that they had
and/or GRAVELY abused its discretion, amounting to lack deployed approximately sixty other workers to their
of jurisdiction, in taking cognizance of the petition for principal, and to the best of their knowledge, no other
certiorari filed by the private respondents, despite the worker assigned to the same principal has resigned,
fact that the nlrcs resolution of December 10, 2001 had much less, filed a case for illegal dismissal.25
already
become
final
and
executory,
private
respondents motion for partial reconsideration with theTo our mind these cited circumstances do not reflect
malice by private respondents nor do they show the
nlrc having been filed out of time
principals intention to subject petitioners to unhealthy
accommodations. Under these facts, we cannot rule
II
that there was constructive dismissal.
Alternatively, whether or not public respondent court of
appeals erred in setting aside the resolutions of the nlrc,Private respondents also claim that petitioners were not
entitled to overtime pay, since they had offered no
and in dismissing the complaint of the petitioners.19
proof that they actually rendered overtime work.
Prefatorily, petitioners aver that private respondents Petitioners, on the other hand, say that they could not
Verification and Certification of the Petition for Certiorari show any documentary proof since their employment
stated that the copy of the resolution of the NLRC dated records were all in the custody of the principal
December 10, 2001 was received on January 4, 2002 employer. It was sufficient, they claim, that they alleged
and its partial motion for reconsideration filed onthe same with particularity.
January 29, 2002, or 15 days beyond the reglementary
period. However, a perusal of the Partial Motion for On this matter, we rule for the petitioners. The claim for
Reconsideration20 filed by private respondents show overtime pay should not have been disallowed because

of the failure of the petitioners to substantiate them.26disparity between the amount of the quitclaim and the
The claim of overseas workers against foreign amount actually due the petitioners.
employers could not be subjected to same rules of
evidence
and
procedure
easily
obtained
byConformably then the petitioners are entitled to the
complainants whose employers are locally based.27 following amounts in Philippine Peso at the rate of
While normally we would require the presentation of exchange prevailing at the time of payment:
payrolls, daily time records and similar documents
before allowing claims for overtime pay, in this case, 1.
MERCEDITA ACUA
that would be requiring the near-impossible.
a. Salary for 4 days
NT $ 2,436.92
b. Overtime pay for 4 hours in 4 days 1,523.07
To our mind, it is private respondents who could have
NT $ 3,959.99
obtained the records of their principal to refute
petitioners claim for overtime pay. By their failure to do 2.
JULIET C. MENDEZ
so, private respondents waived their defense and ina. Salary for 4 days
effect admitted the allegations of the petitioners.
NT $ 2,436.92
It is a time-honored rule that in controversies between a b. Overtime pay for 4 hours in 4 days
worker and his employer, doubts reasonably arising
from the evidence, or in the interpretation of 1,523.07
agreements and writing should be resolved in the
NT $ 3,959.99
workers favor.28 The policy is to extend the
applicability of the decree to a greater number of
MYRNA R. RAMONES
employees who can avail of the benefits under the law, 3.
a.
Salary
for 4 days
which is in consonance with the avowed policy of the
State to give maximum aid and protection to labor.29
Accordingly, we rule that private respondents areNT $ 2,436.92
solidarily liable with the foreign principal for the b. Overtime pay for 4 hours in 4 days
overtime pay claims of petitioners.

1,523.07
NT $ 3,959.99
On the award of moral and exemplary damages, we
According
to the Bangko Sentral Treasury Department,
hold that such award lacks legal basis. Moral and
the
prevailing
exchange rates on December 1999 was
exemplary damages are recoverable only where the
dismissal of an employee was attended by bad faith or NT$1 to P1.268805. Hence, after conversion to
fraud, or constituted an act oppressive to labor, or was Philippine pesos, the amount of the quitclaim paid to
done in a manner contrary to morals, good customs or petitioners was actually higher than the amount due
public policy.30 The person claiming moral damages them.
must prove the existence of bad faith by clear and
convincing evidence, for the law always presumes good WHEREFORE, the petition is DISMISSED, without
faith.31 Petitioners allege they suffered humiliation, prejudice to the filing of illegal recruitment complaint
sleepless nights and mental anguish, thinking how theyagainst the respondents pursuant to Section 6(i) of The
would pay the money they borrowed for their placement Migrant Workers and Overseas Filipino Act of 1995 (Rep.
fees.32 Even so, they failed to prove bad faith, fraud or Act No. 8042).
ill motive on the part of private respondents.33 Moral
damages cannot be awarded. Without the award of SO ORDERED.
moral damages, there can be no award of exemplary
damages, nor attorneys fees.34
Quitclaims executed by the employees are commonly
frowned upon as contrary to public policy and
ineffective to bar claims for the full measure of the
workers legal rights, considering the economic
disadvantage of the employee and the inevitable
pressure
upon
him
by
financial
necessity.35
Nonetheless, the so-called "economic difficulties and
financial crises" allegedly confronting the employee is
not an acceptable ground to annul the compromise
agreement36 unless it is accompanied by a gross
disparity between the actual claim and the amount of
the settlement.37
A perusal of the records reveals that petitioners were
not in any way deceived, coerced or intimidated into
signing a quitclaim waiver in the amounts of P13,640,
P15,080 and P16,200 respectively. Nor was there a

G.R. No. L-63742

April 17, 1989

the court's jurisdiction (or lack of it), over the action.

The respondents' position paper questioned the court's
TANJAY WATER DISTRICT, represented by Engr. JOEL B. jurisdiction over the case and asked for its dismissal of
BORROMEO, Manager, petitioner,
the complaint (Annex F). Instead of a position paper, the
vs.
petitioner filed a reply with opposition to the motion to
HON. PEDRO GABATON, MUN. OF PAMPLONA, dismiss (Annex G).
APOLINARIO ARNAIZ, ROMULO ALPAS, WENCESLAO
DURAN, SERGIO SALMA, APOLLO BOBON, CATALINOOn March 25, 1983, respondent Judge issued an order
ORTEGA, FRANCISCO ZERNA, ANTONIO DIVINAGRACIA, dismissing the complaint for lack of jurisdiction over the
PEDRO SINCERO, DIONISIO TABALOC, ROMEO RAMIREZ, subject matter (water) and over the parties (both being
FRANCISCO
CABILAO
and
ESPERIDION
MOSO,government instrumentalities) by virtue of Art. 88 of PD
respondents.
No. 1067 and PD No. 242. He declared that the
petitioner's recourse to the court was premature
G.R. No. 84300 April 17, 1989
because the controversy should have been ventilated
first before the National Water Resources Council
JOSEFINO DATUIN, petitioner,
pursuant to Arts. 88 and 89 of PD No. 1067. He further
vs.
ruled
that
as
the
parties
are
government
TARLAC WATER DISTRICT, respondent.
instrumentalities, the dispute should be administratively
settled in accordance with PD No. 242.
Rodulfo O. Navarro and Baldomero Limbaga for
petitioner in G.R. No. 63742.
Petitioner filed a petition for certiorari in this Court
alleging that respondent Judge acted without or in
Joaquin R. Hitosis for respondents in G.R. No. 63742.
excess of jurisdiction or with grave abuse of discretion
in dismissing the case.
Isabelo C. Salamida for petitioner in G.R. No. 84300.
II.
G.R. No. 84300
Conrado C. Ginelo Jr. for respondent in G.R. No. 84300.
Petitioner Josefino Datuin filed a complaint for illegal
Bernardito A. Florido for Philippine Association of Water dismissal against respondent Tarlac Water District in the
Districts.
Department of Labor and Employment (DOLE) which
decided in his favor. However, upon respondent's
Reuben A. Espancho for Esperidion Moso.
motion for reconsideration (which was treated as an
appeal) the National Labor Relations Commission
(NLRC) reversed the decision and dismissed the
complaint "for lack of jurisdiction," holding that as the
respondent Tarlac Water District is a corporation created
GRIO-AQUINO, J.:
by a special law (PD No. 198), its officers and
The common issue in these consolidated cases is employees belong to the civil service and their
whether or not water districts created under PD No.separation from office should be governed by Civil
198, as amended, are private corporations orService Rules and Regulations.
government-owned or controlled corporations. Another
issue in G.R. No. 63742 is whether respondent Judge Petitioner contends that this case is similar to the case
acted without, or in excess of, jurisdiction or with grave of Tanjay Water District versus Hon. Pedro C. Gabaton,
abuse of discretion in dismissing Civil Case No. 8144 for et al., G.R. No. 63742, because the lone issue in both
cases is whether or not water districts created under PD
alleged lack of jurisdiction over the subject matter.
No. 198, as amended, are private corporations or
government-owned or controlled corporations. The two
I.
G.R. No. 63742
cases were consolidated pursuant to the resolution
On March 3, 1983, petitioner Tanjay Water District,dated July 25, 1988 of this Court.
represented by its manager, Joel B. Borromeo, filed in
the Regional Trial Court of Negros Oriental, DumagueteActually the question of the corporate personality of
City, 7th Judicial Region, Civil Case No. 8144, an action local water districts is not new. The Court ruled in the
for injunction with preliminary mandatory injunction and recent case of Hagonoy Water District vs. NLRC, G.R.
damages, against respondent Municipality of Pamplona No. 81490, August 31, 1988, that they are quasi public
and its officials to prevent them from interfering in the corporations whose employees belong to the civil
service, hence, the dismissal of those employees shall
management of the Tanjay Waterworks System.
be governed by the civil service law, rules and
Respondent Judge set the hearing of the application forregulations. The pertinent part of this Court's decision
injunction on March 16, 1983. The Municipality and its reads as follows:
officials answered the complaint. Esperidion Moso filed
The only question here is whether or not local water
a separate answer.
districts are government owned or controlled
When the case was called for hearing on March 16, corporations whose employees are subject to the
1983, respondent Judge gave the parties five (5) days toprovisions of the Civil Service Law. The Labor Arbiter
submit their respective position papers on the issue of asserted jurisdiction over the alleged illegal dismissal of

