LABOR SD
August 28, 2018
Tamonte v HSBC
G.R. No. 166970 | Aug 17 2011 | Peralta, J. | Group 2 Gueco
Topic: Labor dispute v civil dispute
Petitioners: Ana and Edilberto Tamonte
Respondents: HSBC, HSBC SRP, Alejandro Custodio, RTC Clerk of Court & Ex-
Officio Sheriff, and Sheriff in Charge Clemente Boloy & Benedicto G. Hebron
Facts
 Ana Tamonte  regular employee of the Hongkong and Shanghai
Banking Corporation Ltd. (HSBC) and a member of the HSBC Staff
Retirement Plan (HSBC SRP)
 HSBC SRP  established through its Board of Trustees for the purpose
of providing retirement, disability and loan benefits to all its regular
employees
 Ana applied for a housing loan with the HSBC SRP
o To secure loan, Ana and HSBC SRP entered into a real estate
mortgage contract where petitioners mortgaged their property
covered by TCT No. 17169 of the Register of Deeds of
Paranaque
o The monthly amortizations of the loan were paid by Ana through
automatic payroll deductions
 January 1993  a labor dispute arose between the bank and the
employees’ union (Ana was a member)
o Culminated in a strike staged on December 22, 1993
o Majority of the bank employees (including Ana) were dismissed
from service for abandonment
 Ana & other dismissed employees filed with the Labor Arbiter an illegal
dismissal case against the bank
o LA declared the strike illegal
o Labor case reached SC on a petition for review filed by the
employees against the bank
 In a letter dated November 28, 1994 addressed to Ana, HSBC SRP
demanded payment of her unpaid accounts as of November 25, 1994,
which included her housing loan
 Petitioners failed to settle their obligation, thus HSBC SRP effected the
foreclosure of their property subject of the real estate mortgage
o Foreclosure proceeding was conducted on May 28, 1996 with
Alejandro L. Custodio emerging as the highest bidder
 October 29, 1997  petitioners filed with RTC Paranaque a Complaint
for Annulment of the Entire Proceedings w/ Prayer for Damages, TRO,
Preliminary and Final Injunction etc against the Bank & Custodio
 HSBC SRP and Custodio filed a Motion to Dismiss w/ Opposition on the
ground that the complaint stated no cause of action
o Extrajudicial foreclosure was proper and regular as the full
amount of the loan had accelerated after Ana ceased to be an
employee of the bank
o Ana’s continued employment with the bank was the sort of
security/guaranty for her loan
o Petitioners had not paid since December 1993
 Respondents argued that they can proceed with the foreclosure of
the mortgaged property pending the labor dispute, since the
foreclosure proceeding was civil in nature, which arose from a
purely civil obligation and pursuant to its rights under the mortgage
contract
 Petitioners filed their Consolidated Opposition  stated that Ana’s
continued employment w/ the bank was never meant to secure the
housing loan
o Did not deny that no amortization payments were made after
December 1993, but claimed that it was not the cause of the
foreclosure action; rather, it was Ana’s termination
 RTC dismissed the complaint; CA affirmed the RTC decision
Issue:
W/N respondent HSBC SRP had the right to withdraw the loan benefit from
petitioner Ana, considering that the issue of her employment status has not yet
been resolved with finality as the labor case is still pending with the SC – YES
Held
 Petitioners had not paid a single monthly amortization after Ana’s
termination from her employment in December 1993
o Despite receipt of demand letter dated November 28, 1994, still
failed to settle
 There is no basis for petitioners’ claim that the default which led the
respondent to foreclose the mortgaged property was mainly due to Ana’s
termination
 HSBC SRP, as mortgagee, resorted to extrajudicial foreclosure of
petitioners’ mortgaged property pursuant to the provisions of their real
estate mortgage contract
o VI. H. In the event that the MORTGAGOR(S) should fail to pay
the sums of money secured by this mortgage x x x the
MORTGAGEE shall have the right, at his election, to foreclose
this mortgage and sell the mortgage property extrajudicially
 Foreclosure is but a necessary consequence of non-payment of
mortgage indebtedness
 Petitioners argue that the resolution of the validity of Ana’s termination is
a prejudicial question; Court does not agree
o Petitioners were already in default in the payment of their loan
obligations; thus, foreclosure of the mortgage property was
resorted to by respondents.
o Respondents were only enforcing the civil obligation of
petitioners under their mortgage contract. There is no labor
aspect involved in the enforcement of petitioners' obligation.
 Nestle Philippines Inc v NLRC  Nestle's demand for payment of the
private respondents' amortizations on their car loans, or, in the
alternative, the return of the cars to the company, is not a labor, but a
civil, dispute. It involves debtor-creditor relations, rather than employee-
employer relations. The terms of the car loan agreements are not in issue
 in the labor case. The rights and obligations of the parties under those
contracts may be enforced by a separate civil action in the regular courts,
not in the NLRC.
 HSBC v Sps Broqueza  the enforcement of a loan agreement involves
debtor-creditor relations founded on contracts and does not in any way
concern employee relations.
To reiterate, respondent HSBC SRP and petitioners agreed in their mortgage
contract that HSBC SRP as mortgagee was authorized to foreclose the mortgaged
property in the event that the petitioners-mortgagors failed to pay the sum of
money secured by the mortgage. After petitioners failed to pay upon demand, the
civil obligation of the petitioners under the mortgage contract must be enforced to
protect HSBC SRP's interest in the housing loan. The dismissal of petitioners'
complaint for the annulment of the foreclosure proceedings is, therefore, valid and
proper.
Yusen Air & Sea Services v Isagani Villamor
Petitioner: Yusen Air & Sea Services (Yusen)
Repondent: Isagani Villamor (Villamor)
Garcia, J | Group 3
Facts:
1. Petitioner is a corporation engaged in the business of freight forwarding.
2. Petitioner hired respondent as branch manager in Cebu but was later
changed to Division manager where he stayed until his resignation.
