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[G.R. No. 141093.

February 20, 2001]


PRUDENTIAL BANK and TRUST COMPANY, petitioner, vs.
CLARITA T. REYES, respondent.
DECISION
Before the Court is a petition for review on certiorari of the
Decision,[1] dated October 15, 1999 of the Court of Appeals in
C.A.-G.R. SP No. 30607 and of its Resolution, dated
December 6, 1999 denying petitioners motion for
reconsideration of said decision. The Court of Appeals
reversed and set aside the resolution[2] of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 00936495, reversing and setting aside the labor arbiters decision and
dismissing for lack of merit private respondents complaint.[3]
The case stems from NLRC NCR Case No. 00-06-03462-92,
which is a complaint for illegal suspension and illegal dismissal
with prayer for moral and exemplary damages, gratuity, fringe
benefits and attorneys fees filed by Clarita Tan Reyes against
Prudential Bank and Trust Company (the Bank) before the
labor arbiter. Prior to her dismissal, private respondent Reyes
held the position of Assistant Vice President in the foreign
department of the Bank, tasked with the duties, among others,
to collect checks drawn against overseas banks payable in
foreign currency and to ensure the collection of foreign bills or
checks purchased, including the signing of transmittal letters
covering the same.
After proceedings duly undertaken by the parties, judgment
was rendered by Labor Arbiter Cornelio L. Linsangan, the
dispositive portion of which reads:
WHEREFORE, finding the dismissal of complainant to be
without factual and legal basis, judgment is hereby rendered
ordering the respondent bank to pay her back wages for three
(3) years in the amount of P540,000.00 (P15,000.00 x 36
mos.). In lieu of reinstatement, the respondent is also ordered
to pay complainant separation pay equivalent to one month
salary for every year of service, in the amount of P420,000.00
(P15,000 x 28 mos.). In addition, the respondent should also
pay complainant profit sharing and unpaid fringe benefits.
Attorneys fees equivalent to ten (10%) percent of the total
award should likewise be paid by respondent.
SO ORDERED.[4]
Not satisfied, the Bank appealed to the NLRC which, as
mentioned at the outset, reversed the Labor Arbiters decision
in its Resolution dated 24 March 1997. Private respondent
sought reconsideration which, however, was denied by the
NLRC in its Resolution of 28 July 1998. Aggrieved, private
respondent commenced on October 28, 1998, a petition for
certiorari before the Supreme Court.[5] The subject petition
was referred to the Court of Appeals for appropriate action and
disposition per resolution of this Court dated November 25,
1998, in accordance with the ruling in St. Martin Funeral
Homes vs. NLRC.[6]
In its assailed decision, the Court of Appeals adopted the
following antecedent facts leading to Reyess dismissal as
summarized by the NLRC:
The auditors of the Bank discovered that two checks, No.
011728-7232-146, in the amount of US$109,650.00, and No.
011730-7232-146, in the amount of US$115,000.00, received
by the Bank on April 6, 1989, drawn by the Sanford Trading
against Hongkong and Shanghai Banking Corporation, Jurong
Branch, Singapore, in favor of Filipinas Tyrom, were not sent
out for collection to Hongkong Shanghai Banking Corporation
on the alleged order of the complainant until the said checks
became stale.

The Bank created a committee to investigate the findings of the


auditors involving the two checks which were not collected and
became stale.
On March 8, 1991, the president of the Bank issued a
memorandum to the complainant informing her of the findings
of the auditors and asked her to give her side. In reply,
complainant requested for an extension of one week to submit
her explanation. In a subsequent letter, dated March 14, 1991,
to the president, complainant stated that in view of the refusal
of the Bank that she be furnished copies of the pertinent
documents she is requesting and the refusal to grant her a
reasonable period to prepare her answer, she was constrained
to make a general denial of any misfeasance or malfeasance
on her part and asked that a formal investigation be made.
As the complainant failed to attend and participate in the formal
investigation conducted by the Committee on May 24, 1991,
despite due notice, the Committee proceeded with its hearings
and heard the testimonies of several witnesses.
The Committees findings were:
a) The two (2) HSBC checks were received by the Foreign
Department on 6 April 1989. On the same day, complainant
authorized the crediting of the account of Filipinas Tyrom in the
amount of P4,780,102.70 corresponding to the face value of
the checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the
following day, a transmittal letter was prepared by Ms. Cecilia
Joven, a remittance clerk then assigned in the Foreign
Department, for the purpose of sending out the two (2) HSBC
checks for collection. She then requested complainant to sign
the said transmittal letters (Exhibits 1, 7 and 25; TSN, 11
March 1993, pp. 42-52), as it is complainant who gives her
instructions directly concerning the transmittal of foreign bills
purchased. All other transmittal letters are in fact signed by
complainant.
b) After Ms. Joven delivered the transmittal letters and the
checks to the Accounting Section of the Foreign Department,
complainant instructed her to withdraw the same for the
purpose of changing the addressee thereon from American
Express Bank to Bank of Hawaii (ibid.) under a special
collection scheme (Exhibits 4 and 5 to 5-B).
c) After complying with complainants instruction, Ms. Joven
then returned to complainant for the latter to sign the new
transmittal letters. However, complainant told Ms. Joven to just
hold on to the letters and checks and await further instructions
(ibid.). Thus, the new transmittal letters remained unsigned.
(See Exhibits 5 to 5-B).
d) In June 1989, Ms. Joven was transferred to another
department. Hence, her duties, responsibilities and functions,
including the responsibility over the two (2) HSBC checks,
were turned over to another remittance clerk, Ms. Analisa
Castillo (Exhibit 14; TSN, 4 June 1993, pp. 27-29).
e) When asked by Ms. Castillo about the two (2) HSBC
checks, Ms. Joven relayed to the latter complainants
instruction (Exhibit 14; TSN, 4 June 1993, p. 42).
f) About fifteen (15) months after the HSBC checks were
received by the Bank, the said checks were discovered in the
course of an audit conducted by the Banks auditors. Atty.
Pablo Magno, the Banks legal counsel, advised complainant
to send the checks for collection despite the lapse of fifteen
(15) months.
g) Complainant, however, deliberately withheld Atty. Magnos
advice from her superior, the Senior Vice-President, Mr.
Renato Santos and falsely informed the latter that Atty. Magno
advised that a demand letter be sent instead, thereby further
delaying the collection of the HSBC checks.

h) On 10 July 1990, the HSBC checks were finally sent for


collection, but were returned on 16 July 1990 for the reason
account closed (Exhibits 2-A and 3-A).
After a review of the Committees findings, the Board of
Directors of the Bank resolved not to re-elect complainant any
longer to the position of assistant president pursuant to the
Banks By-laws.
On July 19, 1991, complainant was informed of her termination
of employment from the Bank by Senior Vice President
Benedicto L. Santos, in a letter the text of which is quoted in
full:
Dear Mrs. Reyes:
After a thorough investigation and appreciation of the charges
against you as contained in the Memorandum of the President
dated March 8, 1991, the Fact Finding Committee which was
created to investigate the commission and/or omission of the
acts alluded therein, has found the following:
1. You have deliberately held the clearing of Checks Nos.
11728 and 11730 of Hongkong and Shanghai Banking
Corporation in the total amount of US$224,650.00 by giving
instructions to the collection clerk not to send the checks for
collection. In view thereof, when the said checks were finally
sent to clearing after the lapse of 15 months from receipt of
said checks, they were returned for the reason Account
closed. To date, the value of said checks have not been paid
by Filipinas Tyrom, which as payee of the checks, had been
credited with their peso equivalent;
2. You tried to influence the decision of Atty. Pablo P. Magno,
Bank legal counsel, by asking him to do something allegedly
upon instructions of a Senior Vice President of the Bank or
else lose his job when in truth and in fact no such instructions
was given; and
3. You deliberately withheld from Mr. Santos, Senior Vice
President, the advice given by the legal counsel of the Bank
which Mr. Santos had asked you to seek. As a matter of fact,
you even relayed a false advice which delayed further the
sending of the two checks for collection. Likewise, you refused
to heed the advice of the Banks legal counsel to send the
checks for collection.
These findings have given rise to the Banks loss of trust and
confidence in you, the same being acts of serious misconduct
in the performance of your duties resulting in monetary loss to
the Bank. In view thereof, the Board has resolved not to reelect you to the position of Assistant Vice President of the
Bank. Accordingly, your services are terminated effective
immediately. In relation thereto, your monetary and retirement
benefits are forfeited except those that have vested in you.
In her position paper, complainant alleged that the real reason
for her dismissal was her filing of the criminal cases against the
bank president, the vice president and the auditors of the
Bank, such filing not being a valid ground for her dismissal.
Furthermore, she alleged that it would be self-serving for the
respondent to state that she was found guilty of gross
misconduct in deliberately withholding the clearing of the two
dollar checks. She further alleged that she was not afforded
due process as she was not given the chance to refute the
charges mentioned in the letter of dismissal. Hence, she was
illegally dismissed.
On the other hand, respondent argues that there were
substantial bases for the Bank to lose its trust and confidence
on the complainant and, accordingly, had just cause for
terminating her services. Moreover, for filing the clearly
unfounded suit against the respondents officers, complainant

is liable to pay moral and exemplary damages and attorneys


fees.[7]
The Court of Appeals found that the NLRC committed grave
abuse of discretion in ruling that the dismissal of Reyes is
valid. In effect, the Court of Appeals reinstated the judgment of
the labor arbiter with modification as follows:
WHEREFORE, in the light of the foregoing, the decision
appealed from is hereby REVERSED and SET ASIDE. In lieu
thereof, judgment is hereby rendered ordering respondent
Bank as follows:
1. To pay petitioner full backwages and other benefits from
July 19, 1991 up to the finality of this judgment;
2. To pay petitioner separation pay equivalent to one (1)
month salary for every year of service in lieu of reinstatement;
and
3. To pay attorneys fee equivalent to ten (10%) percent of the
total award.
SO ORDERED.[8]
Hence, the Banks recourse to this Court contending in its
memorandum that:
IN SETTING ASIDE THE DECISION DATED 24 MARCH
1997 AND THE RESOLUTION DATED 28 JULY 1998 OF THE
NLRC AND REINSTATING
WITH MODIFICATION THE
DECISION DATED 20 JULY 1995 OF LABOR ARBITER
CORNELIO L. LINSANGAN, THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED, IN VIEW OF THE
FOLLOWING:
I.
IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND
NOT THE NLRC WHICH HAS ORIGINAL AND EXCLUSIVE
JURISDICTION OVER CASES INVOLVING THE REMOVAL
FROM OFFICE OF CORPORATE OFFICERS.
II.
EVEN ASSUMING ARGUENDO THAT THE NLRC HAS
JURISDICTION, THERE WAS SUBSTANTIAL EVIDENCE OF
RESPONDENTS MISCONDUCT JUSTIFYING THE BANKS
LOSS OF TRUST AND CONFIDENCE ON (sic) HER.
III.
EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS
ENTITLED TO BACKWAGES, THE HONORABLE COURT OF
APPEALS ERRED IN AWARDING UNLIMITED AND
UNQUALIFIED BACKWAGES THEREBY GOING FAR
BEYOND THE LABOR ARBITERS DECISION LIMITING THE
SAME
TO
THREE
YEARS,
WHICH
DECISION
RESPONDENT HERSELF SOUGHT TO EXECUTE.[9]
In sum, the resolution of this petition hinges on (1) whether the
NLRC has jurisdiction over the complaint for illegal dismissal;
(2) whether complainant Reyes was illegally dismissed; and (3)
whether the amount of back wages awarded was proper.