private respondent Villanueva by relying on Section 25 to read as Sec. 25 by Sec. 4 of P.D. No. 1479. The
of Presidential Decree No. 198, known as the 'Provincialamendatory decree took effect on June 11, 1978.
Water Utilities Act of 1973' which went into effect on 25
May 1973, and which provides as follows:
xxx
xxx
xxx
Exemption from Civil Service. The district and its 3. The BWD is a corporation created pursuant to a
employees, being engaged in a proprietary function, are special law P.D. No. 198, as amended. As such its
hereby exempt from the provisions of the Civil Service officers and employees are part of the Civil Service.
Law. Collective Bargaining shall be available only to(Sec. 1, Art. XII-B, [1973] Constitution; P.D. No. 868.)
personnel below supervisory levels: Provided, however,
That the total of all salaries, wages, emoluments,The hiring and firing of employees of governmentbenefits or other compensation paid to all employees in owned or controlled corporations are governed by the
any month shall not exceed fifty percent (50%) of Civil Service Law and Civil Service Rules and
average net monthly revenue, said net revenue Regulations. In National Housing Corporation vs. Juco,
representing income from water sales and sewerage134 SCRA 172,176, We held:
service charges, less pro-rata share of debt service and
expenses for fuel or energy for pumping during the There should no longer be any question at this time that
preceding fiscal year.
employees
of
government-owned
or
controlled
corporations are governed by the civil service law and
The Labor Arbiter failed to take into account thecivil service rules and regulations.
provisions of Presidential, Decree No. 1479, which went
into effect on 11 June 1978. P.D. No. 1479 wiped awaySection 1, Article XII-B of the [1973] Constitution
Section 25 of P.D. 198 quoted above, and Section 26 ofspecifically provides:
P.D. 198 was renumbered as Section 25 in the following
manner:
The Civil Service embraces every branch, agency,
subdivision, and instrumentality of the Government,
Section 26. of the same decree P.D. 198 is herebyincluding every government-owned or controlled
amended to read as Section 25 as follows:
corporation ... .
Section 25. Authorization. The district may exercise The 1935 Constitution had a similar provision in its
all the powers which are expressly granted by this Title Section 1, Article XII which stated:
or which are necessarily implied from or incidental to
the powers and purposes herein stated. For the purposeA Civil Service embracing all branches and subdivisions
of carrying out the objectives of this Act, a district is of the Government shall be provided by law.
hereby granted the power of eminent domain, the
exercise thereof shall, however, be subject to review by The inclusion of 'government-owned or controlled
the Administration.
corporations' within the embrace of the civil service
shows a deliberate effort of the framers to plug an
Thus, Section 25 of P.D. 198 exempting the employees earlier loophole which allowed government-owned or
of water districts from the application of the Civil controlled corporations to avoid the full consequences
Service Law was removed from the statute books.
of the all-encompassing coverage of the civil service
system. The same explicit intent is shown by the
This is not the first time that officials of the Department addition of 'agency' and 'instrumentality' to branches
of Labor and Employment have taken the position that and subdivisions of the Government. All offices and
the Labor Arbiter here adopted. In Baguio Water District firms of the government are covered.
vs. Cresenciano B. Trajano etc., et al. (127 SCRA 730
[1984]), the petitioner Water District sought review of a The amendments introduced in 1973 are not Idle
decision of the Bureau of Labor Relations which affirmed exercises or meaningless gestures. They carry the
that of a Med-Arbiter calling for a certification election strong message that civil service coverage is broad and
among the regular rank-and-file employees of the all-embracing insofar as employment in the government
Baguio Water District (BWD). In granting the petition, in any of its governmental or corporate arms is
the Court said
concerned.
The Baguio Water District was formed pursuant to Titlex x x
xxx
xxx
II Local Water District Law of P.D. No. 198, as
amended. The BWD is by Sec. 6 of that decree 'a quasi- Section 1 of Article XII-B, 1973 Constitution uses the
public corporation performing public service andword 'every' to modify the phrase 'government-owned
supplying public wants'.
or controlled corporation'
xxxxxx

'Every' means each one of a group, without exception. It

means all possible and all, taken one by one. Of course,
We grant the petition for the following reasons:
our decision in this case refers to a corporation created
as a government-owned or controlled entity. It does not
I. Section 25 of P.D. No. 198 was repealed by Sec. 3 of cover cases involving private firms taken over by the
P.D. No. 1479; Section 26 of P.E. No. 198 was amended government in foreclosure or similar proceedings. We

reserve judgment on these latter cases when thelaw on the subject. The Court of First Instance (now
appropriate controversy is brought to this Court. Regional Trial Court) has only appellate jurisdiction over
(Emphasis ours)
the case.
Significantly, Article XIB Section 2(l) of the 1987P.D. No. 242 which was issued on July 9, 1973,
Constitution provides that "(t)he civil service embraces prescribes administrative procedures for the settlement
all branches, subdivisions, instrumentalities, andof:
agencies of the government, including governmentowned or controlled corporations with original charters.".... all disputes, claims and controversies solely between
Inasmuch as PD No. 198, as amended, is the original or among the departments, bureaus, offices, agencies
charter of the petitioner, Tanjay Water District, and and instrumentalities of the National Government,
respondent Tarlac Water District and all water districts including government-owned or controlled corporations
in the country, they come under the coverage of the but excluding constitutional offices or agencies, arising
civil service law, rules and regulations. (Sec. 35, Art VIIIfrom the interpretation and application of statutes,
and Sec. 37, Art. IX of PD No. 807.)
contracts or agreements.
In G.R. No. 63742, respondent Judge ruled that as the by either the Secretary of Justice, or the Solicitor
subject matter of Civil Case No. 8144 was water, the General, or the Government Corporate Counsel,
case should have been brought first to the National depending on the parties involved and whether the case
Water Resources Council in accordance with Articles 88 raises pure questions of law or mixed questions of law
and 89 of PD No. 1067, and, as the parties are and fact.
government instrumentalities (The Tanjay Water District
and the Municipality of Pamplona), the dispute should P.D. No. 242 is inapplicable to this case because the
be administratively settled in accordance with PD No. controversy herein did not arise from the "interpretation
242.
and application of statutes, contracts, or agreements"
of the parties herein. As previously stated, it involves
Articles 88 and 89 of The Water Code (PD No. 1067, the appropriation, utilization, and control of water.
promulgated on January 25, 1977) provide as follows:
Our determination in the earlier cases (Baguio Water
ART. 88.
The [Water Resources] Council shallDistrict vs. Trajano, 127 SCRA 730; Hagonoy Water
have original jurisdiction over all disputes relating toDistrict vs. NLRC, G.R. No. 81490, August 31, 1988) that
appropriation, utilization, exploitation, development,water districts are government instrumentalities and
control, conservation and protection of waters within that their employees belong to the civil service,
the meaning and context of the provisions of this Code. disposes of Datuin's petition in G.R. No. 84300. The
National Labor Relations Commission has no jurisdiction
The decisions of the Council on water rightsover his complaint for illegal dismissal.
controversies shall be immediately executory and the
enforcement thereof may be suspended only when a WHEREFORE, both petitions in G.R. Nos. 63742 and
bond, in an amount fixed by the Council to answer for84300 are dismissed without prejudice to the
damages occasioned by the suspension or stay of petitioners in G.R. No. 63742 filing their complaint in the
execution, shall have been filed by the appealing party, National Water Resources Council and the petitioner in
unless the suspension is by virtue of an order of a G.R. No. 84300 seeking redress in the Civil Service
competent court.
Commission. No costs.
All disputes shall be decided within sixty (60) days after SO ORDERED.
the parties submit the same for decision or resolution.
The Council shall have the power to issue writs of
execution and enforce its decisions with the assistance
of local or national police agencies.
ART. 89.
The decisions of the Council on water
rights controversies may be appealed to the Court of
First Instance of the province where the subject matter
of the controversy is situated within fifteen (15) days
from the date the party appealing receives a copy of the
decision, on any of the following grounds: (2) grave
abuse of discretion question of law; and (3) questions of
fact and law. (Emphasis supplied.)
Inasmuch as Civil Case No. 8144 involves the
appropriation, utilization and control of water, We hold
that the jurisdiction to hear and decide the dispute in
the first instance, pertains to the Water Resources
Council as provided in PD No. 1067 which is the special

G.R. No. 155146

January 24, 2006

Directors.7 Despite this, respondent PTSI refused to pay

the petitioners their retirement benefits.