3. Respondent immediately started working for Aspac International, a
corporation engaged in the same line of work as Petitioner.
4. Petitioner filed a complaint for injuction and damages with a prayer for
temporary restraining order claiming that Respondent is in violation of
the signed contract Respondent and Petitioner entered which indluded a
stipulation in case of conflict of interest:
a. “No employee may engage in any business or undertaking that
is directly or indirectly in competition with that of the company...”
b. “… That same provision will be implemented for a period of two
years from the date of an employees resignation, termination or
separation from the company”
5. Petitioner prayed for judgment enjoining respondent from bruther
pursuing his work for Aspac and clamed it was entitled to damanges
awarding it P2,000,000 as actual, P300,000 as exemplary, and another
P300,000 as attorney fees.
6. On March 2002 respondent filed a case for illegal dismissal before the
NLRC.
7. Meanwhile, Respondent filed a motion to dismiss, in response to
petitioner’s complaint stating that the RTC had no jurisdiction over the
subject matter of the case as the matter was between a employer-
employee relationship as it arose out of a violation of a employee
handbook.
8. RTC ruled in favor of respondent, hence this petition.
Issues: WoN RTC has jurisdiction over the case (Yes)
Ruling:
Action for Injuction is moot
1. Firstly, we take note of the fact that the 2-year prohibition against
employment in a competing company has already expired. Thus the
seeking of injunction has become moot.
2. However the issue of damages remains unresolved.
Subject matter is one for claim for damages arising from a breach of
contract, which is within the ambit of the regular court jurisdiction.
1. Dai-Chi Electronics Manufacturing vs. Villarama
a. Court held that an action for breach of contractual obligation is
intrinsically a civil dispute.
2. Jurisprudence has evolved the rule that claims for damages under par 4
of Art 217, to be cognizable by the Labor Arbiter, must have a reasonable
causal connection with any of the claims provided for in that article.
3. When, as here, the cause of action is based on a quasi-delict or tort,
which has no reasonable causal connection with any of the claims
provided for in Art 217, jurisdiction over the action is with the regular
courts.
4. Petitioner merely seeks to recover damages based on the parties contract
of employment as redress for respondent’s breach thereof..
5. Such cause of action is within the realm of Civil law, and jurisdiction over
the controversy belongs to regular courts.
6. For sure, a plain and cursory reading of the complaint will readily reveal
that the subject matter is one for claim for damages arising from a breach
of contract, which is within the ambit of the regular court jurisdiction.
ACCORDINGLY , lower court is set aside, case is REMANDED.
G.R. No. 201298 February 5, 2014
RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
Topic: Labor dispute v intra-corporate dispute
FACTS
Cosare filed a complaint against the respondents for constructive dismissal, illegal
suspension, and monetary claims with the NLRC.
Cosare's claims:
1. He was first hired by respondent Arevalo (President of respondent
Broadcom Asia) as a salesman, when the latter was still selling broadcast
equipment to television networks and production houses.
 2. When Arevalo set up Broadcom in December 2000 to continue his
business, Cosare was named an incorporator of Broadcom. He was
assigned 100 shares of stock with par value of P1.00 per share. Later, in
October of 2001 Cosare was promoted to AVP for Sales and Head of
Technical Coordination.
3. In March 23, 2009, Cosare sent a confidential memo to Arevalo to inform
him of the anomalies being committed by Alex Abiog (VP for Sales,
Cosare’s immediate supervisor).
4. Arevalo failed to act on the said information.
5. In March 25, 2009, Cosare was called for a meeting by Arevalo where
he was asked to resign in exchange for "financial assistance" of P300k.
When he refused to comply, Arevalo sent him a memo charging him of
serious misconduct and willful breach of trust on March 30, 2009. He was
given 48 hours from the date of the memo within which to present his
explanation on the charges.
6. On March 31, 2009, Cosare was suspended from having access to
company files and records and precluded from reporting for work. On
April 1, 2009, he was totally barred from entering the company premises.
7. He tried to furnish the company with a Memo where he addressed and
denied the accusations against him. The respondents refused to receive
the memo on the ground of late filing, hence, Cosare served a copy of the
same by registered mail. On April 3, 2009, he filed a labor complaint
against the respondents.
Respondents' claims:
1. Cosare was neither illegally suspended nor dismissed from employment.
He abandoned his job by continually failing to report for work beginning
April 1, 2009, prompting them to issue on April 14 a memo accusing
Cosare of absence without leave beginning April 1.
2. Cosare committed the ff acts inimical to the interests of Broadcom:
 he failed to sell any broadcast equipment since 2007
 he attempted to sell a camera sourced from a competitor
 he made an unauthorized request in Broadcom's name for its
principal, Panasonic USA, to issue an invitation for Cosare's
friend, Alex Paredes, to attend the National Association of
Broadcasters' Conference in Las Vegas.
Labor Arbiter dismissed the complaint on the ground of Cosare's failure to
establish that he was dismissed from employment. NLRC ruled in favor of Cosare,
finding the respondents guilty of constructive illegal dismissal, on the conclusion
that he was constructively dismissed when he was asked to resign from his
employment. Respondents appealed to the CA. During the pendency of their
appeal, they raised a new argument, stating that the case involved an intra-
corporate controversy which was within the jurisdiction of the RTC, and not
of the LA. They argued that the case involved a complaint against a
corporation filed by a stockholder, who, at the same time, was a corporate
officer. CA granted the respondents' petition and dismissed the labor complain
for lack of jurisdiction. It ruled that the case involved an intra-corporate
controversy which, pursuant to PD 902-A was within the exclusive jurisdiction of
the RTC. The CA reasoned that Cosare was a stockholder of Broadcom and he
was listed as one of its directors. He also held the position of AVP for Sales which
was listed as a corporate office, and which was allowed by Broadcom’s by-laws,
and under Sec. 25 of the Corporation Code (see Note*). The respondents were
also able to present substantial evidence that Cosare held a corporate office
through the General Information Sheet they submitted to the SEC on October of
2009.