On the first issue, petitioner seeks refuge behind the argument


that the dispute is an intra-corporate controversy concerning as
it does the non-election of private respondent to the position of
Assistant Vice-President of the Bank which falls under the
exclusive and original jurisdiction of the Securities and
Exchange Commission (now the Regional Trial Court) under
Section 5 of Presidential Decree No. 902-A. More specifically,
petitioner contends that complainant is a corporate officer, an
elective position under the corporate by-laws and her nonelection is an intra-corporate controversy cognizable by the
SEC invoking lengthily a number of this Courts decisions.[10]
Petitioner Bank can no longer raise the issue of jurisdiction
under the principle of estoppel. The Bank participated in the
proceedings from start to finish. It filed its position paper with
the Labor Arbiter. When the decision of the Labor Arbiter was
adverse to it, the Bank appealed to the NLRC. When the
NLRC decided in its favor, the bank said nothing about
jurisdiction. Even before the Court of Appeals, it never
questioned the proceedings on the ground of lack of
jurisdiction. It was only when the Court of Appeals ruled in
favor of private respondent did it raise the issue of jurisdiction.
The Bank actively participated in the proceedings before the
Labor Arbiter, the NLRC and the Court of Appeals. While it is
true that jurisdiction over the subject matter of a case may be
raised at any time of the proceedings, this rule presupposes
that laches or estoppel has not supervened. In this regard,
Baaga vs. Commission on the Settlement of Land Problems,
[11] is most enlightening. The Court therein stated:
This Court has time and again frowned upon the undesirable
practice of a party submitting his case for decision and then
accepting the judgment, only if favorable, and attacking it for
lack of jurisdiction when adverse. Here, the principle of
estoppel lies. Hence, a party may be estopped or barred from
raising the question of jurisdiction for the first time in a petition
before the Supreme Court when it failed to do so in the early
stages of the proceedings.
Undeterred, the Bank also contends that estoppel cannot lie
considering that from the beginning, petitioner Bank has
consistently asserted in all its pleadings at all stages of the
proceedings that respondent held the position of Assistant Vice
President, an elective position which she held by virtue of her
having been elected as such by the Board of Directors. As far
as the records before this Court reveal however, such an
assertion was made only in the appeal to the NLRC and raised
again before the Court of Appeals, not for purposes of
questioning jurisdiction but to establish that private
respondents tenure was subject to the discretion of the Board
of Directors and that her non-reelection was a mere expiration
of her term. The Bank insists that private respondent was
elected Assistant Vice President sometime in 1990 to serve as
such for only one year. This argument will not do either and
must be rejected.
It appears that private respondent was appointed Accounting
Clerk by the Bank on July 14, 1963. From that position she
rose to become supervisor. Then in 1982, she was appointed
Assistant Vice-President which she occupied until her illegal
dismissal on July 19, 1991. The banks contention that she
merely holds an elective position and that in effect she is not a
regular employee is belied by the nature of her work and her
length of service with the Bank. As earlier stated, she rose
from the ranks and has been employed with the Bank since
1963 until the termination of her employment in 1991. As
Assistant Vice President of the foreign department of the Bank,
she is tasked, among others, to collect checks drawn against
overseas banks payable in foreign currency and to ensure the
collection of foreign bills or checks purchased, including the
signing of transmittal letters covering the same. It has been
stated that the primary standard of determining regular
employment is the reasonable connection between the

particular activity performed by the employee in relation to the


usual trade or business of the employer.[12] Additionally, an
employee is regular because of the nature of work and the
length of service, not because of the mode or even the reason
for hiring them.[13] As Assistant Vice-President of the Foreign
Department of the Bank she performs tasks integral to the
operations of the bank and her length of service with the bank
totaling 28 years speaks volumes of her status as a regular
employee of the bank. In fine, as a regular employee, she is
entitled to security of tenure; that is, her services may be
terminated only for a just or authorized cause.[14] This being in
truth a case of illegal dismissal, it is no wonder then that the
Bank endeavored to the very end to establish loss of trust and
confidence and serious misconduct on the part of private
respondent but, as will be discussed later, to no avail.
This brings us to the second issue wherein the Bank insists
that it has presented substantial evidence to prove the breach
of trust on the part of private respondent warranting her
dismissal. On this point, the Court of Appeals disagreed and
set aside the findings of the NLRC that Reyes deliberately
withheld the release of the two dollar checks; that she is guilty
of conflict of interest that she waived her right to due process
for not attending the hearing; and that she was dismissed
based on loss of trust and confidence. We quote pertinent
portions of the decision, to wit:
FIRST: Respondent Bank heavily relied on the testimony and
affidavit of Remittance Clerk Joven in trying to establish loss of
confidence.
However, Jovens allegation that petitioner
instructed her to hold the subject two dollar checks amounting
to $224,650.00 falls short of the requisite proof to warrant
petitioners dismissal. Except for Jovens bare assertion to
withhold the dollar checks per petitioners instruction,
respondent Bank failed to adduce convincing evidence to
prove bad faith and malice. It bears emphasizing that
respondent Banks witnesses merely corroborate Jovens
testimony.
Upon this point, the rule that proof beyond reasonable doubt is
not required to terminate an employee on the charge of loss of
confidence and that it is sufficient that there is some basis for
such loss of confidence, is not absolute. The right of an
employer to dismiss employees on the ground that it has lost
its trust and confidence in him must not be exercised arbitrarily
and without just cause. For loss of trust and confidence to be
valid ground for an employees dismissal, it must be substantial
and not arbitrary, and must be founded on clearly established
facts sufficient to warrant the employees separation from work
(Labor vs. NLRC, 248 SCRA 183).
SECOND.
Respondent Banks charge of deliberate
withholding of the two dollar checks finds no support in the
testimony of Atty. Jocson, Chairman of the Investigating
Committee. On cross examination, Atty. Jocson testified that
the documents themselves do not show any direct withholding
(pp. 186-187, Rollo). There being conflict in the statement of
witnesses, the court must adopt the testimony which it believes
to be true (U.S. vs. Losada, 18 Phil. 90).
THIRD. Settled is the rule that when the conclusions of the
Labor Arbiter are sufficiently substantiated by the evidence on
record, the same should be respected by appellate tribunals
since he is in a better position to assess and evaluate the
credibility of the contending parties (Ala Mode Garments, Inc.
vs. NLRC, 268 SCRA 497). In this regard, the Court quotes
with approval the following disquisition of Labor Arbiter
Linsangan, thus:
This Office has repeatedly gone over the records of the case
and painstakingly examined the testimonies of respondent
banks witnesses. One thing was clearly established: that the
legality of complainants dismissal based on the first ground

stated in respondents letter of termination (exh. 25-J, supra)


will rise or fall on the credibility of Miss Joven who undisputedly
is the star witness for the bank. It will be observed that the
testimonies of the banks other witnesses, Analiza Castillo,
Dante Castor and Antonio Ragasa pertaining to the nonrelease of the dollar checks and their corresponding transmittal
letters were all anchored on what was told them by Ms. Joven,
that is: she was instructed by complainant to hold the release
of subject checks. In a nutshell, therefore, the issue boils
down to who between complainant and Ms. Joven is more
credible.
After painstakingly examining the testimonies of Ms. Joven and
respondents other witnesses this Office finds the evidence still
wanting in proof of complainants guilt. This Office had closely
observed the demeanor of Ms. Joven while testifying on the
witness stand and was not impressed by her assertions. The
allegation of Ms. Joven in that her non-release of the dollar
checks was upon the instruction of complainant Reyes is
extremely doubtful. In the first place, the said instruction
constitutes a gross violation of the banks standard operating
procedure. Moreover, Ms. Joven was fully aware that the
instruction, if carried out, will greatly prejudice her employer
bank. It was incumbent upon Ms. Joven not only to disobey
the instruction but even to report the matter to management, if
same was really given to her by complainant.
Our doubt on the veracity of Ms. Jovens allegation even
deepens as we consider the fact that when the non-release of
the checks was discovered by Ms. Castillo the former
contented herself by continuously not taking any action on the
two dollar checks. Worse, Ms. Joven even impliedly told by
Ms. Castillo (sic) to ignore the two checks and just withhold
their release. In her affidavit Ms. Castillo said:
4. When I asked Cecille Joven what I was supposed to do
with those checks, she said the same should be held as per
instruction of Mrs. Reyes. (Exh. 14, supra).
The evidence shows that it was only on 16 May 1990 that Ms.
Joven broke her silence on the matter despite the fact that on
15 November 1989, at about 8:00 p.m. the complainant,
accompanied by driver Celestino Banito, went to her residence
and confronted her regarding the non-release of the dollar
checks. It took Ms. Joven eighteen (18) months before she
explained her side on the controversy. As to what prompted
her to make her letter of explanation was not even mentioned.
On the other hand, the actions taken by the complainant were
spontaneous. When complainant was informed by Mr. Castor
and Ms. Castillo regarding the non-release of the checks
sometime in November, 1989 she immediately reported the
matter to Vice President Santos, Head of the Foreign
Department. And as earlier mentioned, complainant went to
the residence of Ms. Joven to confront her. In this regard,
Celestino Bonito, complainants driver, stated in his affidavit,
thus:
1. Sometime on November 15, 1989 at about 7:00 oclock in
the evening, Mrs. Clarita Tan Reyes and I were in the
residence of one Ms. Cecille Joven, then a Processing Clerk in
the Foreign Department of Prudential Bank;
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan
Reyes were seated in the sala when the latter asked the
former, Ms. Cecille Joven, how it came about that the two
dollar checks which she was then holding with the transmittal
letters, were found in a plastic envelope kept day-to-day by the
former;
3. Hesitatingly, Cecille Joven said: Eh, Mother (Mrs. Tan
Reyes had been intimately called Mother in the Bank) akala ko
bouncing checks yon mga yon.

4. Mrs. Clarita Tan Reyes, upon hearing those words, was


surprised and she said: Ano, papaano mong alam na
bouncing na hindi mo pa pinadadala;
5. Mrs. Cecille Joven turned pale and was not able to answer.
There are other factors that constrain this Office to doubt even
more the legality of complainants dismissal based on the first
ground stated in the letter of dismissal. The non-release of the
dollar checks was reported to top management sometime on
15 November 1989 when complainant, accompanied by
Supervisor Dante Castor and Analiza Castillo, reported the
matter to Vice President Santos. And yet, it was only on 08
March 1991, after a lapse of sixteen (16) months from the time
the non-release of the checks was reported to the Vice
President, that complainant was issued a memorandum
directing her to submit an explanation. And it took the bank
another four (4) months before it dismissed complainant.
The delayed action taken by respondent against complainant
lends credence to the assertion of the latter that her dismissal
was a mere retaliation to the criminal complaints she filed
against the banks top officials.
It clearly appears from the foregoing that the complainant
herein has no knowledge of, much less participation in, the
non-release of the dollar checks under discussion. Ms. Joven
is solely responsible for the same. Incidentally, she was not
even reprimanded by the bank.
FOURTH. Respondent Bank having failed to furnish petitioner
necessary documents imputing loss of confidence, petitioner
was not amply afforded opportunity to prepare an intelligent
answer. The Court finds nothing confidential in the auditors
report and the affidavit of Transmittal Clerk Joven. Due
process dictates that management accord the employees
every kind of assistance to enable him to prepare adequately
for his defense, including legal representation.
The issue of conflict of interest not having been covered by the
investigation, the Court finds it irrelevant to the charge.[15]
We uphold the findings of the Court of Appeals that the
dismissal of private respondent on the ground of loss of trust
and confidence was without basis. The charge was predicated
on the testimony of Ms. Joven and we defer to the findings of
the Labor Arbiter as confirmed and adopted by the Court of
Appeals on the credibility of said witness. This Court is not a
trier of facts and will not weigh anew the evidence already
passed upon by the Court of Appeals.[16]
On the third issue, the Bank questions the award of full
backwages and other benefits from July 19, 1991 up to the
finality of this judgment; separation pay equivalent to one (1)
month salary for every year of service in lieu of reinstatement;
and attorneys fees equivalent to ten (10%) percent of the total
award. The Bank argues, in the main, that private respondent
is not entitled to full backwages in view of the fact that she did
not bother to appeal that portion of the labor arbiters judgment
awarding back wages limited to three years. It must be
stressed that private respondent filed a special civil action for
certiorari to review the decision of the NLRC[17] and not an
ordinary appeal. An ordinary appeal is distinguished from the
remedy of certiorari under Rule 65 of the Revised Rules of
Court in that in ordinary appeals it is settled that a party who
did not appeal cannot seek affirmative relief other than the
ones granted in the decision of the court below.[18] On the
other hand, resort to a judicial review of the decisions of the
National Labor Relations Commission in a petition for certiorari
under Rule 65 of Rules of Court is confined to issues of want
or excess of jurisdiction and grave abuse of discretion.[19] In
the instant case, the Court of Appeals found that the NLRC
gravely abused its discretion in finding that the private
respondents dismissal was valid and so reversed the same.