DR. PERLA A. POSTIGO, FRANCISCO F. ALMACEN,

NARCISO M. ALMENDRAL, NENA E. BASTO, JUANITO M. The petitioners then filed a complaint before the Labor
BERNARDINO, ADELFA B. CRESCINI, MARCIAL R. DEArbiter.
JESUS, DR. PEDRO LOPEZ DE LEON, PREMIA M. DUMLAO,
DAVID F. ESTACIO, LINA G. ESTRELLA, GENOVEVA V. In a Decision8 dated June 30, 1999, the Labor Arbiter
HERNANDEZ, PEDRO A. PARIL, PEDRO H. SINGSON,declared petitioners entitled to retirement benefits
ALBERTO A. TUDIO, MARIETTA B. ULIT, LOURDES C. under Rep. Act No. 7641. However, one petitioner, Dr.
LEGASPI, PEDRO PEROCHO, LANI CORTEZ, GUADALUPE Finaflor C. Tan who was awarded her terminal leave pay,
B. MACATANGAY, DOLORES C. FERNANDEZ, LUMINOSA was not included in the award of retirement benefits.
G. REYNO, ESTRELLA P. SURATOS, LYDIA E. DE BOSCH,
ZENAIDA C. CARRIEDO, DR. FINAFLOR C. TAN,Aggrieved, respondent PTSI appealed to the NLRC.
Petitioners,
Instead of posting the required cash or surety bond
vs.
equivalent to the amount of the award, the respondent
PHILIPPINE TUBERCULOSIS SOCIETY, INC., Respondent. filed a Motion to Reduce Bond on the ground that the
amount awarded by the Labor Arbiter was erroneous.
DECISION
On January 31, 2000, the NLRC dismissed the appeal for
failure to post the required cash or surety bond.
QUISUMBING, J.:
Undaunted, the respondent elevated the matter to the
This petition assails the Decision1 dated June 13, 2002 Court of Appeals. On June 13, 2002, the CA reversed the
of the Court of Appeals in CA-G.R. SP No. 59597, which NLRCs decision in this wise:
set aside the Resolution2 dated January 31, 2000 of the
National Labor Relations Commission (NLRC) in NLRC Indeed, in several occasions, the Supreme Court has
NCR CN 00-02-02148-99. The NLRC had dismissed the cautioned the NLRC to give Article 223 of the Labor
respondents appeal from the Decision of the LaborCode, as amended, particularly the provisions on
Arbiter, who ordered the payment of retirement benefits requiring a bond on appeals involving monetary awards,
under Republic Act No. 7641 to petitioners. This petition a liberal interpretation in line with the desired objective
likewise assails the Resolution3 dated September 3, of resolving controversies on the merits.
2002 of the Court of Appeals denying petitioners
motion for reconsideration.
Hence, considering the timeliness of the filing of the
motion to reduce the appeal bond and the meritorious
The antecedent facts, as summarized by the Court of ground upon which it relies, We believe and so hold that
Appeals and borne by the records, are as follows:
the legal requirement of posting an appeal bond has
been substantially satisfied. Public respondent acted
Petitioners Dr. Perla A. Postigo, et al., were regularwith grave abuse of discretion in dismissing the appeal
employees of the respondent Philippine Tuberculosis without passing upon the motion to reduce the appeal
Society, Inc. (PTSI). They retired on various dates from bond.
1996 to 1998. Upon retirement from service, some of
the petitioners who were compulsory members of the WHEREFORE, the petition is hereby GRANTED.
Government Service Insurance System (GSIS) obtained Resolutions dated 31 January 2000 and 24 May 2000 in
retirement benefits from the GSIS.
NLRC-NCR CN 00-02-02148-99 of public respondent
National Labor Relations Commission are hereby SET
At the time the petitioners retired, Article 287 of the ASIDE. The NLRC is directed to act on the Motion to
Labor Code had been amended by Republic Act No. Reduce Bond and to give due course to the Appeal.
7641.4 Rep. Act No. 7641 granted retirement pay to
qualified employees in the private sector, in the SO ORDERED.9
absence of any retirement plan or agreement with the
company. As the respondent did not have a retirement The petitioners now submit the following issues for our
plan for its employees, aside from its contribution to the consideration:
GSIS, petitioners claimed from the respondent their
retirement benefits under Rep. Act No. 7641. TheI. Whether or not the remand of the case to the NLRC
respondent denied their claims on the ground that the would only further delay the resolution of this case.
accommodation extended by the GSIS to the petitioners
removed them from the coverage of the law.
II. Whether or not the Honorable Court of Appeals
decided the instant case in accordance with law and
The petitioners then sought the opinion of the Bureau of applicable jurisprudence and based on the evidence on
Working Conditions (BWC) of the Department of Laborrecord for having failed to apply the jurisprudential
and Employment regarding their entitlement to the precepts that:
retirement benefits provided in Rep. Act No. 7641.5 The
BWC confirmed their entitlement.6 The same opinion a. errors in the computation of the monetary award are
was rendered and submitted by the respondents legalproperly a subject of appeal and should be ventilated at
counsel, Atty. Rene V. Sarmiento, to its Board of the appropriate time, not in a mere motion to reduce
bond; and

computation was due and owing to the petitioners.

b. the posting of a bond is an indispensable requirement Since the motion raised a pure mathematical error, the
to perfect an employers appeal.
same may be resolved without going into the merits of
the case.
III. Whether or not Petitioners are entitled to the
benefits of the Retirement Pay Law.
In Rosewood, the petitioner therein filed a motion to
reduce the bond with the appeal bond, albeit not in the
IV. Whether or not Petitioners are entitled to interest on amount equivalent to the monetary award in the
their retirement benefits for the unjustified withholdingjudgment appealed from. The Court held that the NLRC
thereof.
gravely abused its discretion in dismissing the appeal
since a consideration of the merits appearing in the
V. Whether or not Petitioner Dr. Tan should be made appeal as well as the filing of the appeal bond show that
similarly entitled to her retirement pay, which was there was substantial compliance with the rules
inadvertently excluded by the Labor Arbiter, pursuant to governing appeal.
the timely motion to render judgment nunc pro tunc she
filed before the Labor Arbiter and which was Here, aside from the fact that the filing of the motion
consistently raised all the way up to this Honorable was justified, the respondent immediately submitted a
Court, in order to effect a complete disposition of the supersedeas bond15 with its motion for reconsideration
instant case.10
of the NLRC resolution dismissing its appeal. In Ong v.
Court of Appeals,16 we ruled that the aggrieved party
In short, petitioners raise for our resolution these issues: may file the appeal bond within the ten-day
(1) Did the Court of Appeals err in granting the petition reglementary period following the receipt of the
and directing the NLRC to act on the Motion to Reduceresolution of the NLRC to forestall the finality of such
Bond and to give due course to the appeal? and (2) Are resolution.17 Hence, while the appeal of a decision
the petitioners entitled to benefits under Rep. Act No. involving a monetary award in labor cases may be
7641?
perfected only upon the posting of a cash or surety
bond and the posting of the bond is an indispensable
On the first issue, petitioners contend that (1) errors in requirement to perfect such an appeal, a relaxation of
the computation of the monetary award are properly athe appeal bond requirement could be justified by
subject of appeal and should be ventilated at the substantial compliance with the rule.
appropriate time, not in a mere motion to reduce bond;
and (2) the posting of a bond is an indispensable Article 223 of the Labor Code provides that an appeal
requirement to perfect an employers appeal.
from a decision of the Labor Arbiter must be made
within ten calendar days from receipt of a copy of the
Respondent counters that in case the monetary award decision by the aggrieved party; and if the decision
is being disputed, an appeal may still be filed without involves a monetary award, an appeal by the aggrieved
the appeal bond, provided that a motion to reduce bond party may be perfected only upon the posting of a cash
is filed within the reglementary period.
or surety bond issued by a reputable bonding company
duly accredited by the NLRC in the amount equivalent
We think that the Court of Appeals did not err in to the monetary award. In addition, Section 6, Rule VI of
granting the petition and holding that there was the New Rules of Procedure of the NLRC provides that
substantial compliance in the posting of a cash or the Commission may, in justifiable cases and upon
surety bond. We likewise find Nationwide Security andmotion of the aggrieved party, reduce the amount of
Allied Services, Inc. v. NLRC11 and Rosewood the bond. Further, the filing of the motion to reduce
Processing, Inc. v. NLRC12 inapplicable to this case.
bond does not stop the running of the period to perfect
appeal.
In Nationwide Security, the petitioners therein filed a
motion to reduce bond instead of an appeal or surety Time and again, this Court has ruled that while the
bond. The NLRC denied the motion on the grounds that above-mentioned rule treats the filing of a cash or
petitioners alleged inability to post the bond was surety bond in the amount equivalent to the monetary
without basis, and to grant the motion on the grounds award in the judgment appealed from, as a jurisdictional
stated therein would be tantamount to ruling on the requirement to perfect an appeal, the bond requirement
merits. In affirming the decision of the NLRC, the Court on appeals involving awards is sometimes given a
noted that petitioners had funds from its other liberal interpretation in line with the desired objective of
businesses to post the required bond. Further, the errors resolving controversies on the merits.18
raised in the motion dealt with matters that would go
into the merits of the case and were thus moreThe special circumstances in this case, upon which the
appropriate in an appeal.
motion to reduce the bond was predicated, justify the
relaxation of the appeal bond requirement. However,
In this case, respondent deferred the posting of the considering that the claim for retirement benefits was
surety bond in view of the alleged erroneous made sometime in 1999 to support the petitioners
computation by the Labor Arbiter of the monetary during the twilight years of their lives, there is no doubt
award.
While
the
Labor
Arbiter
awardedthat a remand of the case to the NLRC will only unduly
P5,480,484.2513
as
retirement
benefits,
only delay the determination of their entitlement to such
P5,072,277.73,14 according to the respondentsbenefits. Moreover, since the case calls for the

resolution of a question of law, we consider it more . . .