Hence, this petition.
ISSUES
1. WON the case instituted by Cosare was an intra-corporate dispute that was
within the original jurisdiction of the RTC, and not of the LAs;
2. WON Cosare was constructively and illegally dismissed from employment by
the respondents
RULING
1. It is not an intra-corporate dispute, hence, it is the Labor Arbiter, not the
regular courts which has the original jurisdiction over the subject
controversy.
An intra-corporate controversy, which falls within the jurisdiction of regular
courts, pertains to disputes that involve any of the following relationships: (1)
between the corporation, partnership or association and the public; (2) between
the corporation, partnership or association and the state in so far as its franchise,
permit or license to operate is concerned; (3) between the corporation, partnership
or association and its stockholders, partners, members or officers; and (4) among
the stockholders, partners or associates, themselves. Settled jurisprudence,
however, qualifies that when the dispute involves a charge of illegal dismissal,
the action may fall under the jurisdiction of the LAs upon whose jurisdiction,
as a rule, falls termination disputes and claims for damages arising from
employer-employee relations as provided in Article 217 of the Labor Code.
Consistent with this jurisprudence, the mere fact that Cosare was a stockholder
and an officer of Broadcom at the time the subject controversy developed failed to
necessarily make the case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros, it was explained that
“the determination of whether the dismissed officer was a regular employee or
corporate officer unravels the conundrum" of whether a complaint for illegal
dismissal is cognizable by the LA or by the RTC. "In case of the regular employee,
the LA has jurisdiction; otherwise, the RTC exercises the legal authority to
adjudicate. Applying the foregoing to the present case, the LA had the
original jurisdiction over the complaint for illegal dismissal because Cosare,
although an officer of Broadcom for being its AVP for Sales, was not a
"corporate officer" as the term is defined by law.
Corporate officers are those officers of the corporation who are given that
character by the Corporation Code or by the corporation’s by-laws. Xxx (Real v
Sangu Philippines, Inc., citing Eastern Telecommunications Philippines, Inc.)
There are two circumstances which must concur in order for an individual to be
considered a corporate officer, as against an ordinary employee or officer, namely:
(1) the creation of the position is under the corporation’s charter or by-laws; and
(2) the election of the officer is by the directors or stockholders. It is only when
the officer claiming to have been illegally dismissed is classified as such
corporate officer that the issue is deemed an intra-corporate dispute which
falls within the jurisdiction of the trial courts.
The respondents referred to Section 1, Article IV of the Broadcom's by-laws (See
Note*) to support their argument that Cosare was a corporate officer. The Court
disagrees. As may be gleaned from the aforequoted provision, the only officers
who are specifically listed, and thus with offices that are created under Broadcom’s
by-laws are the following: the President, Vice-President, Treasurer and Secretary.
Although a blanket authority provides for the Board’s appointment of such other
officers as it may deem necessary and proper, the respondents failed to
sufficiently establish that the position of AVP for Sales was created by virtue
of an act of Broadcom’s board, and that Cosare was specifically elected or
appointed to such position by the directors. No board resolutions to establish
such facts form part of the case records. Further, it was held in Marc II Marketing,
Inc. v. Joson that an enabling clause in a corporation’s by-laws empowering its
board of directors to create additional officers, even with the subsequent passage
of a board resolution to that effect, cannot make such position a corporate office.
The board of directors has no power to create other corporate offices without first
amending the corporate by-laws so as to include therein the newly created
corporate office.
Moreover, the General Information Sheets which provided that Cosare was an
"officer" of Broadcom was misplaced. The said documents could neither govern
nor establish the nature of the office held by Cosare and his appointment thereto.
Although Cosare could indeed be classified as an officer as provided in the
General Information Sheets, his position could only be deemed a regular office,
and not a corporate office as it is defined under the Corporation Code.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of
the case’s filing did not necessarily make the action an intra- corporate
controversy. Time and again, the Court has ruled that in determining the
existence of an intra-corporate dispute, the (1) status or relationship of the
parties and (2) the nature of the question that is the subject of the
controversy must be taken into account. Considering that the pending
dispute particularly relates to Cosare’s rights and obligations as a regular
officer of Broadcom, instead of as a stockholder of the corporation, the
controversy cannot be deemed intra-corporate. This is consistent with the
"controversy test" explained by the Court in Reyes v. Hon. RTC, Br. 142, to wit:
Under the nature of the controversy test, the incidents of that relationship must
also be considered for the purpose of ascertaining whether the controversy itself
is intra-corporate. The controversy must not only be rooted in the existence of an
intra-corporate relationship, but must as well pertain to the enforcement of the
parties’ correlative rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the corporation. If the relationship
and its incidents are merely incidental to the controversy or if there will still be
conflict even if the relationship does not exist, then no intra-corporate controversy
exists.
It is then evident that the CA erred in reversing the NLRC’s ruling that favored
Cosare solely on the ground that the dispute was an intra-corporate controversy
within the jurisdiction of the regular courts.
2. There was constructive and illegal dismissal.
"Constructive dismissal occurs when there is cessation of work because continued
employment is rendered impossible, unreasonable, or unlikely as when there is a
demotion in rank or diminution in pay or when a clear discrimination, insensibility,
or disdain by an employer becomes unbearable to the employee leaving the latter
with no other option but to quit." (The University of the Immaculate Conception v.