Corollary to the foregoing, the appellate court awarded


backwages in accordance with current jurisprudence.
Indeed, jurisprudence is clear on the amount of backwages
recoverable in cases of illegal dismissal. Employees illegally
dismissed prior to the effectivity of Republic Act No. 6715 on
March 21, 1989 are entitled to backwages up to three (3) years
without deduction or qualification, while those illegally
dismissed after are granted full backwages inclusive of
allowances and other benefits or their monetary equivalent
from the time their actual compensation was withheld from
them up to the time of their actual reinstatement.[20]
Considering that private respondent was terminated on July
19, 1991, she is entitled to full backwages from the time her
actual compensation was withheld from her (which, as a rule,
is from the time of her illegal dismissal) up to the finality of this
judgment (instead of reinstatement) considering that
reinstatement is no longer feasible as correctly pointed out by
the Court of Appeals on account of the strained relations
brought about by the litigation in this case.
Since
reinstatement is no longer viable, she is also entitled to
separation pay equivalent to one (1) month salary for every
year of service.[21] Lastly, since private respondent was
compelled to file an action for illegal dismissal with the labor
arbiter, she is likewise entitled to attorneys fees[22] at the rate
above-mentioned. There is no room to argue, as the Bank
does here, that its liability should be mitigated on account of its
good faith and that private respondent is not entirely
blameless. There is no showing that private respondent is
partly at fault or that the Bank acted in good faith in terminating
an employee of twenty-eight years. In any event, Article 279 of
Republic Act No. 6715[23] clearly and plainly provides for full
backwages to illegally dismissed employees.
WHEREFORE, the instant petition for review on certiorari is
DENIED, and the assailed Decision of the Court of Appeals,
dated October 15, 1999, is AFFIRMED.
SO ORDERED.
[G.R. No. 121143. January 21, 1997]
PURIFICACION G. TABANG, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION and PAMANA GOLDEN
CARE
MEDICAL
CENTER
FOUNDATION,
INC., respondents.
DECISION
REGALADO, J.:
This is a petition for certiorari which seeks to annul the
resolution of the National Labor Relations Commission
(NLRC), dated June 26, 1995, affirming in toto the order of the
labor arbiter, dated April 26, 1994, which dismissed petitioners
complaint for illegal dismissal with money claims for lack of
jurisdiction.
The records show that petitioner Purificacion Tabang was a
founding member, a member of the Board of Trustees, and the
corporate secretary of private respondent Pamana Golden
Care Medical Center Foundation, Inc., a non-stock corporation
engaged in extending medical and surgical services.
On October 30, 1990, the Board of Trustees issued a
memorandum appointing petitioner as Medical Director and
Hospital Administrator of private respondents Pamana Golden
Care Medical Center in Calamba, Laguna.
Although the memorandum was silent as to the amount of
remuneration for the position, petitioner claims that she
received a monthly retainer fee of five thousand pesos
(P5,000.00) from private respondent, but the payment thereof
was allegedly stopped in November, 1991.

As medical director and hospital administrator, petitioner was


tasked to run the affairs of the aforesaid medical center and
perform all acts of administration relative to its daily operations.
On May 1, 1993, petitioner was allegedly informed personally
by Dr. Ernesto Naval that in a special meeting held on April 30,
1993, the Board of Trustees passed a resolution relieving her
of her position as Medical Director and Hospital Administrator,
and appointing the latter and Dr. Benjamin Donasco as acting
Medical Director and acting Hospital Administrator,
respectively. Petitioner averred that she thereafter received a
copy of said board resolution.
On June 6, 1993, petitioner filed a complaint for illegal
dismissal and non-payment of wages, allowances and 13th
month pay before the labor arbiter.
Respondent corporation moved for the dismissal of the
complaint on the ground of lack of jurisdiction over the subject
matter. It argued that petitioners position as Medical Director
and Hospital Administrator was interlinked with her position as
member of the Board of Trustees, hence, her dismissal is an
intra-corporate controversy which falls within the exclusive
jurisdiction of the Securities and Exchange Commission (SEC).
Petitioner opposed the motion to dismiss, contending that her
position as Medical Director and Hospital Administrator was
separate and distinct from her position as member of the Board
of Trustees. She claimed that there is no intra-corporate
controversy involved since she filed the complaint in her
capacity as Medical Director and Hospital Administrator, or as
an employee of private respondent.
On April 26, 1994, the labor arbiter issued an order dismissing
the complaint for lack of jurisdiction. He ruled that the case
falls within the jurisdiction of the SEC, pursuant to Section 5 of
Presidential Decree No. 902-A. [1]
Petitioners motion for reconsideration was treated as an
appeal by the labor arbiter who consequently ordered the
elevation of the entire records of the case to public respondent
NLRC for appellate review. [2]
On appeal, respondent NLRC affirmed the dismissal of the
case on the additional ground that the position of a Medical
Director and Hospital Administrator is akin to that of an
executive position in a corporate ladder structure, hence,
petitioners removal from the said position was an intracorporate controversy within the original and exclusive
jurisdiction of the SEC. [3]
Aggrieved by the decision, petitioner filed the instant petition
which we find, however, to be without merit.
We agree with the findings of the NLRC that it is the SEC
which has jurisdiction over the case at bar. The charges
against herein private respondent partake of the nature of an
intra-corporate controversy. Similarly, the determination of the
rights of petitioner and the concomitant liability of private
respondent arising from her ouster as a medical director and/or
hospital administrator, which are corporate offices, is an intracorporate controversy subject to the jurisdiction of the SEC.
Contrary to the contention of petitioner, a medical director and
a hospital administrator are considered as corporate officers
under the by-laws of respondent corporation. Section 2(i),
Article I thereof states that one of the powers of the Board of
Trustees
is
(t)o
appoint
a
Medical
Director,
Comptroller/Administrator, Chiefs of Services and such other
officers as it may deem necessary and prescribe their powers
and duties. [4]
The president, vice-president, secretary and treasurer are
commonly regarded as the principal or executive officers of a

corporation, and modern corporation statutes usually designate


them as the officers of the corporation.[5] However, other offices
are sometimes created by the charter or by-laws of a
corporation, or the board of directors may be empowered
under the by-laws of a corporation to create additional offices
as may be necessary.[6]
It has been held that an office is created by the charter of the
corporation and the officer is elected by the directors or
stockholders.[7] On the other hand, an employee usually
occupies no office and generally is employed not by action of
the directors or stockholders but by the managing officer of the
corporation who also determines the compensation to be paid
to such employee.[8]
In the case at bar, considering that herein petitioner, unlike an
ordinary employee, was appointed by respondent corporations
Board of Trustees in its memorandum of October 30, 1990,
[9]
she is deemed an officer of the corporation. Perforce,
Section 5(c) of Presidential Decree No. 902-A, which provides
that the SEC exercises exclusive jurisdiction over
controversies in the election or appointment of directors,
trustees, officers or managers of corporations, partnerships or
associations, applies in the present dispute. Accordingly,
jurisdiction over the same is vested in the SEC, and not in the
Labor Arbiter or the NLRC.
Moreover, the allegation of petitioner that her being a member
of the Board of Trustees was not one of the considerations for
her appointment is belied by the tenor of the memorandum
itself. It states: We hope that you will uphold and promote the
mission of our foundation,[10] and this cannot be construed
other than in reference to her position or capacity as a
corporate trustee.
A corporate officers dismissal is always a corporate act, or an
intra-corporate controversy, and the nature is not altered by the
reason or wisdom with which the Board of Directors may have
in taking such action. [11] Also, an intra-corporate controversy is
one which arises between a stockholder and the
corporation. There is no distinction, qualification, nor any
exemption whatsoever. The provision is broad and covers all
kinds
of
controversies
between
stockholders
and
corporations. [12]
With regard to the amount of P5,000.00 formerly received by
herein petitioner every month, the same cannot be considered
as compensation for her services rendered as Medical Director
and Hospital Administrator. The vouchers[13] submitted by
petitioner show that the said amount was paid to her by
PAMANA, Inc., a stock corporation which is separate and
distinct from herein private respondent. Although the
payments were considered advances to Pamana Golden Care,
Calamba branch, there is no evidence to show that the
Pamana Golden Care stated in the vouchers refers to herein
respondent Pamana Golden Care Medical Center Foundation,
Inc.
Pamana Golden Care is a division of Pamana, Inc., while
respondent Pamana Golden Care Medical Center Foundation,
Inc. is a non-stock, non-profit corporation. It is stated in the
memorandum of petitioner that Pamana, Inc. is a stock and
profit corporation selling pre-need plan for education, pension
and health care. The health care plan is called Pamana
Golden Care Plan and the holders are called Pamana Golden
Care Card Holders or, simply, Pamana Members. [14]
It is an admitted fact that herein petitioner is a retained
physician of Pamana, Inc., whose patients are holders of the
Pamana Golden Care Card. In fact, in her complaint[15] filed
before the Regional Trial Court of Calamba, herein petitioner is
asking, among others, for professional fees and/or retainer
fees earned for her treatment of Pamana Golden Care card

holders.[16] Thus, at most, said vouchers can only be


considered as proof of payment of retainer fees made by
Pamana, Inc. to herein petitioner as a retained physician of
Pamana Golden Care.
Moreover, even assuming that the monthly payment
of P5,000.00 was a valid claim against respondent corporation,
this would not operate to effectively remove this case from the
jurisdiction of the SEC. In the case of Cagayan de Oro
Coliseum, Inc. vs. Office of the Minister of Labor and
Employment, etc., et al.,[17] we ruled that (a)lthough the reliefs
sought by Chavez appear to fall under the jurisdiction of the
labor arbiter as they are claims for unpaid salaries and other
remunerations for services rendered, a close scrutiny thereof
shows that said claims are actually part of the perquisites of his
position in, and therefore interlinked with, his relations with the
corporation. In Dy, et al., vs. NLRC, et al., the Court said: (t)he
question of remuneration involving as it does, a person who is
not a mere employee but a stockholder and officer, an integral
part, it might be said, of the corporation, is not a simple labor
problem but a matter that comes within the area of corporate
affairs and management and is in fact a corporate controversy
in contemplation of the Corporation Code.
WHEREFORE, the questioned resolution of the NLRC is
hereby AFFIRMED, without prejudice to petitioners taking
recourse to and seeking relief through the appropriate remedy
in the proper forum.
SO ORDERED.
G.R. No. 125931. September 16, 1999]
UNION MOTORS CORPORATION, BENITO S. CUA, and
CHARLOTTE C. CUA, petitioners, vs. THE NATIONAL
LABOR RELATIONS COMMISSION and PRISCILLA D.
GO, respondents.
DECISION
QUISUMBING, J.:
This petition for certiorari and prohibition, under Rule 65 of the
Rules of Court, seeks to set aside the decision dated March
29, 1996, of the National Labor Relations Commission in
NLRC NCR CA No. 008119-95. It also assails the NLRC
resolution, dated May 28, 1996, denying petitioners motion for
reconsideration. Petitioners also pray that NLRC desist from
further proceedings in said case.
Petitioner Benito S. Cua is the father of Charlotte C.
Cua. They are, respectively, the President and VicePresident/Treasurer of petitioner UMC. Hereafter, they will be
referred to respectively as Mr. Cua and Ms. Cua. Private
respondent Priscilla Go was, originally, the complainant in a
case for illegal dismissal filed against petitioners. Hereafter,
she will be referred to as Ms. Go.
The facts of the case, as culled from the records, are as
follows:
On June 17, 1981, UMC hired Ms. Go as its Administrative and
Personnel Manager. On February 13, 1982, she was
appointed Treasurer while concurrently serving as
Administrative and Personnel Manager.
Seven years later, UMCs Board of Directors effected a toplevel corporate revamp. Ms. Cua was appointed VicePresident/Treasurer. Ms. Go was in turn appointed Assistant to
the President and Administrative and Personnel Manager by
the Board.[1] Ms. Go accepted the appointment on the condition
that she would report solely and directly to the UMC President,
Mr. Cua.