appropriate to resolve the appeal at this juncture, rather
than remand the case to the NLRC.
Having determined the applicable implementing rules,
we now proceed to resolve whether the respondent is a
We come now to the second issue. The petitioners private corporation or a public corporation; and
contend that despite their compulsory membership in consequently, whether the petitioners are employees in
the GSIS, they are still covered by Rep. Act No. 7641 for the private sector or in the public sector.
the following reasons: (1) the respondent is registered
with the Securities and Exchange Commission as a non- On this score, the case of Feliciano v. Commission on
stock and non-profit corporation; hence, it is a private Audit,19 finds strong relevance. Although with different
entity and its employees are employees in the private factual circumstances, the Court discussed therein the
sector; and (2) the petitioners are not included in the two classes of corporations recognized by the 1987
exemptions from coverage of Rep. Act No. 7641.
Constitution. The first refers to private corporations
created under a general law; the second refers to
Respondent PTSI counters that as an employer in the government-owned or controlled corporations created
public sector, it is not covered by Rep. Act No. 7641 by special charters. We also reiterated that under
which applies only to employees in the private sector. It Section 14 of the Corporation Code, "[a]ll corporations
relies on Section 3, Rule I of the Amended Rules organized under this Code shall file with the Securities
Implementing Title II, Book IV of the Labor Code, to wit: and Exchange Commission articles of incorporation "
SEC. 3. Employer(a) The term shall mean any person The respondent was incorporated on March 11, 1960 as
natural or juridical, domestic or foreign, who carries on a non-profit, benevolent and non-stock corporation
in the Philippines any trade, business, industry, under the Corporation Code.20 Having been created
undertaking or activity of any kind and uses the under the general corporation law instead of a special
services of another person who is under his orders as charter, we hold that the respondent is a private and
regards the employment.
not a governmental corporation. More so, Section 2(1),
Article IX(B) of the 1987 Constitution provides:
(b) An employer shall belong to either:
SECTION 2. (1) The civil service embraces all branches,
(1) The public sector covered by the GSIS, comprising subdivisions, instrumentalities, and agencies of the
the National Government, including government-ownedGovernment, including government-owned or controlled
or controlled corporations, the Philippine Tuberculosiscorporations with original charters.
Society, the Philippine National Red Cross, and the
Philippine Veterans Bank; or
Extant on the records is the respondents admission
that although its employees are compulsory members
(2) The private sector covered by the SSS, comprising of the GSIS, said employees are not governed by the
all employers other than those defined in the Civil Service Law. If the respondent is truly a
immediately preceding paragraph.
government-owned or controlled corporation, and
petitioners are employees in the public sector, then,
Respondents reliance on the afore-quoted rules isthey should have been covered by said law. The truth,
unfounded. The definition of a public sector employer as however, is that, the respondent is a non-profit but
quoted above is relevant only for purposes of coverageprivate corporation organized under the Corporation
under the Employees Compensation and StateCode, and the petitioners are covered by the Labor
Insurance Fund. Instead, it is the implementing rules of Code and not by the Civil Service Law.
Title II, Book VI of the Labor Code, which provides for
the coverage and exemptions of retirement benefits.From the foregoing, it is clear to us that the petitioners
Thus:
are employees in the private sector, hence entitled to
the benefits of Rep. Act No. 7641.
SECTION 1. General Statement on Coverage. This Rule
shall apply to all employees in the private sector, Even assuming that by virtue of their compulsory
regardless of their position, designation or status and inclusion in the GSIS, the petitioners became employees
irrespective of the method by which their wages arein the public sector, they are still entitled to the benefits
paid, except to those specifically exempted under of Rep. Act No. 7641 since they are not covered by the
Section 2 hereof. As used herein, the term "Act" shall Civil Service Law and its regulations. This much is
refer to Republic Act No. 7641 which took effect oncertain upon reading the implementing rules of Title II,
January 7, 1993.
Book VI of the Labor Code as afore-cited as well as the
Labor Advisory on Retirement Pay Law.21 Under the
SEC. 2. Exemption. This Rule shall not apply to the said advisory, the coverage of, as well as the exclusion
following employees:
from, Rep. Act No. 7641 has been delineated as follows:
2.1 Employees of the National Government and its RA 7641 or the Retirement Pay Law shall apply to all
political subdivisions, including Government-owned employees in the private sector, regardless of their
and/or controlled corporations, if they are covered byposition, designation or status and irrespective of the
the Civil Service Law and its regulations.
method by which their wages are paid. They shall
include part-time employees, employees of service and

other job contractors and domestic helpers or persons the respondent filed the appeal in good faith. We could
in the personal service of another.
not speculate and say that respondent did not intend to
pay the petitioners their retirement benefits in case the
The law does not cover employees of retail, service and appeal is dismissed.
agricultural establishments or operations employing not
more than (10) employees or workers and employees of On the matter of petitioner Dr. Finaflor C. Tan, records
the National Government and its political subdivisions, show she has two causes of action: (1) non-payment of
including
Government-owned
and/or
controlled terminal leave pay; and (2) non-payment of retirement
corporations, if they are covered by the Civil Servicebenefits.23 While the Labor Arbiter ruled that she is
Law and its regulations. (Underscoring ours.)
entitled to the commutation into cash of her unused
leave credits which is the equivalent of her terminal
Neither do we find merit in the respondents argument leave pay, the former did not include her in the award
that the rationale behind the enactment of Rep. Act No. of retirement benefits. This was properly raised in the
7641 justifies the exclusion of employees in the public Motion to Render Judgment Nunc Pro Tunc24 filed by the
sector, who are already enjoying retirement benefits petitioners on October 29, 1999 before the NLRC. We
under the GSIS law, from the New Retirement Law.
see no cogent reason why she should be excluded from
the over-all award of retirement benefits considering
We direct the respondents attention to Section 2 of that she has participated in the proceedings before the
Rep. Act No. 7641, to wit:
Labor Arbiter.
SEC. 2. Nothing in this Act shall deprive any employeeWHEREFORE, this petition is PARTIALLY GRANTED. The
of benefits to which he may be entitled under existingDecision dated June 13, 2002 of the Court of Appeals in
laws or company policies or practices.
CA-G.R. SP No. 59597, directing the NLRC to act on the
Motion to Reduce Bond and to give due course to the
In addition, Rule II of the Rules Implementing Book VI of Appeal, as well as its Resolution denying the petitioners
the Labor Code provides as follows:
motion for reconsideration, are MODIFIED.
SEC. 8. Relation to agreements and regulations. Consequently, it is DECLARED that the petitioners are
Nothing in this Rule shall justify an employer from entitled to retirement benefits under Rep. Act No. 7641.
withdrawing or reducing any benefits, supplements or In addition to retirement benefits, petitioner Dr. Finaflor
payments as provided in existing laws, individual orC. Tan is entitled to the commutation into cash of her
collective agreements or employment practices or unused leave credits which is the equivalent of her
policies.
terminal leave pay. Likewise, the petitioners are entitled
to attorneys fees, equivalent to 10% of the total
...
monetary award.
In Juco v. NLRC,22 we clarified that employees ofLet this case be remanded to the Labor Arbiter for the
government-owned and controlled corporations withcomputation of the retirement benefits and terminal
special charters are covered under the Civil Service. On leave pay above-mentioned. No pronouncement as to
the other hand, employees of government-owned andcosts.
controlled corporations under the Corporation Code are
governed by the provisions of the Labor Code.
SO ORDERED.
The Philippine Tuberculosis Society, Inc. (PTSI) belongs
to the latter category and, therefore, covered by Rep.
Act No. 7641 which is an amendment to the Labor Code.
The accommodation under Rep. Act No. 1820 extending
GSIS coverage to PTSI employees did not take away
from petitioners the beneficial coverage afforded by
Rep. Act No. 7641. Hence, the retirement pay payable
under Article 287 of the Labor Code as amended by
Rep. Act No. 7641 should be considered apart from the
retirement benefit claimable by the petitioners under
the social security law or, as in this case, the GSIS law.
As to the alleged prolonged refusal by the respondent to
pay the petitioners their retirement benefits, we do not
think that the respondents stance was entirely in bad
faith. The respondent harbored the honest belief that
their compulsory coverage in the GSIS converted it into
a public corporation excluded from the coverage of Rep.
Act No. 7641. As noted by this Court, the respondent
even filed a supersedeas bond, albeit belatedly, with its
motion for reconsideration of the NLRC resolution
dismissing its appeal. Such act only demonstrates that

G.R. No. 80774 May 31, 1988

then.", Ministry of Labor and Employment. Frivate

respondent Vega alleged there that his proposal "[had]
SAN MIGUEL CORPORATION, petitioner,
been accepted by the methods analyst and
vs.
implemented by the Corporation [in] October 1980,"
NATIONAL LABOR RELATIONS COMMISSION andand that the same "ultimately and finally solved the
RUSTICO VEGA, respondents.
problem of the Corporation in the production of Beer
Grande." Private respondent thus claimed entitlement
Siguion Reyna, Montecillo & Ongsiako Law Offices for to a cash prize of P60,000.00 (the maximum award per
petitioner.
proposal offered under the Innovation Program) and
attorney's fees.
The Solicitor General for public respondent.
In an Answer With Counterclaim and Position Paper, 3
petitioner Corporation alleged that private respondent
had no cause of action. It denied ever having approved
or adopted Mr. Vega's proposal as part of the
FELICIANO, J.:
Corporation's brewing procedure in the production of
In line with an Innovation Program sponsored bySan Miguel Beer Grande. Among other things, petitioner
petitioner San Miguel Corporation ("Corporation;"stated that Mr. Vega's proposal was tumed down by the
"SMC") and under which management undertook tocompany "for lack of originality" and that the same,
grant cash awards to "all SMC employees ... except [ED- "even if implemented [could not] achieve the desired
HO staff, Division Managers and higher-ranked result." Petitioner further alleged that the Labor Arbiter
personnel" who submit to the Corporation Ideas and had no jurisdiction, Mr. Vega having improperly
the
grievance
machinery
procedure
suggestions found to be beneficial to the Corporation, bypassed
private respondent Rustico Vega submitted on 23 prescribed under a then existing collective bargaining
September 1980 an innovation proposal. Mr. Vega's agreement between management and employees, and
proposal was entitled "Modified Grande Pasteurization available administrative remedies provided under the
Process," and was supposed to eliminate certain alleged rules of the Innovation Program. A counterclaim for
defects in the quality and taste of the product "San moral and exemplary damages, attorney's fees, and
litigation expenses closed out petitioner's pleading.
Miguel Beer Grande:"
In an Order 4 dated 30 April 1986, the Labor Arbiter,
noting that the money claim of complainant Vega in this
case is "not a necessary incident of his employment"
Modified Grande Pasteurization Process
and that said claim is not among those mentioned in
Article 217 of the Labor Code, dismissed the complaint
Present Condition or Procedure
for lack of jurisdiction. However, in a gesture of
At the early stage of beer grande production, several "compassion and to show the government's concern for
cases of beer grande full goods were received by MB as the workingman," the Labor Arbiter also directed
returned beer fulls (RBF). The RBF's were found to have petitioner to pay Mr. Vega the sum of P2,000.00 as
sediments and their contents were hazy. These effects "financial assistance."
Title of Proposal