NLRC, citing La Rosa v. Ambassador Hotel)
The test of constructive dismissal is whether a reasonable person in the
employee’s position would have felt compelled to give up his position under the
circumstances. xxx (Dimagan v. Dacworks United, Incorporated)
In this case, the respondents were already resolute on a severance of their working
relationship with Cosare. The fact that no further investigation and final disposition
appeared to have been made by the respondents on Cosare’s case only negated
the claim that they actually intended to first look into the matter before making a
final determination as to the guilt or innocence of their employee. This also
manifested from the fact that even before Cosare was required to present his side
on the charges of serious misconduct and willful breach of trust, he was summoned
to Arevalo’s office and was asked to tender his immediate resignation in exchange
for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by
their persistent accusation that Cosare abandoned his post, allegedly signified by
his failure to report to work or file a leave of absence beginning April 1, 2009. As
the records clearly indicated, however, Arevalo placed Cosare under suspension
beginning March 30, 2009. The charge of abandonment was inconsistent with this
imposed suspension. Cosare’s failure to report to work beginning April 1, 2009 was
neither voluntary nor indicative of an intention to sever his employment with
Broadcom. It was illogical to be requiring him to report for work, and imputing fault
when he failed to do so after he was specifically denied access to all of the
company’s assets.
PETITION GRANTED. NLRC DECISION REINSTATED.
*Note:
(from Broadcom’s By-Laws)
ARTICLE IV. OFFICER
Section 1. Election / Appointment – Immediately after their election, the Board of
Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine
to be necessary or proper. Any two (2) or more compatible positions may be held
concurrently by the same person, except that no one shall act as President and
Treasurer or Secretary at the same time.
Manila Electric Company v Jan Carlo Gala
G.R. Nos. 191288 & 191304 | March 7, 2012
BRION, J.:
 sufficient to hold him liable as a conspirator.
Grp. 5 | Orias
Topic: Technical rules, not binding
Petitioner: MANILA ELECTRIC COMPANY,
Respondent: JAN CARLO GALA
Facts
 Jan Carlo Gala commenced employment with the petitioner Meralco Electric
Company (Meralco) as a probationary lineman and was assigned to its
Valenzuela Sector
 Barely four months on the job, Gala was dismissed for alleged complicity in
pilferages of Meralcos electrical supplies, particularly, for the incident which
took place on May 25, 2006.
o On that day, Gala and other Meralco workers were instructed to replace
a worn-out electrical pole at the Pacheco Subdivision in Valenzuela City.
Gala and the other linemen were directed to join Truck No. 1891, under
the supervision of Foreman Nemecio Hipolito.
o When they arrived at the worksite, Gala and the other workers saw that
Truck No. 1837, supervised by Zuniga, was already there. The linemen
of Truck No. 1837 were already at work. Gala and the other members of
the crew of Truck No. 1891 were instructed to help in the digging of a
hole for the pole to be installed.
o While the Meralco crew was at work, one Noberto Bing Llanes, a
non-Meralco employee, arrived. He appeared to be known to the
Meralco foremen as they were seen conversing with him. Llanes
boarded the trucks, without being stopped, and took out what were later
found as electrical supplies.
o Aside from Gala, the foremen and the other linemen who were at the
worksite when the pilferage happened were later charged with
misconduct and dishonesty for their involvement in the incident.
o Unknown to Gala and the rest of the crew, a Meralco surveillance task
force was monitoring their activities and recording everything with a Sony
video camera. The task force was composed of Joseph Aguilar, Ariel
Dola and Frederick Riano. Meralco called for an investigation of the
incident and asked Gala to explain.
 Gala denied involvement in the pilferage, contending that even if his superiors
might have committed a wrongdoing, he had no participation in what they did
and that his mere presence at the scene of the incident was not sufficient to
hold him liable as a conspirator. He claimed that:
o (1) he was at some distance away from the trucks when the pilferage
happened;
o (2) he did not have an inkling that an illegal activity was taking place
since his supervisors were conversing with Llanes, giving him the
impression that they knew him;
o (3) he did not call the attention of his superiors because he was not in a
position to do so as he was a mere lineman; and
o (4) he was just following instructions in connection with his work and had
no control in the disposition of company supplies and materials. He
maintained that his mere presence at the scene of the incident was not
 Despite Galas explanation, Meralco proceeded with the investigation and
eventually terminated his employment on July 27, 2006.Gala responded by
filing an illegal dismissal complaint against Meralco.
 Compulsory Arbitration Rulings: dismissed the complaint for lack of merit
 NLRC: reversed the labor arbiters ruling; no concrete proof of complicity;
reinstatement only until end of probationary period
 CA: denied Meralco’s petition for lack of merit and partially granted Gala’s
petition; Gala was illegally dismissed; reinstatement with full back wages and
benefits
Procedural defects of the petition:
 The Verification and Certification, Secretary’s Certificate, and Affidavit of
Service (submitted by Meralco) do NOT contrain the details of the
Community Residence Tax Certificates of affiants, in violation of Sec. 6
CA 645
 Lawyers who signed the petition failed to indicate their updated MCLE
certificate numbers
Issue: W/N Gala was illegally dismissed - NO
Ruling: petition granted
Ratio
 It is the spirit and intention of labor legislation that the NLRC and the labor
arbiters shall use every reasonable means to ascertain the facts in each
case speedily and objectively, without regard to technicalities of law or
procedure, provided due process is duly observe
 In keeping with this policy and in the interest of substantial justice, the
Court deems it proper to give due course to the petition, especially in view
of the conflict between the findings of the labor arbiter, on the one hand,
and the NLRC and the CA, on the other.
o S.S. Ventures International, Inc. v. S.S. Ventures Labor Union:
the application of technical rules of procedure in labor cases
may be relaxed to serve the demands of substantial justice.
 Contrary to the conclusions of the CA and the NLRC, there is substantial
evidence supporting Meralco’s position that Gala had become unfit to continue
his employment with the company.
o Gala was found, after an administrative investigation, to have failed to
meet the standards expected of him to become a regular employee and
this failure was mainly due to his undeniable knowledge, if not
participation, in the pilferage activities done by their group, all to the
prejudice of the Company’s interests.