On November 2, 1989, however, Mr. Cua issued an inter-office


memorandum advising Ms. Go that she would be under the
direct supervision of Ms. Cua, the Vice-President/Treasurer.[2]
On July 15, 1991, UMC Service Manager Reymundo M. Varilla
requested Ms. Go for the assignment of one Analyn Aldea to
his department for the duration of her contractual
employment. Ms. Go denied the request. The denial was
based on the lack of an official written advice from Ms. Cua.[3]
On July 18, 1991, Ms. Cua issued a memorandum-reminder
stating that Ms. Cua was Ms. Gos immediate superior. The
memorandum went on to say that [any] verbal, written, taped
or any other form of communication advicewill constitute
official advice[4] Ms. Cua further said that Ms. Go had been
given verbal advice regarding Aldeas transfer of assignment.
That memorandum prompted Ms. Go to write Mr. Cua
regarding her intention to withdraw given the escalating level
of tension between her and Ms. Cua.[5]
On July 19, 1991, Ms. Go stopped reporting for work. She
claimed she had gone on leave to avoid further clashes
between her and Ms. Cua.
On August 7, 1991, Mr. Cua designated one Nancy T. Borras
as Administrative and Personnel Consultant in the absence of
Ms. Go. Meanwhile, Ms. Go met with Mr. Cua and UMC
Chairman Gilbert Dee, Sr. She was advised to extend her
leave until her differences with Ms. Cua could be resolved.
On September 30, 1991, Ms. Go wrote Mr. Cua requesting him
to come up with a concrete plan to implement his commitment
to draw up a workable arrangement between her and Charlotte
Cua.
On November 6, 1991, however, Mr. Cua wrote private
respondent a letter advising her that he was accepting her
resignation.[6]
Insisting that she did not resign and hence, an acceptance of
her resignation could not be possible, Ms. Go then filed a
complaint for constructive/illegal dismissal with the Labor
Arbiter. Her case was docketed as NLRC-NCR Case No. 0001-06745-91. She prayed for reinstatement and payment of
backwages, 13th month pay, allowances, and bonuses. She
also sought moral damages in the amount of P3 million,
exemplary damages of no less than P500,000.00, and
attorneys fees equivalent to 10% of the total monetary claims
to be awarded her.
In their reply dated February 24, 1992, petitioners denied that
Ms. Go was illegally dismissed. They countered that she had
abandoned her job after she had expressed her intention to
resign on July 18, 1991. This intent was concretized when she
stopped reporting for work the following day.
On November 21, 1994, the Labor Arbiter rendered his
decision dismissing the private respondents complaint. The
dispositive portion of the decision reads:
IN THE LIGHT OF THE FOREGOING CONSIDERATIONS,
the separation of the complainant from her service, for
whatever cause, must be upheld. The strained relation
existing between the parties does not favor the continuous stay
of the complainant in the respondent corporation. Be that as it
may, the respondents are ordered to extend to the
complainant, monetary considerations, equivalent to her one
month salary for every year of service rendered. The
respondents are, likewise, assessed 10% of the financial
considerations awarded as attorneys fees. The rest of the
complaints are dismissed for lack of merit.
SO ORDERED.[7]

Dissatisfied, Ms. Go seasonably appealed the Labor Arbiters


decision to the NLRC. Her appeal was docketed as NLRC
NCR CA No. 008119-95. In her Memorandum of Appeal, she
charged the Labor Arbiter with grave error in: (1) failing to hold
that she was constructively/illegally dismissed; and (2) failing to
appreciate the evidence on record.[8]
In their Reply/Opposition, petitioners initially argued that she
was not dismissed, but had voluntarily resigned and
abandoned her employment.[9] However, in their Supplemental
Reply, petitioners switched tracks. They now contended that
she was a corporate officer who had been elected/appointed to
the position of Assistant to the President/Administrative and
Personnel Manager by the UMC Board of Directors. Any issue
relating to her removal from the said posts was therefore an
intra-corporate dispute.[10] As such, jurisdiction over the action
did not lie with the NLRC but rather with the Securities and
Exchange Commission (SEC), pursuant to Section 5 of
Presidential Decree No. 902-A which provides:
SECTION 5. In addition to the regulatory and adjudicative
functions of the Securities and Exchange Commission over
corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws and
decrees, it shall have original and exclusive jurisdiction to hear
and decide cases involving:
xxx
[c] Controversies in the election or appointments of directors,
trustees, officers, or managers of such corporations,
partnerships, or associations.
Petitioners reinforced their arguments by pointing to this
Courts ruling in Espino v. NLRC.[11] We held in Espino that a
corporate officers dismissal is always a corporate act and/or
intra-corporate controversy and that nature is not altered by the
reason or wisdom which the Board of Directors may have in
taking such action.[12]
Petitioners then prayed for the dismissal of the case before the
NLRC.
On March 29, 1996, the Second Division of the NLRC
promulgated its decision in NCR CA No. 008119-95, reversing
and setting aside the decision of the Labor Arbiter. The
decretal portion of the said decision states:
WHEREFORE, premises considered, the November 21, 1995
Decision of Labor Arbiter Manuel F. Asuncion is hereby,
Reversed and Set Aside and a new one entered finding that
complainant-appellant was illegally dismissed. In lieu of
reinstatement, respondent Union Motors Corporation is hereby
ordered to pay complainant separation pay equivalent to one
(1) month pay for every year of service and to pay full
backwages computed from date of dismissal (June 19, 1991)
up to promulgation of this resolution plus ten percent (10%) of
all amounts awarded by way of attorneys fees.
SO ORDERED.[13]
Petitioners duly filed a motion for reconsideration. Said motion
was denied by the NLRC in its resolution dated May 28, 1996.
Unhappy with this turn of events, petitioners filed the instant
petition for certiorari and/or prohibition, raising the following
issues:
1. Whether or not the public respondent NLRC has jurisdiction
over the instant complaint for an alleged illegal dismissal from
a corporate office;
2. Whether or not the public respondent NLRC acted with
grave abuse of discretion in refusing to dismiss the instant

case based on lack of jurisdiction over the subject matter, and


instead ordering the petitioners to pay separation pay plus
backwages to the private respondent;
3. Whether or not the public respondent NLRC should cease
and desist from further proceeding with the instant case.[14]
The issues shall be jointly discussed because they are interrelated.
In the present case, we once again face the tug-of-war
between the jurisdiction of the NLRC and the SEC. It is the
private respondents stand that she is but mere employee of
the petitioner corporation. A high-ranking employee, but an
employee nonetheless, who was illegally dismissed. Hence,
no grave abuse of discretion was committed by the NLRC
when it assumed jurisdiction over her case. Petitioners,
however, vehemently insist that she was a corporate officer
who had been ousted from office. Thus, private respondents
dismissal squarely falls within the jurisdiction of the SEC as an
intra-corporate dispute. A proper resolution of this case thus
entails determining whether the private respondent is a mere
employee (albeit high in rank) or a corporate officer. To
determine which body has jurisdiction over this case requires
considering not only the relationship of the parties, but also the
nature of the question that is the subject of their controversy.[15]
Section 25 of the Corporation Code provides in part:
Immediately after their election, the directors of a corporation
must formally organize by the election of a president, who shall
be a director, a treasurer who may or may not be a director, a
secretary who shall be a resident and citizen of the Philippines,
and such other officers as may be provided for in the by laws x
x x
Thus, there are specifically three officers which a corporation
must have under the statute: president, secretary, and
treasurer. However, the law does not limit corporate officers to
these three. Section 25 gives corporations the widest latitude
to provide for such other offices, as they may deem
necessary. The by-laws may and usually do provide for such
other officers, e.g., vice-president, cashier, auditor, and general
manager. The by-laws of petitioner corporation are no
exception. Article V (1) thereof states that one of the powers
vested in the Board of Directors is to appoint such other
officers as they may deem necessary who shall have such
power and shall perform such duties as may from time to time
be prescribed by the Board.[16]
The records clearly show that private respondents position as
Assistant to the President and Personnel & Administrative
Manager is a corporate office under the by-laws of UMC. The
Secretarys Certificate of February 3, 1989, lists the position of
Assistant to the President and Personnel & Administrative
Manager as a corporate office.[17] We have held that one who is
included in the by-laws of an association in its roster of
corporate officers is an officer of said corporation and not a
mere employee.[18] It is also settled that if found regular on its
face, a Secretarys Certification is sufficient to rely on, and
there is no need to investigate the truth of the facts contained
in such certification.[19] No reason has been shown here to
doubt the veracity of the said corporate secretarys
certification. Hence, the inescapable conclusion is that private
respondent was an officer of petitioner UMC.
Section 23 of the Corporation Code provides in part:
Unless otherwise provided in this Code, the corporate powers
of all corporations formed under this Code shall be exercised,
all business conducted, and all property of such corporations
controlled and held by the board of directors or trustees x x x

Under Section 23 of the Corporation Code, directors are thus


charged with the control and management of their
corporation. It is settled that they may appoint officers and
agents and as incident to this power of appointment, they may
discharge those appointed.[20]
From all the foregoing, it becomes clear that the charges filed
by Ms. Go against petitioners partake of the nature of an intracorporate dispute. Similarly, the determination of the rights of
Ms. Go and the concomitant liability of the petitioners arising
from her ouster as a corporate officer, is an intra-corporate
controversy. For the SEC to take cognizance of a case, the
controversy must pertain to any of the following relationships:
(a) between the corporation, partnership or association and the
public; (b) between the corporation, partnership or association
and its stockholders, partners, members, or officers (italics for
emphasis); (c) between the corporation, partnership, or
association and the state so far as its franchise, permit, or
license to operate is concerned; and (d) among the
stockholders, partners, or associates themselves.[21] The
instant case, in our view, is a dispute between a corporation
and one of its officers. As such, Ms. Gos complaint is subject
to the jurisdiction of the SEC, and not the NLRC. Interpreting
Section 5 of Presidential Decree No. 902-A, we have
consistently ruled that it is the SEC that has exclusive and
original jurisdiction over controversies involving removal from a
corporate office.[22]
Private respondent now faults petitioners for failing to raise the
issue of lack of jurisdiction by the NLRC at the earliest possible
time. She contends that since the petitioners actively
participated in the proceedings before the Labor Arbiter and
the NLRC, they are now estopped from assailing the
jurisdiction of the NLRC. Private respondents reliance on the
principle of estoppel to justify the exercise of jurisdiction by the
NLRC over her case is misplaced.
The long-established rule is that jurisdiction over a subject
matter is conferred by law.[23] Estoppel does not apply to confer
jurisdiction to a tribunal that has none over a cause of action.
[24]
Where it appears that the court or tribunal has no
jurisdiction, then the defense may be interposed at any time,
even on appeal[25] or even after final judgment.[26] Moreover, the
principle of estoppel cannot be invoked to prevent this court
from taking up the question of jurisdiction.[27]
To conclude, we find that the NLRC erred in assuming
jurisdiction over, and thereafter in failing to dismiss, the private
respondents complaint for illegal dismissal against petitioners,
because the NLRC is without jurisdiction on the subject matter
of the controversy.
WHEREFORE, the instant petition for certiorari and/or
prohibition is hereby GRANTED. The decision of the National
Labor Relations Commission dated March 29, 1996 and the
resolution of May 28, 1996 denying petitioners motion for
reconsideration are hereby REVERSED and SET ASIDE for
having been rendered without jurisdiction. This ruling is
without prejudice to the private respondents seeking relief, if
so minded, in the proper forum. No pronouncement as to
costs.
SO ORDERED.
G.R. No. 118088 November 23, 1995
MAINLAND CONSTRUCTION, CO., INC., and/or LUCITA LU
CARABUENA, ROBERT L. CARABUENA, ELLEN LU
CARABUENA,
and
MARTIN
LU, petitioners,
vs.
MILA MOVILLA, ERNESTO MOVILLA, JR., MILA JUDITH C.
MOVILLA, JUDE BRIX C. MOVILLA, JONARD ELLERY C.
MOVILLA, AND MAILA JONAH M. QUIMBO, surviving heirs
of ERNESTO MOVILLA, and THE HONORABLE

COMMISSIONER of the NATIONAL LABOR RELATIONS


COMMISSION-5TH DIVISION,respondents.

attorney's fees, with the Department of Labor and Employment,


Regional Arbitration, Branch XI, Davao City.

Petitioners urge this Court to set aside the Decision of the


National Labor Relations Commission (NLRC), dated May 30,
1994,
in
NLRC-CA
No.
M-000949-92 for having been rendered with grave abuse of
discretion amounting to lack of jurisdiction. This reversed the
decision of the Labor Arbiter in case No. RAB-11-10-99883-91.
Petitioners' motion for reconsideration of the NLRC decision
was denied in a Resolution, dated August 31, 1994.

On February 29, 1992, Ernesto Movilla died while the case


was being tried by the Labor Arbiter and was promptly
substituted by his heirs, private respondents herein, with the
consent of the Labor Arbiter.

Mainland Construction Co., Inc. is a domestic corporation, duly


organized and existing under Philippine laws, having been
issued a certificate of registration by the Securities and
Exchange Commission (SEC) on July 26, 1977, under Registry
Number 74691. Its principal line of business is the general
construction of roads and bridges and the operation of a
service shop for the maintenance of equipment. Respondents
on the other hand, are the surviving heirs of complainant,
Ernesto Movilla, who died during the pendency of the action
with the Labor Arbiter.

It is clear that in the case at bar, the controversy presented by


complainant is intra-corporate in nature and is within the
jurisdiction of the Securities and Exchange Commission,
pursuant to P.D. 902-A (Phil. School of Business
Administration, et al. v. Leano, G.R. No. L-58468, February 24,
1984; Dy et al. v. NLRC, et al., G.R. No. L-68544, October 27,
1986). What Movilla is claiming against respondents are his
alleged unpaid salaries and separation pay as Administrative
Manager of the corporation for which position he was
appointed by the Board of Directors. His claims therefore fall
under the jurisdiction of the Securities and Exchange
Commission because this is not a simple labor problem; but a
matter that comes within the area of corporate affairs and
management, and is in fact a corporate controversy in
contemplation of the Corporation Code. (Fortune Cement
Corporation v. NLRC, et al., G.R. No. 79762, January 24,
1991). 5

Records show that Ernesto Movilla, who was a Certified Public


Accountant during his lifetime, was hired as such by Mainland
in 1977. Thereafter, he was promoted to the position of
Administrative Officer with a monthly salary of P4,700.00. 1
Ernesto Movilla, recorded as receiving a fixed salary of
P4,700.00 a month, was registered with the Social Security
System (SSS) as an employee of petitioner Corporation. His
contributions to the SSS, Medicare and Employees
Compensation Commission (ECC) were deducted from his
monthly earnings by his said employer. 2
On April 12, 1987, during petitioner corporation's annual
meeting of stockholders, the following were elected members
of the Board of Directors, viz.: Robert L. Carabuena, Ellen L.
Carabuena, Lucita Lu Carabuena, Martin G. Lu and Ernesto L.
Movilla.