are usually caused by underpasteurization time and the

pasteurzation units for beer grande were almost similar The Labor Arbiter's order was subsequently appealed by
both parties, private respondent Vega assailing the
to those of the steinie.
dismissal of his complaint for lack of jurisdiction and
petitioner Corporation questioning the propriety of the
Proposed lnnovation (Attach necessary information)
award of "financial assistance" to Mr. Vega. Acting on
In order to minimize if not elienate underpasteurization the appeals, the public respondent National Labor
of beer grande, reduce the speed of the beer grande Relations Commission, on 4 September 1987, rendered
pasteurizer thereby, increasing the pasteurization timea Decision, 5 the dispositive portion of which reads:
and the pasteurization acts for grande beer. In this way,
the self-life (sic) of beer grande will also be increased. 1 WHEREFORE, the appealed Order is hereby set aside
and another udgment entered, order the respondent to
Mr. Vega at that time had been in the employ of pay the complainant the amount of P60,000.00 as
petitioner Corporation for thirteen (1 3) years and wasexplained above.
then holding the position of "mechanic in the Bottling
Department of the SMC Plant Brewery situated in Tipolo, SO ORDERED.
Mandaue City.
In the present Petition for certiorari filed on 4 December
Petitioner Corporation, however, did not find the1987, petitioner Corporation, invoking Article 217 of the
aforequoted proposal acceptable and consequentlyLabor Code, seeks to annul the Decision of public
refused Mr. Vega's subsequent demands for a cash respondent Commission in Case No. RAB-VII-01 70-83
award under the Innovation Program. On 22 February upon the ground that the Labor Arbiter and the
1983., a Complaint 2 (docketed as Case No. RAB-VII-Commission have no jurisdiction over the subject
0170-83) was filed against petitioner Corporation with matter of the case.
Regional Arbitration Branch No. VII (Cebu City) of the

The jurisdiction of Labor Arbiters and the National Labor today. For it cannot be presumed that money claims of
Relations Commission is outlined in Article 217 of the workers which do not arise out of or in connection with
Labor Code, as last amended by Batas Pambansa Blg. their employer-employee relationship, and which would
227 which took effect on 1 June 1982:
therefore fall within the general jurisdiction of the
regular courts of justice, were intended by the
ART. 217.
Jurisdiction of Labor Arbiters and thelegislative authority to be taken away from the
commission. (a) The Labor Arbiters shall have thejurisdiction of the courts and lodged with Labor Arbiters
original and exclusive jurisdiction to hear and decide on an exclusive basis. The Court, therefore, believes
within thirty (30) working days after submission of the and so holds that the money claims of workers" referred
case by the parties for decision, the following cases to in paragraph 3 of Article 217 embraces money claims
involving are workers, whether agricultural or non- which arise out of or in connection with the employeragricultural:
employee relationship, or some aspect or incident of
such relationship. Put a little differently, that money
1.
Unfair labor practice cases;
claims of workers which now fall within the original and
exclusive jurisdiction of Labor Arbiters are those money
2.
Those that workers may file involving wages, claims which have some reasonable causal connection
hours of work and other terms and conditions ofwith the employer-employee relationship.
employment;
Applying the foregoing reading to the present case, we
3.
All money claims of workers, including those note that petitioner's Innovation Program is an
based on non-payment or underpayment of wages, employee incentive scheme offered and open only to
overtime compensation, separation pay and other employees of petitioner Corporation, more specifically
benefits provided by law or appropriate agreement, to employees below the rank of manager. Without the
except claims for employees' compensation, socialexisting employer-employee relationship between the
security, medicare and maternity benefits;
parties here, there would have been no occasion to
consider the petitioner's Innovation Program or the
4.
Cases involving household services; and
submission by Mr. Vega of his proposal concerning beer
grande; without that relationship, private respondent
5.
Cases arising from any violation of Article 265 of Vega's suit against petitioner Corporation would never
this; Code, including questions involving the legality of have arisen. The money claim of private respondent
strikes and lockouts.
Vega in this case, therefore, arose out of or in
connection with his employment relationship with
(b)
The Commission shall have exclusive appellate petitioner.
jurisdiction over all cases decided by Labor Arbiters.
(Emphasis supplied)
The next issue that must logically be confronted is
whether the fact that the money claim of private
While paragraph 3 above refers to "all money claims ofrespondent Vega arose out of or in connection with his
workers," it is not necessary to suppose that the entire employment relation" with petitioner Corporation, is
universe of money claims that might be asserted by enough to bring such money claim within the original
workers against their employers has been absorbed into and exclusive jurisdiction of Labor Arbiters.
the original and exclusive jurisdiction of Labor Arbiters.
In the first place, paragraph 3 should be read not in In Molave Motor Sales, Inc. v. Laron, 7 the petitioner was
isolation from but rather within the context formed bya corporation engaged in the sale and repair of motor
paragraph 1 related to unfair labor practices),vehicles, while private respondent was the sales
paragraph 2 (relating to claims concerning terms and Manager of petitioner. Petitioner had sued private
conditions of employment), paragraph 4 (claims relating respondent for non-payment of accounts which had
to household services, a particular species of employer-arisen from private respondent's own purchases of
employee relations), and paragraph 5 (relating to vehicles and parts, repair jobs on cars personally owned
certain activities prohibited to employees or toby him, and cash advances from the corporation. At the
employers).<re||an1w> It is evident that there is apre-trial in the lower court, private respondent raised
unifying element which runs through paragraphs 1 to 5 the question of lack of jurisdiction of the court, stating
and that is, that they all refer to cases or disputes that because petitioner's complaint arose out of the
arising out of or in connection with an employer-employer-employee relationship, it fell outside the
employee relationship. This is, in other words, a jurisdiction of the court and consequently should be
situation where the rule of noscitur a sociis may be dismissed. Respondent Judge did dismiss the case,
usefully invoked in clarifying the scope of paragraph 3,holding that the sum of money and damages sued for
and any other paragraph of Article 217 of the Laborby the employer arose from the employer-employee
Code, as amended. We reach the above conclusion from relationship and, hence, fell within the jurisdiction of the
an examination of the terms themselves of Article 217, Labor Arbiter and the NLRC. In reversing the order of
as last amended by B.P. Blg. 227, and even though dismissal and requiring respondent Judge to take
earlier versions of Article 217 of the Labor Code cognizance of the case below, this Court, speaking
expressly brought within the jurisdiction of the Labor through Mme. Justice Melencio-Herrera, said:
Arbiters and the NLRC "cases arising from employer
employee relations," 6 which clause was not expressly Before the enactment of BP Blg. 227 on June 1, 1982,
carried over, in printer's ink, in Article 217 as it exists Labor Arbiters, under paragraph 5 of Article 217 of the

Labor Code had jurisdiction over" all other cases arising but by the employer company, unlike Medina. The
from employer-employee relation, unless, expressly important principle that runs through these three (3)
excluded by this Code." Even then, the principle cases is that where the claim to the principal relief
followed by this Court was that, although a controversy sought 9 is to be resolved not by reference to the Labor
is between an employer and an employee, the LaborCode or other labor relations statute or a collective
Arbiters have no jurisdiction if the Labor Code is not bargaining agreement but by the general civil law, the
involved. In Medina vs. Castro-Bartolome, 11 SCRA 597, jurisdiction over the dispute belongs to the regular
604, in negating jurisdiction of the Labor Arbiter, courts of justice and not to the Labor Arbiter and the
although the parties were an employer and two NLRC. In such situations, resolution of the dispute
employees, Mr. Justice Abad Santos stated:
requires expertise, not in labor management relations
nor in wage structures and other terms and conditions
The pivotal question to Our mind is whether or not the of employment, but rather in the application of the
Labor Code has any relevance to the reliefs sought bygeneral civil law. Clearly, such claims fall outside the
the plaintiffs. For if the Labor Code has no relevance, area of competence or expertise ordinarily ascribed to
any discussion concerning the statutes amending it and Labor Arbiters and the NLRC and the rationale for
whether or not they have retroactive effect is granting jurisdiction over such claims to these agencies
unnecessary.
disappears.
It is obvious from the complaint that the plaintiffs haveApplying the foregoing to the instant case, the Court
not alleged any unfair labor practice. Theirs is a simple notes that the SMC Innovation Program was essentially
action for damages for tortious acts allegedlyan invitation from petitioner Corporation to its
committed by the defendants. Such being the case, the employees to submit innovation proposals, and that
governing statute is the Civil Code and not the Labor petitioner Corporation undertook to grant cash awards
Code. It results that the orders under review are basedto employees who accept such invitation and whose
on a wrong premise.
innovation suggestions, in the judgment of the
Corporation's officials, satisfied the standards and
And in Singapore Airlines Limited v. Pao, 122 SCRA requirements of the Innovation Program 10 and which,
671, 677, the following was said:
therefore, could be translated into some substantial
benefit to the Corporation. Such undertaking, though
Stated differently, petitioner seeks protection under the unilateral in origin, could nonetheless ripen into an
civil laws and claims no benefits under the Labor Code. enforceable contractual (facio ut des) 11 obligation on
The primary relief sought is for liquidated damages forthe part of petitioner Corporation under certain
breach of a contractual obligation. The other items circumstances. Thus, whether or not an enforceable
demanded are not labor benefits demanded by workerscontract, albeit implied arid innominate, had arisen
generally taken cognizance of in labor disputes, such as between petitioner Corporation and private respondent
payment of wages, overtime compensation or Vega in the circumstances of this case, and if so,
separation pay. The items claimed are the naturalwhether or not it had been breached, are preeminently
consequences flowing from breach of an obligation, legal questions, questions not to be resolved by
intrinsically a civil dispute.
referring to labor legislation and having nothing to do
with wages or other terms and conditions of
In the case below, PLAINTIFF had sued for monies employment, but rather having recourse to our law on
loaned to DEFENDANT, the cost of repair jobs made on contracts.
his personal cars, and for the purchase price of vehicles
and parts sold to him. Those accounts have no WEREFORE, the Petition for certiorari is GRANTED. The
relevance to the Labor Code. The cause of action was decision dated 4 September 1987 of public respondent
one under the civil laws, and it does not breach any National Labor Relations Commission is SET ASIDE and
provision of the Labor Code or the contract of the complaint in Case No. RAB-VII-0170-83 is hereby
employment of DEFENDANT. Hence the civil courts, not DISMISSED, without prejudice to the right of private
the Labor Arbiters and the NLRC should have respondent Vega to file a suit before the proper court, if
jurisdiction. 8
he so desires. No pronouncement as to costs.
It seems worth noting that Medina v. Castro-Bartolome, SO ORDERED.
referred to in the above excerpt, involved a claim for
damages by two (2) employees against the employer
company and the General Manager thereof, arising from
the use of slanderous language on the occasion when
the General Manager fired the two (2) employees (the
Plant General Manager and the Plant Comptroller). The
Court treated the claim for damages as "a simple action
for damages for tortious acts" allegedly committed by
private respondents, clearly if impliedly suggesting that
the claim for damages did not necessarily arise out of or
in connection with the employer-employee relationship.
Singapore Airlines Limited v. Pao, also cited in Molave,
involved a claim for liquidated damages not by a worker