 As a probationary employee, his overall job performance and his behavior
were being monitored and measured in accordance with the standards (i.e.,
the terms and conditions) laid down in his probationary employment
agreement.
o Under paragraph 8 of the agreement, he was subject to strict compliance
 with, and non- violation of the Company Code on Employee Discipline,
Safety Code, rules and regulations and existing policies.
o Par. 10 required him to observe at all times the highest degree of
transparency, selflessness and integrity in the performance of his duties
and responsibilities, free from any form of conflict or contradicting with
his own personal interest.
 The evidence on record established Galas presence in the worksite where the
pilferage of company property happened. It also established that it was not
only on May 25, 2006 that Llanes, the pilferer, had been seen during a Meralco
operation. He had been previously noticed by Meralco employees, including
Gala (based on his admission),in past operations. If Gala had seen Llanes in
earlier projects or operations of the company, it is incredulous for him to say
that he did not know why Llanes was there or what Zuiga and Llanes were
talking about.
 The Court finds that Gala he was complicit in its commission, if not by direct
participation, certainly, by his inaction while it was being perpetrated and by
not reporting the incident to company authorities.
 Thus, we find substantial evidence to support the conclusion that Gala does
not deserve to remain in Meralco’s employ as a regular employee.
o He violated his probationary employment agreement, especially the
requirement for him to observe at all times the highest degree of
transparency, selflessness and integrity in the performance of their
duties and responsibilities. He failed to qualify as a regular employee.
INDUSTRIAL TIMBER CORPORATION v. ABABON
G.R. Nos. 164518 & 164965 | January 25, 2006 Group 6 Dela Cruz
PETITIONER: Industrial Timber Corporation (ITC), Industrial Plywood Group
Corporation (IPGC), Tomas Tangsoc, Jr., Lorenzo Tangsoc and Tomas Tan (first
G.R. No.; the other way for the 2nd)
DEFENDANT: Virgilio Ababon plus 96 other workers (wow sipag ni Ma’am
magbilang)
PONENTE: Ynares-Santiago, J.
Topic:
 Technical rules, not blinding → Liberality in application of rules (important
part starts at NLRC stage)
 Article 227 (221 before) of the Labor Code
Facts and Procedural History:
 Industrial Plywood Group Corporation (IPGC) is the owner of a plywood
plant located at Butuan City, leased to Industrial Timber Corporation (ITC)
on August 30, 1985 for a period of five years. Thereafter, ITC commenced
operation of the plywood plant and hired 387 workers.
o In 1990, ITC notified the DOLE and its workers that effective
March 19, 1990 it will undergo a no plant operation due to lack
of raw materials and will resume only after it can secure logs for
milling.
o IPGC notified ITC of the expiration of the lease contract in
August 1990 and its intention not to renew the same.
o ITC notified the DOLE and its workers of the plants shutdown
due to the non-renewal of anti-pollution permit that expired in
April 1990.
 The non-renewal of permit and the alleged lack of logs for milling
constrained ITC to lay off all its workers until further notice.
o Advices for all the workers to collect the benefits due them under
the law and CBA
 IPGC took over the plywood plant after it was issued a wood processing
permit, which included the anti-pollution permit, by the DENR,
coincidentally on the same day the ITC ceased operation of the plant.
 This action led to the workers (Virgilio Ababon, et al.) to file a
complaint against ITC and IPGC for illegal dismissal, unfair labor
practice and damages. They alleged, among others, that:
o The cessation of ITCs operation was intended to bust the union;
and
o Both corporations are one and the same entity being controlled
by one owner
 LA: upheld the validity of the closure; not enough evidence to prove it
was used to perpetrate fraud or illegal act; and ordered ITC to pay
separation pay of month for every year of service
 NLRC: set aside the decision of the Labor Arbiter and ordered the
reinstatement of the employees to their former positions, and the payment
of full back wages, damages and attorney’s fees
o ITC and IPGC filed a Motion for Reconsideration. However, it
was dismissed for being filed out of time having been filed
only on the date of actual receipt by the NLRC on June 29, 1993,
three days after the last day of the reglamentary period.
o Thus, they filed a Petition for Relief from Resolution, which was
treated as a 2nd motion for reconsideration by the NLRC and
dismissed for lack of merit in a Resolution.
 From said dismissal, petitioners filed a Notice of Appeal with the
Supreme Court. Subsequently, they filed a Motion for
Reconsideration/Second Petition for Relief with the NLRC.
 The SC dismissed the Notice of Appeal for being a wrong mode of
appeal from the NLRC decision.
 On the other hand, the NLRC granted the Second Petition for Relief
and set aside all its prior decision and resolutions.
 Ababon, et al. filed a Petition for Certiorari with the SC. However,
pursuant to the ruling in St. Martins Funeral Home v. NLRC, SC referred
the petition to the CA for appropriate action and disposition.
 CA: rendered a decision setting aside the May 24, 1995 decision of the
NLRC (NLRC granting 2nd petition for relief and setting aside all its prior
decisions and resolutions) and reinstated its May 20, 1993 (NLRC
reinstating employees and granting wages) decision and September 29,
1993 resolution (NLRC dismissing petition for lack of merit)
 Both parties filed their respective motions for reconsideration which were
denied. Hence, the present consolidated petitions for review.
Issue:
1. Whether the CA erred in liberally applying the rules of procedure with
respect to respondents but being rigid in its application as regards
petitioners – YES (in G.R. No. 164518 only; the other issue is irrelevant)
Ratio:
1. Yes. The Court has the power to except a particular case from the
operation of the rule whenever the purposes of justice requires it because
what should guide judicial action is that a party is given the fullest
opportunity to establish the merits of his action or defense rather than for
him to lose life, honor, or property on mere technicalities.