The Labor Arbiter rendered judgment on June 26, 1992,


dismissing the complaint on the ground of lack of jurisdiction.
Specifically, the Labor Arbiter made the following ratiocination:

Aggrieved by this decision, respondents appealed to the


National Labor Relations Commission (NLRC). The NLRC
ruled that the issue in the case was one which involved a labor
dispute between an employee and petitioner corporation and,
thus, the NLRC had jurisdiction to resolve the case. The
dispositive portion of the NLRC decision reads:
WHEREFORE, the assailed decision is Reversed and Set
Aside. Respondents are ordered to pay the heirs of
complainant the following:

On the same day, an organizational meeting was held and the


Board of Directors elected Ernesto Movilla as Administrative
Manager. 3 He occupied the said position up to the time of his
death.

1. Unpaid salaries from January 1989 to September 1991 in


the sum of P155,100.00;

On April 2, 1991, the Department of Labor and Employment


(DOLE) conducted a routine inspection on petitioner
corporation and found that it committed such irregularities in
the conduct of its business as:

3. Moral damages in the sum of P10,000.00;

1. Underpayment of wages under R.A. 6727 and RTWPB-XI01;


2. Non-implementation of Wage Order No. RTWPB-XI-02;
3. Unpaid wages for 1989 and 1990;
4. Non-payment of holiday pay and service incentive leave
pay; and
5. Unpaid 13th month pay (remaining balance for 1990). 4
On the basis of this finding, petitioner corporation was ordered
by DOLE to pay to its thirteen employees, which included
Movilla, the total amount of P309,435.89, representing their
salaries, holiday pay, service incentive leave pay differentials,
unpaid wages and 13th month pay.
All the employees listed in the DOLE's order were paid by
petitioner corporation, except Ernesto Movilla.
On October 8, 1991, Ernesto Movilla filed a case against
petitioner corporation and/or Lucita, Robert, and Ellen, all
surnamed Carabuena, for unpaid wages, separation pay and

2. Separation pay in the sum of P65,800.00;

4. Indemnity in the sum of P3,000.00; and,


5. Attorney's fees equivalent to 10% of the total award. 6
The pivotal issue in this case is which of the two agencies of
the government the NLRC or the SEC has jurisdiction
over the controversy.
As we stated earlier, it is of course the contention of petitioners
that the NLRC committed grave abuse of discretion when it
nullified the decision of the Labor Arbiter which dismissed the
complaint of Movilla for unpaid wages, separation pay and
attorney's fees on the ground of lack of jurisdiction. Petitioners
take the position that, since Ernesto Movilla was a corporate
officer, the controversy as to his compensation is within the
jurisdiction of the SEC as mandated by P.D. 902-A and not with
the NLRC.
We find for the respondents, it appearing that petitioners'
contention is bereft of merit.
In order that the SEC can take cognizance of a case, the
controversy must pertain to any of the following relationships:
a) between the corporation, partnership or association and the
public; b) between the corporation, partnership or association
and its stockholders, partners, members or officers;

c) between the corporation, partnership or association and the


State as far as its franchise, permit or license to operate is
concerned; and d) among the stockholders, partners or
associates themselves. 7 The fact that the parties involved in
the controversy are all stockholders or that the parties involved
are the stockholders and the corporation does not necessarily
place the dispute within the ambit of the jurisdiction of SEC.
The better policy to be followed in determining jurisdiction over
a case should be to consider concurrent factors such as the
status or relationship of the parties or the nature of the
question that is the subject of their controversy. 8 In the
absence of any one of these factors, the SEC will not have
jurisdiction. Furthermore, it does not necessarily follow that
every conflict between the corporation and its stockholders
would involve such corporate matters as only the SEC can
resolve in the exercise of its adjudicatory or quasijudicial powers. 9
In the case at bench, the claim for unpaid wages and
separation pay filed by the complainant against petitioner
corporation involves a labor dispute. It does not involve an
intra-corporate matter, even when it is between a stockholder
and a corporation. It relates to an employer-employee
relationship which is distinct from the corporate relationship of
one with the other. Moreover, there was no showing of any
change in the duties being performed by complainant as an
Administrative Officer and as an Administrative Manager after
his election by the Board of Directors. What comes to the fore
is whether there was a change in the nature of his functions
and not merely the nomenclature or title given to his job.
Indeed, Ernesto Movilla worked as an administrative officer of
the company for several years and was given a fixed salary
every month. To further sustain this assertion Movilla also
submitted a joint affidavit executed by Juanito S. Malubay and
Delia S. Luciano, Project Engineer and Personnel-In-Charge,
respectively, of petitioner corporation, attesting that they
personally knew Movilla and that he was employed in the
company. A Premium Certification issued by an authorized
representative of petitioners was also presented to show his
actual monthly earnings as well as his monthly contributions to
the SSS, Medicare and ECC. 10 Movilla's registration in the
SSS by petitioner corporation added strength to the conclusion
that he was petitioner corporation's employee as coverage by
the said law is predicated on the existence of an employeremployee relationship. 11 Furthermore, petitioner corporation
failed to present evidence which showed that, after his election
as Administrative Manager, he was excluded from the
coverage of the SSS, Medicare and ECC.
He also presented, appearing to be relevant to the issue, the
result of the investigation conducted by DOLE which found that
petitioner corporation has transgressed several labor standard
laws against its employees.
As correctly ruled by the NLRC:
The claims for unpaid salaries/monetary benefits and
separation pay, are not a corporate conflict as respondents
presented them to be. If complainant is not an employee,
respondent should have contested the DOLE inspection report,
What they did was to exclude complainant from the order of
payment . . . and worse, he was not both given responsibilities
and paid his salaries for the succeeding months . . . . This is a
clear case of constructive dismissal without due process . . . 12
The existence of an employer-employee relationship is a
factual question and public respondent's findings are accorded
great weight and respect as the same are supported by
substantial evidence. 13 Hence, we uphold the conclusion of
public respondent that Ernesto Movilla was an employee of
petitioner corporation.

It is pertinent to note that petitioner corporation is not


prohibited from hiring its corporate officers to perform services
under a circumstance which will make him an
employee. 14 Moreover, although a director of a corporation is
not, merely by virtue of his position, its employee, said director
may act as an employee or accept duties that make him also
an employee. 15
Since Ernesto Movilla's complaint involves a labor dispute, it is
the NLRC, under Article 217 of the Labor Code of the
Philippines, which has jurisdiction over the case at bench.
WHEREFORE, the petition is DISMISSED for lack of showing
of any grave abuse of discretion on the part of public
respondent NLRC. The assailed decision of public respondent
is thus AFFIRMED.
SO ORDERED.

LESLIE OKOL,

G.R. No. 160146


Petitioner,

- versus SLIMMERS
WORLD ,*
INTERNATIONAL,
BEHAVIOR
MODIFICATIONS,
INC.,
and
RONALD JOSEPH MOY,
December 11, 2009
Respondents.
DECISION
The Case
Before the Court is a petition for review on
certiorari[1] assailing the Decision[2] dated 18 October 2002 and
Resolution dated 22 September 2003 of the Court of Appeals
in CA-G.R. SP No. 69893, which set aside the Resolutions
dated 29 May 2001 and 21 December 2001 of the National
Labor Relations Commission (NLRC).
The Facts
Respondent Slimmers World International operating
under the name Behavior Modifications, Inc. (Slimmers World)
employed petitioner Leslie Okol (Okol) as a management
trainee on 15 June 1992. She rose up the ranks to become
Head Office Manager and then Director and Vice President
from 1996 until her dismissal on 22 September 1999.
On 28 July 1999, prior to Okols dismissal, Slimmers
World preventively suspended Okol. The suspension arose
from the seizure by the Bureau of Customs of seven Precor
elliptical machines and seven Precor treadmills belonging to or
consigned to Slimmers World. The shipment of the equipment
was placed under the names of Okol and two customs brokers
for a value less than US$500. For being undervalued, the
equipment were seized.
On 2 September 1999, Okol received a memorandum
that her suspension had been extended from 2 September until
1 October 1999 pending the outcome of the investigation on
the Precor equipment importation.
On 17 September 1999, Okol received another
memorandum from Slimmers World requiring her to explain
why no disciplinary action should be taken against her in
connection with the equipment seized by the Bureau of
Customs.

On 19 September 1999, Okol filed her written


explanation. However, Slimmers World found Okols
explanation to be unsatisfactory. Through a letter dated 22
September 1999 signed by its president Ronald Joseph Moy
(Moy), Slimmers World terminated Okols employment.

Okol filed a complaint[3] with the Arbitration branch of the


NLRC against Slimmers World, Behavior Modifications, Inc.
and Moy (collectively called respondents) for illegal
suspension, illegal dismissal, unpaid commissions, damages
and attorneys fees, with prayer for reinstatement and payment
of backwages.
On 22 February 2000, respondents filed a Motion to
Dismiss[4] the case with a reservation of their right to file a
Position Paper at the proper time. Respondents asserted that
the NLRC had no jurisdiction over the subject matter of the
complaint.
In an Order,[5] dated 20 March 2000, the labor arbiter
granted the motion to dismiss. The labor arbiter ruled that
Okol was the vice-president of Slimmers World at the time of
her dismissal. Since it involved a corporate officer, the dispute
was an intra-corporate controversy falling outside the
jurisdiction of the Arbitration branch.
Okol filed an appeal with the NLRC. In a
Resolution[6] dated 29 May 2001, the NLRC reversed and set
aside the labor arbiters order. The dispositive portion of the
resolution states:
WHEREFORE, the Order appealed from is
SET ASIDE and REVERSED. A new one is hereby ENTERED
ordering respondent Behavior Modification, Inc./Slimmers
World International to reinstate complainant Leslie F. Okol to
her former position with full back wages which to date stood in
the amount of P10,000,000.00 computed from July 28, 1999 to
November 28, 2000 until fully reinstated; and the further sum
of P1,250,000.00 as indemnity pay plus attorneys fee
equivalent to ten (10%) of the total monetary award. However,
should reinstatement be not feasible separation pay equivalent
to one month pay per year of service is awarded, a fraction of
at least six months considered one whole year.
All other claims are dismissed for lack of factual or legal
basis.
SO ORDERED.[7]
Respondents filed a Motion for Reconsideration with the
NLRC. Respondents contended that the relief prayed for was
confined only to the question of jurisdiction. However, the
NLRC not only decided the case on the merits but did so in the
absence of position papers from both parties. In a
Resolution[8] dated 21 December 2001, the NLRC denied the
motion for lack of merit.
Respondents then filed an appeal with the Court of
Appeals, docketed as CA-G.R. SP No. 69893.
The Ruling of the Court of Appeals
In a Decision[9] dated 18 October 2002, the
appellate court set aside the NLRCs Resolution dated 29 May
2001 and affirmed the labor arbiters Order dated 20 March
2000. The Court of Appeals ruled that the case, being an intracorporate dispute, falls within the jurisdiction of the regular
courts pursuant to Republic Act No. 8799. [10] The appellate
court added that the NLRC had acted without jurisdiction in
giving due course to the complaint and deprived respondents
of their right to due process in deciding the case on the merits.