G.R. No. 185567

October 20, 2010

ARSENIO Z. LOCSIN, Petitioner,

vs.
NISSAN LEASE PHILS. INC.
Respondents.
DECISION

and

LUIS

On August 16, 2007, Locsin submitted his opposition to

the motion to dismiss, maintaining his position that he
is an employee of NCLPI.
On March 10, 2008, Labor Arbiter Concepcion issued an
BANSON, Order denying the Motion to Dismiss, holding that her
office acquired "jurisdiction to arbitrate and/or decide
the instant complaint finding extant in the case an
employer-employee relationship."11

BRION, J.:

NCLPI, on June 3, 2008, elevated the case to the CA

through a Petition for Certiorari under Rule 65 of the
Through a petition for review on certiorari,1 petitioner Rules of Court.12 NCLPI raised the issue on whether the
Arsenio Z. Locsin (Locsin) seeks the reversal of the Labor Arbiter committed grave abuse of discretion by
Decision2 of the Court of Appeals (CA) dated August 28, denying the Motion to Dismiss and holding that her
2008,3 in "Arsenio Z. Locsin v. Nissan Car Lease Phils., office had jurisdiction over the dispute.
Inc. and Luis Banson," docketed as CA-G.R. SP No.
103720 and the Resolution dated December 9, 2008,4The CA Decision - Locsin was a corporate officer; the
denying Locsins Motion for Reconsideration. The issue of his removal as EVP/Treasurer is an intraassailed ruling of the CA reversed and set aside the corporate dispute under the RTCs jurisdiction.
Decision5 of the Hon. Labor Arbiter Thelma Concepcion
(Labor Arbiter Concepcion) which denied Nissan LeaseOn August 28, 2008,13 the CA reversed and set aside
Phils. Inc.s (NCLPI) and Luis T. Bansons (Banson)the Labor Arbiters Order denying the Motion to Dismiss
Motion to Dismiss.
and ruled that Locsin was a corporate officer.
THE FACTUAL ANTECEDENTS

Citing PD 902-A, the CA defined "corporate officers as

those officers of a corporation who are given that
On January 1, 1992, Locsin was elected Executive Vice character either by the Corporation Code or by the
President and Treasurer (EVP/Treasurer) of NCLPI. As corporations by-laws." In this regard, the CA held:
EVP/Treasurer, his duties and responsibilities included:
(1) the management of the finances of the company; (2) Scrutinizing the records, We hold that petitioners
carrying out the directions of the President and/or thesuccessfully discharged their onus of establishing that
Board of Directors regarding financial management; and private respondent was a corporate officer who held the
(3) the preparation of financial reports to advise theposition of Executive Vice-President/Treasurer as
officers and directors of the financial condition of provided in the by-laws of petitioner corporation and
NCLPI.6 Locsin held this position for 13 years, having that he held such position by virtue of election by the
been re-elected every year since 1992, until January 21, Board of Directors.
2005, when he was nominated and elected Chairman of
NCLPIs Board of Directors.7
That private respondent is a corporate officer cannot be
disputed.
The
position
of
Executive
ViceOn August 5, 2005, a little over seven (7) months afterPresident/Treasurer is specifically included in the roster
his election as Chairman of the Board, the NCLPI Board of officers provided for by the (Amended) By-Laws of
held a special meeting at the Manila Polo Club. One of petitioner corporation, his duties and responsibilities, as
the items of the agenda was the election of a new set of well as compensation as such officer are likewise set
officers. Unfortunately, Locsin was neither re-elected forth therein.14
Chairman nor reinstated to his previous position as
EVP/Treasurer.8
Article 280 of the Labor Code, the receipt of salaries by
Locsin, SSS deductions on that salary, and the element
Aggrieved, on June 19, 2007, Locsin filed a complaint for of control in the performance of work duties indicia
illegal dismissal with prayer for reinstatement, paymentused by the Labor Arbiter to conclude that Locsin was a
of backwages, damages and attorneys fees before theregular employee were held inapplicable by the CA.15
Labor Arbiter against NCLPI and Banson, who was then The CA noted the Labor Arbiters failure to address the
President of NCLPI.9
fact that the position of EVP/Treasurer is specifically
enumerated as an "office" in the corporations byThe Compulsory Arbitration Proceedings before thelaws.16
Labor Arbiter.
Further, the CA pointed out Locsins failure to "state any
On July 11, 2007, instead of filing their position paper,circumstance by which NCLPI engaged his services as a
NCLPI and Banson filed a Motion to Dismiss,10 on thecorporate officer that would make him an employee."
ground that the Labor Arbiter did not have jurisdiction The CA found, in this regard, that Locsins assumption
over the case since the issue of Locsins removal as and retention as EVP/Treasurer was based on his
EVP/Treasurer involves an intra-corporate dispute.
election and subsequent re-elections from 1992 until
2005. Further, he performed only those functions that
were "specifically set forth in the By-Laws or required of
him by the Board of Directors.17"

With respect to the suit Locsin filed with the Labor Procedurally, Locsin essentially submits that NCLPI
Arbiter, the CA held that:
wrongfully filed a petition for certiorari before the CA, as
the latters remedy is to proceed with the arbitration,
Private respondent, in belatedly filing this suit before and to appeal to the NLRC after the Labor Arbiter shall
the Labor Arbiter, questioned the legality of hishave ruled on the merits of the case. Locsin cites, in this
"dismissal" but in essence, he raises the issue of regard, Rule V, Section 6 of the Revised Rules of the
whether or not the Board of Directors had the authorityNational Labor Relations Commission (NLRC Rules),
to remove him from the corporate office to which he which provides that a denial of a motion to dismiss by
was elected pursuant to the By-Laws of the petitioner the Labor Arbiter is not subject to an appeal. Locsin also
corporation. Indeed, had private respondent been an argues that even if the Labor Arbiter committed grave
ordinary employee, an election conducted by the Board abuse of discretion in denying the NCLPI motion, a
of Directors would not have been necessary to remove special civil action for certiorari, filed with the CA was
him as Executive Vice-President/Treasurer. However, innot the appropriate remedy, since this was a breach of
an obvious attempt to preclude the application of the doctrine of exhaustion of administrative remedies.
settled jurisprudence that corporate officers whose
position is provided in the by-laws, their election, Substantively, Locsin submits that he is a regular
removal or dismissal is subject to Section 5 of P.D. No. employee of NCLPI since - as he argued before the
902-A (now R.A. No. 8799), private respondent would Labor Arbiter and the CA - his relationship with the
even claim in his Position Paper, that since his company meets the "four-fold test."
responsibilities were akin to that of the companys
Executive Vice-President/Treasurer, he was "hired under First, Locsin contends that NCLPI had the power to
the pretext that he was being elected into said post.18 engage his services as EVP/Treasurer. Second, he
[Emphasis supplied.]
received regular wages from NCLPI, from which his SSS
and Philhealth contributions, as well as his withholding
As a consequence, the CA concluded that Locsin does taxes were deducted. Third, NCLPI had the power to
not have any recourse with the Labor Arbiter or the terminate his employment.22 Lastly, Nissan had control
NLRC since the removal of a corporate officer, whether over the manner of the performance of his functions as
elected or appointed, is an intra-corporate controversyEVP/Treasurer, as shown by the 13 years of faithful
over which the NLRC has no jurisdiction.19 Instead, execution of his job, which he carried out in accordance
according to the CA, Locsins complaint for "illegal with the standards and expectations set by NCLPI.23
dismissal" should have been filed in the Regional Trial Further, Locsin maintains that even after his election as
Court (RTC), pursuant to Rule 6 of the Interim Rules of Chairman, he essentially performed the functions of
Procedure Governing Intra-Corporate Controversies.20 EVP/Treasurer

handling
the
financial
and
administrative operations of the Corporation thus
Finally, the CA addressed Locsins invocation of Article 4 making him a regular employee.24
of the Labor Code. Dismissing the application of the
provision, the CA cited Dean Cesar Villanueva of the Under these claimed facts, Locsin concludes that the
Ateneo School of Law, as follows:
Labor Arbiter and the NLRC not the RTC (as NCLPI
posits) has jurisdiction to decide the controversy.
x x x the non-coverage of corporate officers from the Parenthetically, Locsin clarifies that he does not dispute
security of tenure clause under the Constitution is now the validity of his election as Chairman of the Board on
well-established principle by numerous decisions January 1, 2005. Instead, he theorizes that he never lost
upholding such doctrine under the aegis of the 1987 his position as EVP/Treasurer having continuously
Constitution in the face of contemporary decisions of performed the functions appurtenant thereto.25 Thus,
the same Supreme Court likewise confirming thathe questions his "unceremonious removal" as
security of tenure covers all employees or workers EVP/Treasurer during the August 5, 2005 special Board
including managerial employees.21
meeting.
THE PETITIONERS ARGUMENTS