 Ordinarily, once a judgment has become final and executory, it can no
longer be disturbed, altered or modified. However, this rule admits of
exceptions in cases of special and exceptional nature.
o Industrial Timber Corporation v. NLRC: It is true that after a
judgment has become final and executory, it can no longer be
modified or otherwise disturbed. However, this principle admits
of exceptions, as where facts and circumstances transpire which
render its execution impossible or unjust and it therefore
becomes necessary, in the interest of justice, to direct its
modification in order to harmonize the disposition with the
prevailing circumstances
 A careful scrutiny of the facts and circumstances of these
consolidated cases warrants liberality in the application of technical
rules and procedure.
o NLRC is right when it said that substantial justice is best
served by allowing the petition for relief despite procedural
defect of filing the motion for reconsideration three days
late, for to rule otherwise, a greater injustice would be done
to ITC by ordering it to reinstate the employees to their former
positions that no longer exist due to valid and legitimate
cessation of business and pay huge judgment award.
o Legal basis: Article 221 (now 227) of the Labor Code
 The real purpose behind the limitation of the period is to forestall or
avoid an unreasonable delay in the administration of justice, from
which the NLRC absolved ITC and IPGC because the filing of their motion
for reconsideration three days later than the prescribed period was due
to excusable negligence.
o Sec. 14 of Rule VII of the New Rules of Procedure of the
NLRC: a motion for reconsideration of any order, resolution or
decision of the Commission shall not be entertained except
when based on palpable or patent errors, provided that the
motion is under oath and filed within 10 calendar days from
receipt of the order, resolution or decision -> should not be
interpreted as to sacrifice substantial justice to technicality
Judgment:
o CA decision and resolution REVERSED
o Decision of NLRC is AFFIRMED WITH MODIFICATIONS.
SANTOS V LITTON MILLS
G.R. No. 170646 | June 22, 2011 | Del Castillo C2020 Digest
Topic: Technical rules, not binding; substantial compliance with rules
Facts
Litton Mills is a company engaged in the business of manufacturing textile
materials. Petitioner Santos is a clerk under the Plant Administration and Services
Department, selling sludge oil and other waste materials. Santos was accused of
engaging in an unauthorized engagement with a waste buyer. He was accused of
demanding money from Leonardo Concepcion every time Concepcion would buy
from the company, threatening to withhold the release of the purchased materials
by delaying the release of official delivery receipt and gate pass if he wouldn’t
oblige.
A criminal complaint for robbery/ extortion was filed in the RTC. Santos received a
letter of termination from his employers, for violating the company’s Code of
Conduct. He then filed a complaint for illegal dismissal.
Procedural History
 LA: Dismissed the complaint, just cause for dismissal
o Relied on the pendency of the criminal case saying that it’s an
indication that there’s sufficient evidence that Santos is
responsible for the offense charged (only substantial evidence
and not proof beyond reasonable doubt is nec for a valid
dismissal)
 NLRC: Affirmed the findings of the LA despite the decision of the RTC
acquitting her of the criminal charge, declaring that she merely demanded
payment for a loan
o Held that the acquittal in the criminal case has no bearing on the
illegal dismissal
 Petition for Certiorari with the CA
 CA: Dismissed the petition for failure of Santos to indicate in the petition
the actual addresses of the parties and to state in the Verification and
Certification of non-forum shopping that there were no other pending
cases between the parties at the time of filing
Issue: WN the CA erred in dismissing the petition
Ratio
YES
 Rules of procedure should be relaxed when there is substantial and
subsequent compliance.
 Petitioner failed to indicate the actual addresses of the parties in the
 petition, but she clearly mentioned that they may be served through their
respective counsels whose addresses were specified.
o Court: This constitutes substantial compliance with the
requirements under Section 3, Rule 46, ROC
o At any rate, she fully complied when she indicated in her MR the
actual addresses of the parties.
 With regards to her Verification and Certification of non-forum shopping,
a reading shows that she nonetheless certified that:
o I certify that I have not caused the filing to the Court of Appeals,
to the Supreme Court or to any other Court or body of a case
similar to the instant petition and should I learn that the existence
or pendency of a similar case at the Court of Appeals, the
Supreme Court or any other Court or body, I undertake to inform
this Court within five (5) days from knowledge.
o Court considers this substantial compliance.
 It has been held that with respect to the contents of the certification, the
rule of substantial compliance may be availed of.
o Besides, in her MR, she rectified such to:
o I certify that I have not theretofore commenced any action or
filed any claim involving the same issues in any court, tribunal
or quasi-judicial agency and to the best of my knowledge, no
such other action is pending therein and should I learn that the
same or similar action or claim has been filed or is pending, I
[shall] immediately inform this Honorable Court within five (5)
days from knowledge or notice.
 Subsequent and substantial compliance may call for the relaxation of
the rules of procedure. The Court has time and again relaxed the rigid
application of the rules to offer full opportunity for parties to ventilate their
causes and defenses in order to promote rather than frustrate the ends
of justice.
RICARDO N. AZUELO v. ZAMECO II ELECTRIC COOPERATIVE, INC.