Okol filed a Motion for Reconsideration which was


denied in a Resolution[11] dated 22 September 2003.
Hence, the instant petition.
The Issue
The issue is whether or not the NLRC has jurisdiction
over the illegal dismissal case filed by petitioner.
The Courts Ruling
The petition lacks merit.
Petitioner insists that the Court of Appeals erred in ruling
that she was a corporate officer and that the case is an intracorporate dispute falling within the jurisdiction of the regular
courts. Petitioner asserts that even as vice-president, the work
that she performed conforms to that of an employee rather
than a corporate officer. Mere title or designation in a
corporation will not, by itself, determine the existence of an
employer-employee relationship. It is the four-fold test,
namely (1) the power to hire, (2) the payment of wages, (3) the
power to dismiss, and (4) the power to control, which must be
applied.
Petitioner enumerated the instances that she was under the
power and control of Moy, Slimmers Worlds president: (1)
petitioner received salary evidenced by pay slips, (2) Moy
deducted Medicare and SSS benefits from petitioners salary,
and (3) petitioner was dismissed from employment not through
a board resolution but by virtue of a letter from Moy. Thus,
having shown that an employer-employee relationship exists,
the jurisdiction to hear and decide the case is vested with the
labor arbiter and the NLRC.
Respondents, on the other hand, maintain that petitioner was
a corporate officer at the time of her dismissal from Slimmers
World as supported by the General Information Sheet and
Directors Affidavit attesting that petitioner was an officer. Also,
the factors cited by petitioner that she was a mere employee
do not prove that she was not an officer of Slimmers World.
Even the alleged absence of any resolution of the Board of
Directors approving petitioners termination does not constitute
proof that petitioner was not an officer. Respondents assert
that petitioner was not only an officer but also a stockholder
and director; which facts provide further basis that petitioners
separation from Slimmers World does not come under the
NLRCs jurisdiction.
The issue revolves mainly on whether petitioner was an
employee or a corporate officer of Slimmers World. Section 25
of the Corporation Code enumerates corporate officers as the
president, secretary, treasurer and such other officers as may
be provided for in the by-laws. In Tabang v. NLRC,[12] we held
that an office is created by the charter of the corporation and
the officer is elected by the directors or stockholders. On the
other hand, an employee usually occupies no office and
generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation
who also determines the compensation to be paid to such
employee.
In the present case, the respondents, in their motion to
dismiss filed before the labor arbiter, questioned the jurisdiction
of the NLRC in taking cognizance of petitioners complaint. In
the motion, respondents attached the General Information
Sheet[13] (GIS) dated 14 April 1998, Minutes[14] of the meeting of
the Board of Directors dated 14 April 1997 and Secretarys
Certificate,[15] and the Amended By-Laws[16] dated 1 August
1994 of Slimmers World as submitted to the SEC to show that
petitioner was a corporate officer whose rights do not fall within
the NLRCs jurisdiction. The GIS and minutes of the meeting
of the board of directors indicated that petitioner was a

member of the board of directors, holding one subscribed


share of the capital stock, and an elected corporate officer.
The relevant portions of the Amended By-Laws of
Slimmers World which enumerate the power of the board of
directors as well as the officers of the corporation state:

It is a settled rule that jurisdiction over the subject


matter is conferred by law.[20] The determination of the rights
of a director and corporate officer dismissed from his
employment as well as the corresponding liability of a
corporation, if any, is an intra-corporate dispute subject to the
jurisdiction of the regular courts. Thus, the appellate court
correctly ruled that it is not the NLRC but the regular courts
which have jurisdiction over the present case.

Article II
The Board of Directors
1. Qualifications and Election The general
management of the corporation shall be vested in a board of
five directors who shall be stockholders and who shall be
elected annually by the stockholders and who shall serve until
the election and qualification of their successors.
Article III
Officers
4. Vice-President Like the Chairman of the Board and
the President, the Vice-President shall be elected by the Board
of Directors from [its] own members.
The Vice-President shall be vested with all the powers
and authority and is required to perform all the duties of the
President during the absence of the latter for any cause.
The Vice-President will perform such duties as the
Board of Directors may impose upon him from time to time.
xxx
Clearly, from the documents submitted by respondents,
petitioner was a director and officer of Slimmers World. The
charges of illegal suspension, illegal dismissal, unpaid
commissions, reinstatement and back wages imputed by
petitioner against respondents fall squarely within the ambit of
intra-corporate disputes. In a number of cases,[17] we have
held that a corporate officers dismissal is always a corporate
act, or an intra-corporate controversy which arises between a
stockholder and a corporation. The question of remuneration
involving a stockholder and officer, not a mere employee, is not
a simple labor problem but a matter that comes within the area
of corporate affairs and management and is a corporate
controversy in contemplation of the Corporation Code.[18]
Prior to its amendment, Section 5(c) of Presidential
Decree No. 902-A[19] (PD 902-A) provided that intra-corporate
disputes fall within the jurisdiction of the Securities and
Exchange Commission (SEC):
Sec. 5. In addition to the regulatory and adjudicative
functions of the Securities and Exchange Commission over
corporations, partnerships and other forms of associations
registered with it as expressly granted under existing laws and
decrees, it shall have original and exclusive jurisdiction to hear
and decide cases involving:
c) Controversies in the election or appointments of
directors, trustees, officers or managers of such corporations,
partnerships or associations.
Subsection 5.2, Section 5 of Republic Act No. 8799, which took
effect on 8 August 2000, transferred to regional trial courts the
SECs jurisdiction over all cases listed in Section 5 of PD 902A:
5.2. The Commissions jurisdiction over all cases
enumerated under Section 5 of Presidential Decree No. 902-A
is hereby transferred to the Courts of general jurisdiction or the
appropriate Regional Trial Court.

WHEREFORE, we DENY the petition. We AFFIRM the


18 October 2002 Decision and 22 September 2003 Resolution
of the Court of Appeals in CA-G.R. SP No. 69893. This
Decision is without prejudice to petitioner Leslie Okols taking
recourse to and seeking relief through the appropriate remedy
in the proper forum.
SO ORDERED.
G.R. No. 164888

December 6, 2006

RURAL BANK OF CORON (PALAWAN), INC., EMPIRE


COLD STORAGE AND DEVELOPMENT CORPORATION,
CITIZENS DEVELOPMENT INCOPRORATED, CARIDAD B.
GARCIA, SANDRA G. ESCAT, LORNA GARCIA, and OLGA
G.
ESCAT, petitioners,
vs.
ANNALISA CORTES, respondent.
In 1987, Virgilio Garcia, "founder" of petitioner corporations
(the corporations), hired the then still single Annalisa Cortes
(respondent) as clerk of the Rural Bank of Coron (Manila
Office).
After Virgilio died, his son Victor took over the management of
the corporations.
Anita Cortes (Anita), the wife of Victor Garcia, was also
involved in the management of the corporations. Respondent
later married Anitas brother Eduardo Cortes.
Anita soon assumed the position of Vice President of petitioner
Citizens Development Incorporated (CDI) and practically
controlled the financial operations of almost all of the other
corporations in the course of which she allowed some of her
relatives and in-laws, including respondent, to hold several key
sensitive positions thereat.
Respondent later became the Financial Assistant, Personnel
Officer and Corporate Secretary of The Rural Bank of Coron,
Personnel Officer of CDI, and also Personnel Officer and
Disbursing Officer of The Empire Cold Storage Development
Corporation (ECSDC). She simultaneously received salaries
from these corporations.
On examination of the financial books of the corporations by
petitioner Sandra Garcia Escat, a daughter of Virgilio Garcia
who was previously residing in Spain, she found out that
respondent was involved in several anomalies,1drawing
petitioners to terminate respondents services on November
23, 1998 in petitioner corporations.2
By letter of November 25, 19983 addressed to individual
petitioners Caridad B. Garcia (widow of Virgilio Garcia), Sandra
G. Escat, and Olga G. Escat (another daughter of Virgilio
Garcia), respondents counsel conveyed respondents
willingness to abide by the decision to terminate her but
reminded them that she was entitled to separation pay
equivalent to 11 months salary as well as to the other benefits
provided by law in her favor.
Respondents counsel thus demanded the payment of
respondents unpaid salary for the months of October and

November 1998, separation pay equivalent to 12 months


salary,4 13th month pay and other benefits.
As the demand remained unheeded, respondent filed a
complaint5 for illegal dismissal and non-payment of salaries
and other benefits, docketed as NLRC-NCR Case No. 00-0505738-99.

the NLRC New Rules of Procedure. It also noted that


the Motion for Reduction of Bond was "premised on selfserving allegations." It accordingly dismissed the appeal.
Petitioners Motion for Reconsideration15 was denied by the
NLRC by November 26, 2001 Resolution,16 hence, they filed a
Petition for Certiorari17 before the Court of Appeals.

Petitioners moved for the dismissal of the complaint on the


ground of lack of jurisdiction, contending that the case was an
intra-corporate controversy involving the removal of a
corporate officer, respondent being the Corporate Secretary of
the Rural Bank of Coron, Inc., hence, cognizable by the
Securities and Exchange Commission (SEC) pursuant to
Section 5 of PD 902-A.6

By Decision dated May 26, 2004 18, the appellate court


dismissed the petition for lack of merit. Petitioners motion for
reconsideration was also denied by Resolution of August 13,
2004.19

In resolving the issue of jurisdiction, the Labor Arbiter noted as


follows:

It is to be noted that complainant, aside from her being


Corporate Secretary of Rural Bank of Coron,complainant was
likewise appointed as Financial Assistant & Personnel
Officer of all respondents herein, whose services w[ere]
terminated on 23 November 1998, hence, the instant
complaint.
Verily, a Financial Assistant & Personnel Officer is not a
Corporate Officer of the [petitioners] corporation, thus,
pursuant to Article 217 of the Labor Code, as amended, the
instant case falls within the ambit of original and exclusive
jurisdiction of this Office.7 (Emphasis and underscoring
supplied).
Eventually, the Labor Arbiter found for respondent, computing
the monetary award due her as follows:
Backwages

P658,000.00

13th Month Pay for 1998, 1999 & 63,000.00


2000
P721,000.00
Separation Pay

315,000.00

Unpaid Salary

25,900.00

Attorneys fees

106,190.00
P1,168,090.00

Thus, the Labor Arbiter, by Decision of July 18, 2001,


disposed:
WHEREFORE, in view of all the foregoing, respondents are
hereby ordered to jointly and severally pay complainant the
total amount of ONE MILLION ONE HUNDRED SIXTY-EIGHT
THOUSAND NINETY (P1,168,090.00) PESOS as discussed
above.8
On August 13, 2001, the tenth or last day of the period of
appeal,9 petitioners filed a Notice of Appeal and Motion for
Reduction of Bond10 to which they attached a Memorandum on
Appeal.11 In their Motion for Reduction of Bond, petitioners
alleged that the corporations were under financial distress and
the Rural Bank of Coron was under receivership. They thus
prayed that the amount of bond be substantially reduced,
preferably to one half thereof or even lower.12
By Resolution of October 16, 200113, the National Labor
Relations Commission (NLRC), while noting that petitioners
timely filed the appeal, held that the same was not
accompanied by an appeal bond, a mandatory requirement
under Article 22314 of the Labor Code and Section 6, Rule VI of

Hence, this petition,20 petitioners faulting the appellate court


for:

. . . FAIL[URE] TO RULE THAT THE NLRCS RULE OF


PROCEDURE WHICH PROVIDES FOR THE POSTING OF A
BOND AS A CONDITION PRECEDENT FOR PERFECTING
AN APPEAL AS A CONDITION PRECEDENT FOR
PERFECTING AN APPEAL IS CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.
II
. . . DISMISS[ING] PETITIONERS[] PETITION FOR
[CERTIORARI] BASED ON TECHNICALITY AND FAIL[URE]
TO DECIDE THE SAME BASED ON ITS MERIT.
III
. . . DISMISSING PETITIONERS PETITION FOR
CERTIORARI FROM THE DECISION OF THE NLRC FOR
NON-PERFECTION THEREOF.
IV
. . . DISMISSING PETITIONERS PETITION FOR
[CERTIORARI] FROM THE DECISION OF THE NLRC
WITHOUT RESOLVING THE CASE BASED ON ITS MERITS.
V
. . . FAIL[URE] TO DECLARE THAT INDIVIDUAL
PETITIONERS ARE NOT SOLIDARY LIABLE TO PAY THE
RESPONDENT FOR HER MONETARY CLAIM IN VIEW OF
THE ABSENCE OF ANY EVIDENCE SHOWING THAT THEY
WERE MOTIVATED BY ILL-WILL OR MALICE IN SEVERING
HER EMPLOYMENT.
VI
. . . FAIL[URE]
JURISDICTION.21

TO

RESOLVE

THE

ISSUE

OF

While, indeed, respondent was the Corporate Secretary of the


Rural Bank of Coron, she was also its Financial Assistant and
the Personnel Officer of the two other petitioner corporations.22
Mainland Construction Co., Inc. v. Movilla 23 instructs that a
corporation can engage its corporate officers to perform
services under a circumstance which would make them
employees.24
The Labor Arbiter has thus jurisdiction over respondents
complaint.
On the first three assigned errors which bear on whether
petitioners appeal before the NLRC was perfected:
As before the Court of Appeals, petitioners cite Cosico, Jr. v.
NLRC[25] and Taberrah v. NLRC[26] in support of their
contention that their appeal before the NLRC was perfected.