THE RESPONDENTS ARGUMENTS

Failing to obtain a reconsideration of the CAs decision, It its April 17, 2009 Comment,26 Nissan prays for the
Locsin filed the present petition on January 28, 2009, denial of the petition for lack of merit. Nissan submits
raising the following procedural and substantive issues: that the CA correctly ruled that the Labor Arbiter does
not have jurisdiction over Locsins complaint for illegal
(1) Whether the CA has original jurisdiction to review dismissal. In support, Nissan maintains that Locsin is a
decision of the Labor Arbiter under Rule 65?
corporate officer and not an employee. In addressing
the procedural defect Locsin raised, Nissan brushes the
(2) Whether he is a regular employee of NCLPI under issue aside, stating that (1) this issue was belatedly
the definition of Article 280 of the Labor Code? and
raised in the Motion for Reconsideration, and that (2) in
any case, Rule VI, Section 2(1) of the NLRC does not
(3) Whether Locsins position as Executive Vice- apply since only appealable decisions, resolutions and
President/Treasurer makes him a corporate officerorders are covered under the rule.
thereby excluding him from the coverage of the Labor
Code?
THE COURTS RULING

x x x The NLRC rule proscribing appeal from a denial of

a motion to dismiss is similar to the general rule
observed in civil procedure that an order denying a
At the outset, we stress that there are two (2) important motion to dismiss is interlocutory and, hence, not
considerations in the final determination of this case. appealable until final judgment or order is rendered [1
On the one hand, Locsin raises a procedural issue that, Feria and Noche, Civil Procedure Annotated 453 (2001
if proven correct, will require the Court to dismiss the ed.)]. The remedy of the aggrieved party in case of
instant petition for using an improper remedy. On the denial of the motion to dismiss is to file an answer and
other hand, there is the substantive issue that will be interpose, as a defense or defenses, the ground or
disregarded if a strict implementation of the rules of grounds relied upon in the motion to dismiss, proceed
procedure is upheld.
to trial and, in case of adverse judgment, to elevate the
entire case by appeal in due course [Mendoza v. Court
Prefatorily, we agree with Locsins submission that the of Appeals, G.R. No. 81909, September 5, 1991, 201
NCLPI incorrectly elevated the Labor Arbiters denial ofSCRA 343]. In order to avail of the extraordinary writ of
the Motion to Dismiss to the CA. Locsin is correct in certiorari, it is incumbent upon petitioner to establish
positing that the denial of a motion to dismiss is that the denial of the motion to dismiss was tainted with
unappealable. As a general rule, an aggrieved partys grave abuse of discretion. [Macawiwili Gold Mining and
proper recourse to the denial is to file his position Development Co., Inc. v. Court of Appeals, G.R. No.
paper, interpose the grounds relied upon in the motion115104, October 12, 1998, 297 SCRA 602]
to dismiss before the labor arbiter, and actively
participate in the proceedings. Thereafter, the labor In so citing Feria and Noche, the Court was referring to
arbiters decision can be appealed to the NLRC, not to Sec. 1 (b), Rule 41 of the Rules of Court, which
the CA.
specifically enumerates interlocutory orders as one of
the court actions that cannot be appealed. In the same
As a rule, we strictly adhere to the rules of procedurerule, as amended by A.M. No. 07-7-12-SC, the aggrieved
and do everything we can, to the point of penalizing party is allowed to file an appropriate special civil action
violators, to encourage respect for these rules. We take under Rule 65. The latter rule, however, also contains
exception to this general rule, however, when a strict limitations for its application, clearly outlined in its
implementation of these rules would cause substantial Section 1 which provides:
injustice to the parties.
Section 1. Petition for certiorari.
We see it appropriate to apply the exception to this case
for the reasons discussed below; hence, we are When any tribunal, board or officer exercising judicial or
compelled to go beyond procedure and rule on the quasi-judicial functions has acted without or in excess of
merits of the case. In the context of this case, we see its or his jurisdiction, or with grave abuse of discretion
sufficient justification to rule on the employer-employeeamounting to lack or excess of jurisdiction, and there is
relationship issue raised by NCLPI, even though the no appeal, or any plain, speedy, and adequate remedy
Labor Arbiters interlocutory order was incorrectly in the ordinary course of law, a person aggrieved
brought to the CA under Rule 65.
thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that
The NLRC Rules are clear: the denial by the labor arbiter judgment be rendered annulling or modifying the
of the motion to dismiss is not appealable because the proceedings of such tribunal, board or officer, and
denial is merely an interlocutory order.
granting such incidental reliefs as law and justice may
require.
In Metro Drug v. Metro Drug Employees,27 we
definitively stated that the denial of a motion to dismiss In the labor law setting, a plain, speedy and adequate
by a labor arbiter is not immediately appealable.28
remedy is still open to the aggrieved party when a labor
arbiter denies a motion to dismiss. This is Article 223 of
We similarly ruled in Texon Manufacturing v. Millena,29Presidential Decree No. 442, as amended (Labor Code),
in Sime Darby Employees Association v. National Labor 34 which states:
Relations
Commission30
and
in
Westmont
Pharmaceuticals v. Samaniego.31 In Texon, we ART. 223. APPEAL
specifically said:
Decisions, awards, or orders of the Labor Arbiter are
The Order of the Labor Arbiter denying petitioners final and executory unless appealed to the Commission
motion to dismiss is interlocutory. It is well-settled thatby any or both parties within ten (10) calendar days
a denial of a motion to dismiss a complaint is an from receipt of such decisions, awards, or orders. Such
interlocutory order and hence, cannot be appealed,appeal may be entertained only on any of the following
until a final judgment on the merits of the case isgrounds:
rendered. [Emphasis supplied.]32
(a) If there is prima facie evidence of abuse of discretion
and indicated the appropriate recourse in Metro Drug, on the part of the Labor Arbiter; x x x [Emphasis
as follows:33
supplied.]
We resolve to deny the petition for lack of merit.

Pursuant to this Article, we held in Metro Drug (citing Air From this perspective, the CA clearly erred in the
Services Cooperative, et al. v. Court of Appeals35) that application of the procedural rules by disregarding the
the NLRC is clothed with sufficient authority to correct relevant provisions of the NLRC Rules, as well as the
any claimed "erroneous assumption of jurisdiction" byrequirements for a petition for certiorari under the Rules
labor arbiters:
of Court. To reiterate, the proper action of an aggrieved
party faced with the labor arbiters denial of his motion
In Air Services Cooperative, et al. v. The Court of to dismiss is to submit his position paper and raise
Appeals, et al., a case where the jurisdiction of the labor therein the supposed lack of jurisdiction. The aggrieved
arbiter was put in issue and was assailed through a party cannot immediately appeal the denial since it is
petition for certiorari, prohibition and annulment ofan interlocutory order; the appropriate remedial
judgment before a regional trial court, this Court had recourse is the procedure outlined in Article 223 of the
the opportunity to expound on the nature of appeal as Labor Code, not a petition for certiorari under Rule 65.
embodied in Article 223 of the Labor Code, thus:
A strict implementation of the NLRC Rules and the Rules
x x x Also, while the title of the Article 223 seems to of Court would cause injustice to the parties because
provide only for the remedy of appeal as that term isthe Labor Arbiter clearly has no jurisdiction over the
understood in procedural law and as distinguished from present intra-corporate dispute.
the office of certiorari, nonetheless, a closer reading
thereof reveals that it is not as limited as understood by Our ruling in Mejillano v. Lucillo36 stands for the
the petitioners x x x.
proposition that we should strictly apply the rules of
procedure. We said:
Abuse of discretion is admittedly within the ambit of
certiorari and its grant of review thereof to the NLRCTime and again, we have ruled that procedural rules do
indicates the lawmakers intention to broaden the not exist for the convenience of the litigants. Rules of
meaning of appeal as that term is used in the Code. For Procedure exist for a purpose, and to disregard such
this reason, petitioners cannot argue now that the NLRC rules in the guise of liberal construction would be to
is devoid of any corrective power to rectify a supposed defeat such purpose. Procedural rules were established
erroneous assumption of jurisdiction by the Laborprimarily to provide order to and enhance the efficiency
Arbiter x x x. [Air Services Cooperative, et al. v. The of our judicial system. [Emphasis supplied.]
Court of Appeals, et al. G.R. No. 118693, 23 July 1998,
293 SCRA 101]
An exception to this rule is our ruling in Lazaro v. Court
of Appeals37 where we held that the strict enforcement
Since the legislature had clothed the NLRC with the of the rules of procedure may be relaxed in
appellate authority to correct a claimed "erroneous exceptionally meritorious cases:
assumption of jurisdiction" on the part of the labor
arbiter a case of grave abuse of discretion - the x x x Procedural rules are not to be belittled or
remedy availed of by petitioner in this case is patently dismissed simply because their non-observance may
erroneous as recourse in this case is lodged, under thehave resulted in prejudice to a party's substantive
law, with the NLRC.
rights. Like all rules, they are required to be followed
except only for the most persuasive of reasons when
In Metro Drug, as in the present case, the defect they may be relaxed to relieve a litigant of an injustice
imputed through the NLCPI Motion to Dismiss is the not
commensurate
with
the
degree
of
his
labor arbiters lack of jurisdiction since Locsin is alleged thoughtlessness in not complying with the procedure
to be a corporate officer, not an employee. Parallelisms prescribed. The Court reiterates that rules of procedure,
between the two cases is undeniable, as they are especially those prescribing the time within which
similar on the following points: (1) in Metro Drug, as in certain acts must be done, "have oft been held as
this case, the Labor Arbiter issued an Order denying the absolutely indispensable to the prevention of needless
Motion to Dismiss by one of the parties; (2) the basis of delays and to the orderly and speedy discharge of
the Motion to Dismiss is also the alleged lack of business. x x x The reason for rules of this nature is
jurisdiction by the Labor Arbiter to settle the dispute; because the dispatch of business by courts would be
and (3) dissatisfied with the Order of the Labor Arbiter, impossible, and intolerable delays would result, without
the aggrieved party likewise elevated the case to the rules governing practice x x x. Such rules are a
CA via Rule 65.
necessary incident to the proper, efficient and orderly
discharge of judicial functions." Indeed, in no uncertain
The similarities end there, however. Unlike in theterms, the Court held that the said rules may be relaxed
present case, the CA denied the petition for certiorari only in exceptionally meritorious cases. [Emphasis
and the subsequent Motion for Reconsideration in Metro supplied.]
Drug; the CA correctly found that the proper appellate
mechanism was an appeal to the NLRC and not a Whether a case involves an exceptionally meritorious
petition for certiorari under Rule 65. In the present case, circumstance can be tested under the guidelines we
the CA took a different position despite our clear ruling established in Sanchez v. Court of Appeals,38 as
in Metro Drug, and allowed, not only the use of Rule 65, follows:
but also ruled on the merits.
Aside from matters of life, liberty, honor or property
which would warrant the suspension of the Rules of the