G.R. 192573 | October 22, 2014 Reyes, J. Armada, Group 2
Topic: Non-applicability of technical rules of procedure in labor cases, not a
license to disregard the right of employer against unreasonable claims
FACTS
- P was employed by R as a maintenance worker
- Sometime in March 2006, P filed with the Regional Arbitration Branch (RAB) of
NLRC in San Fernando, Pampanga a Complaint for illegal dismissal and non-
payment of benefits
• After several medications, LA ordered the parties to submit their respective
position papers
• On the deadline of submission, P moved for an extension, which was granted
by LA
• However, upon expiration of the extension, P again failed to submit his
position paper
• On another date granted by LA, instead of submitting the position paper, P
moved for an issuance directing R to furnish him with a complete copy of the
investigation regarding his dismissal
• LA finally issued an Order dismissing the case for lack of interest
• P received a copy of the Order
- About 8 months after, P again filed a Complaint with RAB for illegal dismissal
with money claims containing the same allegations in his first complaint
• R filed a Motion to Dismiss on the ground of res judicata, pointing out that the
first complaint was dismissed for P failing to submit his position paper despite
ample opportunity and that P should have appealed from the First Order
instead of filing a new complaint
• P says that his failure to submit the position paper was because R refused to
furnish him with complete documents. He also alleged that the First Order
was dismissed without prejudice, thus, he could either a file an MoR or re-file
a case within 10 days from receipt of Order
• LA affirmed the First Order
- The previous Dismissal is with prejudice* considering that the First Order
did not qualify the nature of the dismissal of the first complaint
- P filed a petition for certiorari with the CA for grave abuse of discretion of NLRC
• CA denied the petition
ISSUE & RATIO:
Was the dismissal of P's first complaint, on the ground of lack of interest on
his part to prosecute the same, bar the filing of another complaint for illegal
dismissal against R for based on the same allegations?
YES
OR, ultimately, the question to be resolved is this - whether the dismissal of
a complaint due to the unreasonable failure of the complainant to submit his
position paper amounts to a dismissal with prejudice? YES
- The first dismissal is with prejudice as held by the labor tribunals
• The unjustified failure of a complainant in arbitration proceedings before the
LA to submit his position paper is akin to the case of a complainant's failure
to prosecute his action for an unreasonable length of time in ordinary civil
proceedings
- In both cases, the complainants are remiss, sans reasonable cause, to
prove the material allegations in their respective complaints
- General rule: the dismissal of a case for failure to prosecute has the effect
of adjudication on the merits, and is necessarily understood to be with
prejudice to the filing of another action; Unless otherwise provided in the
order of dismissal
- The First Order, which dismissed P's first complaint due to
unreasonable failure to submit his position is unqualified. It is thus
 considered as an adjudication on the merits and with prejudice to
filing of another complaint.
- Though technical rules of procedure are not binding in labor cases, they
are necessary for an effective and expeditious administration of justice
• The non-applicability of technical rules of procedure in labor cases should not
be made a license to disregard the rights of employers against unreasonable
and/or unjustified claims.
• P was given sufficient chances to establish his claim against R, which he
failed to do when he did not submit his position paper despite several
extensions granted to him
• Expeditious disposition of labor cases is mandated not only for the benefit of
the employees, but of the employers as well
- P sought the wrong remedy
• Since the dismissal of P's complaint was already an adjudication on the
merits, he should have filed a verified Memo of Appeal with the RAB within
10 days from receipt of the First Order
• Because he did not do so, the dismissal of the first complaint became final
and executory
RULING
WHEREFORE, in consideration of the foregoing disquisitions, the petition is
DENIED.
b. Effect: nullified the hard-earned P1.33 daily wage increase
negotiated and obtained by petitioners-workers in their collective
bargaining agreement
2. In deciding the case, the LA relied primarily on Section 1(k) of the
Implementing Rules and Regulations (IRR) of PD 1123:
"Section 1. Coverage.—These rules shall apply to all
employees except the following:
xxx xxx xxx
(k) Those that have granted, in addition to the allowance
under P.D. 525, at least P60.00 monthly wage increase on
or after January 1, 1977 provided that those who paid less
than this amount shall pay the difference."
3. Petitioner appealed to the NLRC but the latter dismissed it due to the
procedural technicality that it did not furnish the adverse party with a copy
of its memorandum of appeal
ISSUE/HELD
I. W/N the Labor Arbiter erred in ruling that negotiated daily
allowance in the CBA between the Company and its workers
can be deducted from the required allowance mandated by PD
1123? (YES)

*with prejudice: a court case that is dismissed permanently, that the case is over
and done with, once and for all, and can't be brought back to court.
Kapisanang Manggagawang Pinagyakap vs. National Labor Relations
Commission
No. L-60328 July 16, 1987 Group 3 (Oliquino)
Petitioner: Kapisanang Manggagawang Pinagyakap
Respondents: National Labor Relations Commission, Franklin Baker Company of
the Philippines
1. Paraghaph 1(k), IRR of PD 1123 has already been declared VOID in
Philippine Apparel Workers Union vs. National Labor Relations
Commission.
2. In that case, the Secretary of Labor exceeded his authority when he
included paragraph 1(k) in the IRR.
3. "Section 1 of PD 1123 spells out the scope of its benefits, as follows:
'Section 1. In the Private Sector.—ln the private sector, an across-the-board
increase of sixty pesos (P60.00) in emergency allowance as provided in P.D. 525
shall be paid by all employers to their employees effective 1 May 1977…

Topic: Rule-making/Limitation
4.
FACTS
1. Labor Arbiter (LA) ruled that the negotiated daily wage increase of P1.33
in the collective bargaining agreement between petitioner and private
respondent could be credited to and deducted from the P60.00
monthly or P2.00 daily living allowance required by P.D. 1123
a. Contrary to ruling in Phil. Apparel Workers Union vs. NLRC and
Philippine Apparel, Inc.