As correctly ruled by the Court of Appeals, however, the cited


cases are not in point.
The appellant in Taberrah filed a motion to fix appeal bond
instead of posting an appeal bond; and the Supreme Court
relaxed the requirement considering that the labor arbiters
decision did not contain a computation of the monetary
award. In Cosico, the appeal bond posted was of insufficient
amount but the Supreme Court ruled that provisions of the
Labor Code on requiring a bond on appeal involving monetary
awards must be given liberal interpretation in line with the
desired objective of resolving controversies on their merits.
Herein, no appeal bond, whether sufficient or not, was ever
filed by the petitioners.27(Italics in the original; emphasis and
underscoring supplied)
Petitioners additionally cite Star Angel Handicraft v.
NLRC[28] to support their position that there is a distinction
between the filing of an appeal within the reglementary period
and its perfection. In the parallel case of Computer Innovations
Center v. National Labor Relations Commission,29 this Court
hesitated to reiterate the doctrine in Star Angel in this wise:
Petitioners
invoke
the
aforementioned
holding
in Star Angel that there is a distinction between the filing of an
appeal within the reglementary period and its perfection, and
that the appeal may be perfected after the said reglementary
period. Indeed, Star Angel held that the filing of a motion for
reduction of appeal bond necessarily stays the reglementary
period for appeal. However, in this case, the motion for
reduction of appeal bond, which was incorporated in the
appeal memorandum, was filed only on the tenth or final day of
the reglementary period. Under such circumstance, the
motion for reduction of appeal bond can no longer be
deemed to have stayed the appeal, and the petitioner
faces the risk, as had happened in this case, of summary
dismissal of the appeal for non-perfection.
Moreover, the reference in Star Angel to the distinction
between the period to file the appeal and to perfect the appeal
has been pointedly made only once by this Court in Gensoli v.
NLRC thus, it has not acquired the sheen of venerability
reserved for repeatedly-cited cases. The distinction, if any, is
not particularly evident or material in the Labor Code; hence,
the reluctance of the Court to adopt such doctrine.
Moreover,the present provision in the NLRC Rules of
Procedure, that "the filing of a motion to reduce bond shall not
stop the running of the period to perfect appeal" flatly
contradicts the notion expressed in Star Angel that there
is a distinction between the filing an appeal and perfecting
an appeal.
Ultimately, the disposition of Star Angel was premised on the
ruling that a motion for reduction of the appeal bond
necessarily stays the period for perfecting the appeal, and that
the employer cannot be expected to perfect the appeal by
posting the proper bond until such time the said motion for
reduction is resolved. The unduly stretched-out distinction
between the period to file an appeal and to perfect an
appeal was not material to the resolution of Star Angel,
and this could be properly considered as obiter
dictum.30 (Italics in the original; emphasis and underscoring
supplied)
The appellate court did not thus err in dismissing the petition
before it. And contrary to petitioners assertion, the appellate
court dismissed its petition not "on a mere technicality." For the
non-posting of an appeal bond within the reglementary period
divests the NLRC of its jurisdiction to entertain the appeal.
Thus, in the same case ofComputer Innovations Center, this
Court held:

Petitioners also characterize the appeal bond requirement as a


technical rule, and that the dismissal of an appeal on purely
technical grounds is frowned upon. However, Article 223,
which prescribes the appeal bond requirement, is a rule of
jurisdiction and not of procedure. There is a little leeway for
condoning a liberal interpretation thereof, and certainly none
premised on the ground that its requirements are mere
technicalities. It must be emphasized that there is no inherent
right to an appeal in a labor case, as it arises solely from grant
of statute, namely the Labor Code.
We have indeed held that the requirement for posting the
surety bond is not merely procedural butjurisdictional and
cannot be trifled with. Non-compliance with such legal
requirements is fatal and has the effect of rendering the
judgment final and executory. The petitioners cannot be
allowed to seek refuge in a liberal application of rules for their
act of negligence.31 (Emphasis and underscoring supplied)
It bears emphasis that all that is required to perfect the appeal
is the posting of a bond to ensure that the award is eventually
paid should the appeal be dismissed. Petitioners should thus
have posted a bond, even if it were only partial, but they did
not. No relaxation of the Rule may thus be considered.32
In
the
case
at
bar, petitioner
did
not
post
a full or partial appeal bond within the prescribed period, thus,
no appeal was perfected from the decision of the Labor Arbiter.
For this reason, the decision sought to be appealed to the
NLRC had become final and executory and therefore
immutable. Clearly then, the NLRC has no authority to
entertain the appeal, much less to reverse the decision of the
Labor Arbiter. Any amendment or alteration made which
substantially affects the final and executory judgment is null
and void for lack of jurisdiction, including the entire proceeding
held for that purpose.33 (Emphasis and underscoring supplied)
As the decision of the Labor Arbiter had become final and
executory, a discussion of the fourth and fifth assigned errors is
no longer necessary.
WHEREFORE, the petition is DENIED.
SO ORDERED.
ATTY. VIRGILIO R. GARCIA,
Petitioner,
- versus EASTERN TELECOMMUNICATIONS
PHILIPPINES, INC. and ATTY.SALVADOR C.
HIZON,
Respondents.
x----------------------x
EASTERN TELECOMMUNICATIONS
PHILIPPINES, INC. and ATTY.SALVADOR C.
HIZON,
Petitioners,
- versus
ATTY. VIRGILIO R. GARCIA,
Respondent.
x- - - - - - - - -- - - - - - - - - - - - - - - - - - - - - -x
Assailed
before
Us via consolidated
petitions
for certiorari under Rule 45 of the Rules of Court is the
Decision[1] of the Court of Appeals in CA-G.R. SP No. 88887
and No. 89066 dated 24 March 2006, which dismissed the
petitions for certiorari questioning the Decision[2] of the National
Labor Relations Commission (NLRC) dated 21 March 2003,
docketed as NLRC NCR CA No. 028901-01. The NLRC
reversed the decision of the Labor Arbiter dated 30 September
2002, finding the preventive suspension and dismissal of

Atty. Virgilio R. Garcia illegal, and dismissed the case for lack
of jurisdiction.

reconsideration[17] of the decision, but the same was denied.


[18]
Consequently, the case was re-raffled to Labor Arbiter
Ramon Valentin C. Reyes.[19]

The facts are not disputed.

Atty. Virgilio R. Garcia was the Vice President and Head of


Business Support Services and Human Resource Departments
of the Eastern Telecommunications Philippines, Inc. (ETPI).

ETPI is a corporation duly organized and existing under the


laws of the Republic of the Philippines.

Atty. Salvador C. Hizon is the President/Chief Executive Officer


of ETPI.

On 16 January 2000, Atty. Garcia was placed under preventive


suspension based on three complaints for sexual harassment
filed by Atty. Maria Larrie Alinsunurin, former manager of
ETPIs Office of the Legal Counsel; Ms. Emma Valeros-Cruz,
Assistant Vice President of ETPI and former secretary of Atty.
Garcia; and Dr. Mercedita M. Macalintal, medical
retainer/company physician of ETPI. In response to the
complaints, the Human Resources Department constituted a
Committee on Decorum to investigate the complaints. By
reason of said complaints, Atty. Garcia was placed in
preventive suspension. The committee conducted an
investigation where Atty. Garcia was given copies of affidavits
of the witnesses against him and a chance to defend himself
and to submit affidavits of his witnesses. The Committee
submitted a report which recommended his dismissal.[3] In a
letter dated 14 April 2000, Atty. Hizon advised Atty. Garcia that
his employment with ETPI was, per recommendation of the
Committee, terminated effective 16 April 2000.

A complaint-affidavit for illegal dismissal with prayer for full


backwages[4] and recovery of moral and exemplary damages
was filed on 11 July 2000 by Atty. Virgilio R. Garcia against
ETPI and Atty. Salvador C. Hizon. [5] The case, docketed as
NLRC NCR-30-07-02787-00, was assigned to Labor Arbiter
Patricio P. Libo-on. The parties submitted their respective
position papers,[6] reply position papers[7] and rejoinders.[8] Per
agreement of the parties, ETPI and Atty. Hizon filed a surrejoinder on 6 March 2001.[9] Atty. Garcia manifested that he
was no longer submitting a sur-rejoinder and was submitting
the case for resolution.
On 15 April 2001, Atty. Garcia filed a Motion to Inhibit, praying
that Labor Arbiter Libo-on inhibit himself from further
proceeding with the case, on the ground that he was a
fraternity brother of Atty. Hizon. [10] Atty. Garcia thereafter filed a
second Motion to Inhibit[11] on 10 May 2001. ETPI and Atty.
Hizon opposed said motion, arguing that the reason on which it
was grounded was not one of those provided by law.[12] In an
Order dated 13 June 2001, said motions were denied.[13] Atty.
Garcia appealed said order before the NLRC via a
Memorandum on Appeal dated 4 July 2001,[14] to which ETPI
and Atty. Hizon filed an Answer.[15]

The NLRC, in its decision dated 20 December 2001, set aside


the order of Labor Arbiter Libo-on and ordered the re-raffling of
the case.[16] ETPI and Atty. Hizon moved for the

The parties were directed to submit their respective


memoranda.[20] Atty. Garcia filed his memorandum [21] on 9 July
2002 while ETPI and Atty. Hizon submitted their
memorandum[22] on 22 July 2002. On 16 August 2002, with
leave of court, ETPI and Atty. Hizon filed a Reply
Memorandum, raising for the first time the issue of lack of
jurisdiction.

In his decision dated 30 September 2002, Labor Arbiter


Reyes found the preventive suspension and subsequent
dismissal of Atty. Garcia illegal. The dispositive portion of the
decision reads:

WHEREFORE, premises all considered, judgment is hereby


rendered, finding the preventive suspension and the dismissal
illegal and ordering the respondents to:

1. Reinstate complainant to his former position without loss of


seniority rights and other benefits appurtenant to the position
that complainant received prior to the illegal dismissal;

2. Pay complainant his backwages which for purpose of appeal


is computed to the amount of P4,200,000.00 (P150,000 x 28);

3. Pay complainant Moral damages in the amount


of P1,000,000.00 and Exemplary damages in the amount
of P500,000.00.[23]

On 14 November 2002, Atty. Garcia filed an Ex-Parte Motion


for the Issuance of a Writ of Execution. [24] On 20 November
2002, Labor Arbiter Reyes issued a Writ of Execution insofar
as the reinstatement aspect of the decision was concerned.
[25]
ETPI and Atty. Hizon filed a Very Urgent Motion to
Lift/Quash Writ of Execution on 28 November 2002.[26] Per
Sheriffs Return on the Writ of Execution, said writ remained
unsatisfied because ETPI and Atty. Hizon refused to reinstate
Atty. Garcia to his former position.[27]

On 29 November 2002, Atty. Garcia filed an Ex-Parte Motion


for the Issuance of an Alias Writ of Execution praying that said
writ be issued ordering the sheriff to enforce the decision by
garnishing the amount of P450,000.00 representing his
monthly salaries for two months and 13 th month pay from any
of ETPIs bank accounts.[28] Atty. Garcia manifested that he was
no longer filing any responsive pleading to the Very Urgent
Motion to Lift/Quash Writ of Execution because the Labor
Arbiter lost jurisdiction over the case when an appeal had been
perfected.[29] In an Order dated 10 December 2002, Labor
Arbiter Reyes denied the Very Urgent Motion to Lift/Quash Writ
of Execution, explaining that it still had jurisdiction over the
reinstatement aspect of the decision, notwithstanding the
appeal taken, and that the grounds relied upon for the lifting or
quashing of the writ were not valid grounds.[30] Labor Arbiter

Reyes subsequently issued a 1st Alias Writ of Execution


dated 11 December 2002 ordering the sheriff to proceed to the
premises of ETPI to reinstate Atty. Garcia and/or garnish the
amounts prayed for.[31] Per Sheriffs Return dated 17 January
2003, the 1st Alias Writ of Execution was satisfied with the
amount of P450,000.00 being released for proper disposition to
Atty. Garcia.[32]