most mandatory character and an examination andOfficers of the Corporation shall be appointed by the
review by the appellate court of the lower courtsBoard upon the recommendation of the President.
findings of fact, the other elements that should be
considered are the following: (a) the existence of special x x x x
or compelling circumstances, (b) the merits of the case,
(c) a cause not entirely attributable to the fault or Section 4. Executive Vice-President/Treasurer The
negligence of the party favored by the suspension of Executive Vice-President/Treasurer shall have such
the rules, (d) a lack of any showing that the review powers and perform such duties as are prescribed by
sought is merely frivolous and dilatory, and (e) the these By-Laws, and as may be required of him by the
other party will not be unjustly prejudiced thereby. Board of Directors. As the concurrent Treasurer of the
[Emphasis supplied.]
Corporation, he shall have the charge of the funds,
securities, receipts, and disbursements of the
Under these standards, we hold that exceptional Corporation. He shall deposit, or cause to be deposited,
circumstances exist in the present case to merit the the credit of the Corporation in such banks or trust
relaxation of the applicable rules of procedure.
companies, or with such banks of other depositories, as
the Board of Directors may from time to time designate.
Due to existing exceptional circumstances, the ruling on He shall tender to the President or to the Board of
the merits that Locsin is an officer and not an employee Directors whenever required an account of the financial
of Nissan must take precedence over procedural condition of the corporation and of all his transactions
considerations.
as Treasurer. As soon as practicable after the close of
each fiscal year, he shall make and submit to the Board
We arrived at the conclusion that we should go beyond of Directors a like report of such fiscal year. He shall
the procedural rules and immediately take a look at thekeep correct books of account of all the business and
intrinsic merits of the case based on several transactions of the Corporation.
considerations.
In Okol v. Slimmers World International,40 citing Tabang
First, the parties have sufficiently ventilated their v. National Labor Relations Commission,41 we held that
positions
on
the
disputed
employer-employee
relationship and have, in fact, submitted the matter for
the CAs consideration.
x x x an "office" is created by the charter of the
corporation and the officer is elected by the directors or
Second, the CA correctly ruled that no employer- stockholders. On the other hand, an "employee" usually
employee relationship exists between Locsin and occupies no office and generally is employed not by
Nissan.
action of the directors or stockholders but by the
managing officer of the corporation who also
Locsin was undeniably Chairman and President, and wasdetermines the compensation to be paid to such
elected to these positions by the Nissan board pursuant employee. [Emphasis supplied.]
to its By-laws.39 As such, he was a corporate officer,
not an employee. The CA reached this conclusion by In this case, Locsin was elected by the NCLPI Board, in
relying on the submitted facts and on Presidential accordance with the Amended By-Laws of the
Decree 902-A, which defines corporate officers ascorporation. The following factual determination by the
"those officers of a corporation who are given that CA is elucidating:
character either by the Corporation Code or by the
corporations by-laws." Likewise, Section 25 of BatasMore important, private respondent failed to state any
Pambansa Blg. 69, or the Corporation Code of the such "circumstance" by which the petitioner corporation
Philippines (Corporation Code) provides that corporate "engaged his services" as corporate officer that would
officers are the president, secretary, treasurer and such make him an employee. In the first place, the Viceother officers as may be provided for in the by-laws.
President/Treasurer was elected on an annual basis as
provided in the By-Laws, and no duties and
Third. Even as Executive Vice-President/Treasurer,responsibilities were stated by private respondent which
Locsin already acted as a corporate officer because the he discharged while occupying said position other than
position of Executive Vice-President/Treasurer isthose specifically set forth in the By-Laws or required of
provided for in Nissans By-Laws. Article IV, Section 4 of him by the Board of Directors. The unrebutted fact
these By-Laws specifically provides for this position, as remains that private respondent held the position of
follows:
Executive
Vice-President/Treasurer
of
petitioner
corporation, a position provided for in the latters byARTICLE IV
laws, by virtue of election by the Board of Directors, and
Officers
has
functioned
as
such
Executive
VicePresident/Treasurer pursuant to the provisions of the
Section 1. Election and Appointment The Board of said By-Laws. Private respondent knew very well that he
Directors at their first meeting, annually thereafter, was simply not re-elected to the said position during the
shall elect as officers of the Corporation a Chairman of August 5, 2005 board meeting, but he had objected to
the
Board,
a
President,
an
Executive
Vice- the election of a new set of officers held at the time
President/Treasurer, a Vice-President/General Manager upon the advice of his lawyer that he cannot be
and a Corporate Secretary. The other Senior Operating "terminated"
or
replaced
as
Executive
Vice-

President/Treasurer
security.42

as

he

had

attained

tenurial regional trial courts the SECs jurisdiction over all cases
listed in Section 5 of PD 902-A:

We fully agree with this factual determination which we5.2. The Commissions jurisdiction over all cases
find to be sufficiently supported by evidence. Weenumerated under Section 5 of Presidential Decree No.
likewise rule, based on law and established902-A is hereby transferred to the Courts of general
jurisprudence, that Locsin, at the time of his severance jurisdiction or the appropriate Regional Trial Court.
from NCLPI, was the latters corporate officer.
[Emphasis supplied.]
a. The Question of Jurisdiction

b. Precedence of Substantive Merits;

Primacy of Element of Jurisdiction

Given Locsins status as a corporate officer, the RTC, not

the Labor Arbiter or the NLRC, has jurisdiction to hear Based on the above jurisdictional considerations, we
the legality of the termination of his relationship with would be forced to remand the case to the Labor Arbiter
Nissan. As we also held in Okol, a corporate officers for further proceedings if we were to dismiss the
dismissal from service is an intra-corporate dispute:
petition outright due to the wrongful use of Rule 65.44
We cannot close our eyes, however, to the factual and
In a number of cases [Estrada v. National Labor legal reality, established by evidence already on record,
Relations Commission, G.R. No. 106722, 4 October that Locsin is a corporate officer whose termination of
1996, 262 SCRA 709; Lozon v. National Labor Relations relationship is outside a labor arbiters jurisdiction to
Commission, 310 Phil. 1 (1995); Espino v. National rule upon.
Labor Relations Commission, 310 Phil. 61 (1995);
Fortune Cement Corporation v. National Labor RelationsUnder these circumstances, we have to give
Commission, G.R. No. 79762, 24 January 1991, 193 precedence to the merits of the case, and primacy to
SCRA 258], we have held that a corporate officers the element of jurisdiction. Jurisdiction is the power to
dismissal is always a corporate act, or an intra-hear and rule on a case and is the threshold element
corporate controversy which arises between a that must exist before any quasi-judicial officer can act.
stockholder and a corporation.43 [Emphasis supplied.] In the context of the present case, the Labor Arbiter
does not have jurisdiction over the termination dispute
so that the RTC should exercise jurisdiction based on the Locsin brought, and should not be allowed to continue
following legal reasoning:
to act on the case after the absence of jurisdiction has
become obvious, based on the records and the law. In
Prior to its amendment, Section 5(c) of Presidential more practical terms, a contrary ruling will only cause
Decree No. 902-A (PD 902-A) provided that intra- substantial delay and inconvenience as well as
corporate disputes fall within the jurisdiction of theunnecessary expenses, to the point of injustice, to the
Securities and Exchange Commission (SEC):
parties. This conclusion, of course, does not go into the
merits of termination of relationship and is without
Sec. 5. In addition to the regulatory and adjudicative prejudice to the filing of an intra-corporate dispute on
functions of the Securities and Exchange Commission this point before the appropriate RTC.
over corporations, partnerships and other forms of
associations registered with it as expressly grantedWHEREFORE, we DISMISS the petitioners petition for
under existing laws and decrees, it shall have original review on certiorari, and AFFIRM the Decision of the
and exclusive jurisdiction to hear and decide cases Court of Appeals, in CA-G.R. SP No. 103720,
involving:
promulgated on August 28, 2008, as well as its
Resolution of December 9, 2008, which reversed and
xxxx
set aside the March 10, 2008 Order of Labor Arbiter
Concepcion in NLRC NCR Case No. 00-06-06165-07. This
c) Controversies in the election or appointments of Decision is without prejudice to petitioner Locsins
directors, trustees, officers or managers of suchavailable recourse for relief through the appropriate
corporations, partnerships or associations.
remedy in the proper forum.
Subsection 5.2, Section 5 of Republic Act No. 8799, No pronouncement as to costs.
which took effect on 8 August 2000, transferred to
SO ORDERED.