To implement the same, the Secretary of Labor was authorized in
Section 4 of the PD 1123 to issue appropriate rules and regulations
a. “Section 4. The Secretary of Labor and the Commissioner of
the Budget shall issue appropriate rules and regulations to
implement this Decree for their respective sectors. Under such
rules and regulations, distressed employers whether public or
private may be exempted while in such condition in the interest
of development and employment.”
 b. It should be noted that ONLY those distressed employers
whether public or private may be exempted while in such
condition in the interest of development and employment
5. However, the Secretary of Labor issued on May 1, 1977 a set of rules
which exempts not only distressed employers but also 'those who
have granted in addition to the allowance under P.D. 525, at least P60.00
monthly wage increase on or after January 1, 1977, provided that those
who paid less than this amount shall pay the difference
6. The LA totally ignored the petitioner’s logical plea stating that said
deduction is
a. contrary to the spirit and intent of P.D. 1123 which is to protect
the wages against inflation
b. that the workers belong to the lowest income group
c. that what the workers obtained through a CBA should be
protected and not be deducted from the decreed additional
P60.00 monthly (or P2.00 daily) living allowance
II. W/N the failure of appellant to serve a copy of his memorandum
of appeal upon the appellee would warrant the dismissal of a
meritorious appeal (NO) (important part)
1. Estrada vs. NLRC: The commission's dismissal of the employee's
appeal, on a motion for reconsideration (whereby it set aside its original
decision on appeal in favor of the employee on the mere ground of his
failure to furnish employer-employee with a copy of his
memorandum of appeal), was based on mere procedural technicality
and not a jurisdictional defect
a. "Considering that there is no basis for the dismissal of petitioner,
it would be inconsistent with the requirement of social
justice to terminate his employment on mere grounds of
technicality.”
2. Estrada v. NLRC: That respondent’s right to due process was violated by
having been allegedly deprived of the opportunity to answer petitioner's
appeal on account of the latter's failure to furnish the former with a copy
of his memorandum of appeal is unavailing.
a. Since the entire record of the case on appeal is open for review
by the NLRC, the absence of an answer or opposition to the
appeal would not really have a significant bearing on the
adjudication of the case.
b. Respondent had already the opportunity to answer petitioner's
appeal when he filed a MOR of the earlier decision of the NLRC.
c. Respondent never touched on the merits of the case in his
aforementioned MOR. Instead, it relied solely on technicality to
oppose petitioner's appeal which thereby reasonably creates
the impression that its case is weak as in fact it is.
3. Dismissal of petitioner's appeal on a purely technical ground is
inconsistent with the constitutional mandate on protection to labor
a. Where the rules are applied to labor cases, they must be
interpreted with the liberal spirit of the labor laws.
b. "Where a decision may be made to rest on informed judgment
rather than rigid rules, all the equities of the case must be
accorded their due weight . . . labor determinations . . . should
be not only secundum rationem but also secundum
caritatem." (not only according to reason but also
according to charitable heart)
4. It certainly would work against reason and compassion to hold that the
hard-earned P1.33 daily wage increase finally negotiated and secured by
petitioners-workers in the CBA was meant to be wiped out by the later
issuance of P.D. 1123 recognizing the need to grant the workers a P2.00
daily cost of living allowance.
5. To repeat, P.D. 1123 did not authorize such a credit and deduction.
a. It is clear that the living allowance decreed therein is over and
above any wage increase contracted and agreed by the parties
6. TUPAS vs. NLRC: Paragraph (k) of the Rules Implementing P.D. 1123
being void, petitioner's claim must be granted as private respondent
would no longer have any basis for exemption."
7. IBAAEU vs. Inciong: It is elementary in the rules of statutory
construction that when the language of the law is clear and unequivocal
the law must be taken to mean exactly what it says. All doubts in the
implementation and interpretation of the provisions of this Code, including
its implementing rules and regulations, shall be resolved in favor of
labor."
HELD: Labor arbiter's Decision and Resolution dismissing the appeal are hereby
SET ASIDE and Company is ordered to comply fully with the obligation imposed
upon it by P.D. 1123 and pay to all its workers the living allowance therein provided
separately and distinctly from the wage increase agreed by it and embodied in the
CBA of March 7, 1977.
Phil Nat’l Oil Company Energy Development Corp. v. NLRC & Mercado
1. In June 1985, Danilo Mercado (clerk, shipping clerk) was dismissed by
Phil. National Oil Company-Energy Development Corporation (PNOC-
EDC) due to serious acts of dishonesty he allegedly committed
(Misappropriation of company funds, bought supplies for less than the
agreed amount and then appropriated the excess; did not report
discounts obtained, etc.]
2. Danilo then filed a complaint for illegal dismissal against PNOC-EDC.
3. PNOC-EDC filed a motion to dismiss on the ground that the LA and/or
the NLRC has no jurisdiction over PNOC-EDC because it is a subsidiary
of the Philippine National Oil Company (PNOC), a government owned or
controlled corporation, and as a subsidiary, it is also a GOCC and as
such, the proper forum for Danilo’s suit is the Civil Service Commission.
4. LA: ruled in favor of Danilo
5. NLRC: affirmed.
WON matters of employment affecting PNOC-EDC, a GOCC, are within the
jurisdiction of the LA and NLRC? YES
- The issue in this case has been decided already in the case of PNOC-
EDC vs Leogardo.
- It is true that PNOC is a GOCC and that PNOC-EDC, being a subsidiary
of PNOC, is likewise a GOCC.
- It is also true that under the 1973 Constitution, all GOCCs are under the
jurisdiction of the CSC.
- However, this has been supplanted by 1987 Constitution as it now
provides:
o The Civil Service embraces all branches, subdivisions,
instrumentalities and agencies of the Government, including
government-owned or controlled corporations with original
charters. (Article IX-B, Section 2 [1])
- Hence, the above provision sets the rule that the mere fact that a
corporation is a GOCC does not automatically place it under the CSC.
- Under this provision, the test in determining whether a GOCC is subject
to the Civil Service Law is the manner of its creation such that government
corporations created by special charter are subject to its provisions while
those incorporated under the general Corporation Law are not within its
coverage.
- In the case at bar, PNOC-EDC, even though it is a GOCC, was
incorporated under the general Corporation Law – it does not have its
own charter, hence, it is under the jurisdiction of the LA and NLRC
- Even though the facts of this case occurred while the 1973 Constitution
was still in force, the provisions of the 1987 Constitution regarding the
legal matters [procedural aspect] are applicable because it is the law in
force at the time of the decision.