ETPI and Atty. Hizon appealed the decision to the NLRC, filing
a Notice of Appeal and Memorandum of Appeal,[33] which
appeal was opposed by Atty. Garcia.[34] The appeal was
docketed as NLRC NCR CA Case No. 028901-01. ETPI and
Atty. Hizon filed a Supplemental Appeal Memorandum
dated 23 January 2003 (With Very Urgent Motion for Issuance
of Temporary Restraining Order).[35] In a Manifestation ad
Cautelam dated 28 January 2003, without waiving their right to
continue to question the jurisdiction of the Labor Arbiter, they
informed the Labor Arbiter that they had filed a Supplemental
Appeal Memorandum before the NLRC and asked that all
processes relating to the implementation of the reinstatement
order be held in abeyance so as not to render moot the reliefs
prayed for in said Supplemental Appeal Memorandum.[36] They
likewise filed on 31 January 2003 a Very Urgent Motion to
Lift/Quash Order of Garnishment ad Cautelam, praying that the
notice of garnishment on ETPIs bank account with Metrobank,
Dela Costa Branch, or with other banks with which ETPI
maintained an account and which received said notice of
garnishment be immediately lifted/quashed.[37] On 12 February
2003, Atty. Garcia filed his Opposition to said Supplemental
Appeal Memorandum.[38]
On 3 February 2003, Atty. Garcia filed an Ex-Parte Motion for
the Issuance of a 2nd Alias Writ of Execution.[39] In an Order
dated 5 February 2003, Labor Arbiter Reyes lifted the notice of
garnishment on ETPIs bank account with Metrobank, Dela
Costa Branch.[40] On 10 February 2003, Labor Arbiter Reyes
issued a 2nd Writ of Execution.[41]
In a Manifestation ad Cautelam[42] dated 10 February 2003,
ETPI and Atty. Hizon said that they filed with the NLRC on 7
February 2003 an Urgent Petition (for Preliminary Injunction
With Issuance of Temporary Restraining Order) [43] which
prayed, inter alia, for the issuance of a temporary restraining
order to restrain the execution pending appeal of the order of
reinstatement and to enjoin the Labor Arbiter from issuing writs
of execution or other processes implementing the decision
dated 30 September 2002. They added that they also filed
on 7 February 2003 a Notice to Withdraw[44] their Supplemental
Appeal Memorandum dated 23 January 2003.
ETPI and Atty. Hizon, without waiving their right to continue to
question the jurisdiction of the Labor Arbiter over the case, filed
on 18 February 2003 a Motion to Inhibit, seeking the inhibition
of Labor Arbiter Reyes for allegedly evident partiality in favor of
the complainant in issuing writs of execution in connection with
the order of reinstatement contained in his decision dated 30
September 2002, despite the pendency of an Urgent Petition
(for Preliminary Injunction With Prayer for the Issuance of
Temporary Restraining Order) with the NLRC, which sought
the restraining of the execution pending appeal of the order of
reinstatement.[45] The petition for injunction was docketed
as NLRC NCR IC No. 0001193-02. Atty. Garcia filed an
opposition,[46] to which ETPI and Atty. Hizon filed a reply.
[47]
Said motion to inhibit was subsequently granted by Labor
Arbiter Reyes.[48] The case was re-raffled to Labor Arbiter Elias
H. Salinas.[49]
In an Order dated 26 February 2003, the NLRC, in NLRC NCR
IC No. 0001193-02, issued a temporary restraining order
(TRO) enjoining Labor Arbiter Reyes from executing pending
appeal the order of reinstatement contained in his decision

dated 30 September 2002, and from issuing similar writs of


execution pending resolution of the petition for preliminary
injunction. It directed ETPI and Atty. Hizon to post a bond in
the amount of P30,000.00 to answer for any damage which
Atty. Garcia may suffer by reason of the issuance of the TRO.
[50]

On 21 March 2003, the NLRC rendered its decision in NLRC


NCR CA Case No. 028901-01 reversing the decision of
Labor Arbiter Reyes and dismissing the case for lack of
jurisdiction. The decretal portion of the decision reads:

WHEREFORE, the decision appealed from is


REVERSED, and the instant case DISMISSED for lack of
jurisdiction.[51]

The Commission ruled that the dismissal of Atty. Garcia, being


ETPIs Vice President, partook of the nature of an intracorporate dispute cognizable by Regional Trial Courts and not
by Labor Arbiters. It added that ETPI and Atty. Hizon were not
barred by estoppel from challenging the jurisdiction of the
Labor Arbiter over the instant case.
Atty. Garcia moved for the reconsideration[52] of the decision,
which ETPI and Atty. Hizon opposed.[53] In a resolution
dated 16 December 2003, the motion for reconsideration was
denied for lack of merit.[54]
On 26 March 2003, Atty. Garcia filed a Motion to Inhibit,
requesting Associate Commissioner Angelita A. Gacutan to
inhibit herself from further participating in the deliberation and
resolution of the case for manifest bias and partiality in favor of
ETPI and Atty. Hizon. The motion was later withdrawn.[55]
On 3 April 2003, the NLRC made permanent the TRO it issued
pursuant to its ruling in NLRC NCR CA Case No. 02890101, that since the Labor Arbiter had no jurisdiction over the
case, the decision of the Labor Arbiter dated 30 September
2002 was void.[56]
On 6 March 2004, the resolution dated 16 December
2003 became final and executory. Consequently, on 14 June
2004, an entry of judgment was made recording said resolution
in the Book of Entries of Judgments.[57]
On 18 June 2004, ETPI and Atty. Hizon filed a Motion to
Discharge and/or Release the Appeal Bond[58] in the amount
of P5,700,000.00 that they had posted. [59]
On 9 July 2004, Atty. Garcia filed a Motion to Set Aside Finality
of Judgment With Opposition to Motion to Discharge Appeal
Bond,[60] claiming that he did not receive the resolution dated
16 December 2003 of the NLRC, the same having been sent to
his former address at 9 Isidora St., Don Antonio Heights,
Diliman, Quezon City, and not to his new address at 4 Pele St.,
Filinvest 2, Batasan Hills, Quezon City, where he had been
receiving all pleadings, Resolutions, Orders and Decisions
pertaining to the instant case since April 2001. On 19 July
2004, ETPI and Atty. Hizon filed their opposition
thereto. On 23 August 2004, the NLRC, admitting that it
missent the resolution dated 16 December 2003 denying Atty.
Garcias motion for reconsideration, issued an order granting
the motion. It recalled and set aside the Entry of Judgment
dated 14 June 2004 and denied the Motion to Discharge
and/or Release the Appeal Bond.[61]

In its Motion for Reconsideration dated 17 September 2004,


ETPI and Atty. Hizon argued that the NLRC correctly sent the
resolution of 16 December 2003 to counsels allegedly old
address, considering that same was counsels address of
record, there being no formal notice filed with the NLRC
informing it of a change of address. They contended that the
aforesaid resolution had become final and executory, and that
Atty. Garcia should bear the consequences of his inequitable
conduct and/or gross negligence.[62] On 10 January 2005, the
NLRC denied the motion for reconsideration.[63]
On 14 March 2005, Atty. Garcia appealed to the Court of
Appeals via a Petition for Certiorari. It prayed that the Decision
dated 21 March 2003 and resolution dated16 December
2003 of the NLRC be annulled and set aside, and that the
decision of the Labor Arbiter dated 30 September 2002 be
reinstated.[64] The appeal was docketed as CA-G.R. SP No.
88887.
On 28 March 2005, ETPI and Atty. Hizon likewise filed a
Petition for Certiorari asking that the Orders dated 23 August
2004 and 10 January 2005 of the NLRC be set aside; that its
resolution dated 16 December 2003 be declared final and
executory; and that the NLRC be directed to discharge and/or
release Supersedeas Bond No. JCL (15) 00823 SICI Bond No.
75069 dated 18 November 2002 posted by them.[65] The
appeal was docketed as CA-G.R. SP No. 89066.
Upon motion of Atty. Garcia, the two petitions for certiorari
were consolidated.[66]
On 24 March 2006, the assailed decision of the Court of
Appeals was rendered, the dispositive portion reading:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the
consolidated petitions are hereby DISMISSED for lack of
merit. Without costs in both instances.[67]
The appellate court, on ETPI and Atty. Hizons
argument that Atty. Garcias petition for certiorari was filed out
of time, ruled that the NLRC did not commit grave abuse of
discretion in liberally applying the rules regarding changes in
the address of counsel. It likewise ruled that Atty. Garcia,
being the Vice President for Business Support Services and
Human Resource Departments of ETPI, was a corporate
officer at the time he was removed. Being a corporate officer,
his removal was a corporate act and/or an intra-corporate
controversy, the jurisdiction of which rested with the Securities
and Exchange Commission (now with the Regional Trial
Court), and not the Labor Arbiter and the NLRC. It added that
ETPI and Atty. Hizon were not estopped from questioning the
jurisdiction of the Labor Arbiter before the NLRC on appeal,
inasmuch as said issue was seasonably raised by ETPI and
Atty. Hizon in their reply memorandum before the Labor Arbiter.
On 18 April 2006, Atty. Garcia filed his Motion for
Reconsideration.[68] On 20 April 2006, ETPI and Atty. Hizon
filed a Motion for Partial Reconsideration. [69] The parties filed
their respective comments thereon.[70] On 14 June 2006, the
Court of Appeals denied the motions for reconsideration.[71]
Atty. Garcia is now before us via a Petition for Review,
which he filed on 3 August 2006.[72] The petition was docketed
as G.R. No. 173115. On 8 August 2006, he filed an Amended
Petition for Review.[73] He prays that the decision of the NLRC
dated 21 March 2003 and its resolution dated 16 December
2003, and the decision of the Court of Appeals dated 24 March
2006 and its resolution dated 14 June 2006, be reconsidered
and set aside and that the decision of the Labor Arbiter
dated 30 September 2002 be affirmed and reinstated.
ETPI and Atty. Hizon are also before us by way of a
Petition for Certiorari.[74] The petition which was filed on 6 July
2006 was docketed as G.R. Nos. 173163-64.

In our resolution dated 30 August 2006, G.R. Nos.


173163-64 were consolidated with G.R. No. 173115, and the
parties were required to comment on the petitions within ten
days from notice. [75] Atty. Garcia filed his comment on 13
November 2006,[76] while ETPI and Atty. Hizon filed theirs on 29
November 2006.[77]
On 15 January 2007, we noted the comments filed by
the parties and required them to file their Replies to said
comments.[78] ETPI and Atty. Hizon[79] filed their Reply on 26
February 2007, with Atty. Garcia filing his on 2 March 2007.[80]
On 26 March 2007, we gave due course to the petitions
and required the parties to submit the respective memoranda
within 30 days from notice.[81] Atty. Garcia submitted his
Memorandum[82] on 12 June 2007 and ETPI and Atty. Hizon
filed theirs on 13 July 2007.[83] With leave of court, ETPI and
Atty. Hizon filed a reply memorandum.[84]
Atty. Garcia raises the lone issue:
WHETHER THE QUESTION OF LEGALITY OR ILLEGALITY
OF THE REMOVAL OR TERMINATION OF EMPLOYMENT
OF AN OFFICER OF A CORPORATION IS AN INTRACORPORATE CONTROVERSY THAT FALLS UNDER THE
ORIGINAL EXCLUSIVE JURISDICTION OF THE REGIONAL
TRIAL COURTS?[85]
ETPI and Atty. Hizon argue that the Court of Appeals, in
ruling that the NLRC did not commit grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing its order
dated 23 August 2004 and its resolution dated 10 January
2005, committed grave reversible error and decided questions
of substance in a way not in accordance with law and
applicable decisions of the Honorable Court, and departed
from the accepted and usual course of judicial proceedings,
necessitating the Honorable Courts exercise of its power of
supervision.
I
THE RESOLUTION DATED 16 DECEMBER 2003 ISSUED BY
THE NATIONAL LABOR RELATIONS COMMISSION
(SECOND DIVISION) HAS ALREADY BECOME FINAL AND
EXECUTORY AND HAS VESTED UPON PETITIONERS ETPI,
ET AL. A RIGHT RECOGNIZED AND PROTECTED UNDER
THE LAW CONSIDERING THAT:
A.
RESPONDENTS COPY OF SAID RESOLUTION WAS
PROPERLY SENT TO HIS ADDRESS OF RECORD, AT THE
LATEST ON 15 JANUARY 2004, IN ACCORDANCE WITH
WELL
ESTABLISHED
JURISPRUDENCE. HENCE,
RESPONDENT GARCIA HAD ONLY UNTIL 15 MARCH
2004 WITHIN WHICH TO FILE HIS PETITION FOR
CERTIORARI
WITH
THE
COURT
OF
APPEALS. RESPONDENT GARCIA FAILED TO FILE HIS
PETITION FOR CERTIORARI BY SAID DATE.
B.
NOTWITHSTANDING
THE
FOREGOING,
RESPONDENT GARCIA HAD ACTUAL NOTICE OF THE
ISSUANCE OF THE SAME AS OF 24 JUNE 2004. HENCE
RESPONDENT GARCIA HAD ONLY UNTIL 23 AUGUST
2004 WITHIN WHICH TO FILE HIS PETITION FOR
CERTIORARI
WITH
THE
COURT
OF
APPEALS. RESPONDENT GARCIA FAILED TO FILE HIS
PETITION FOR CERTIORARI BY SAID DATE.
C.
EVEN IF THE DATE OF RECEIPT IS RECKONED
FROM 15 SEPTEMBER 2005, THE DATE RESPONDENT
GARCIA ADMITTED IN HIS PETITION FOR CERTIORARI TO
BE THE DATE OF HIS RECEIPT OF THE COPY OF THE
RESOLUTION DATED 16 DECEMBER 2003 AT HIS
ALLEGED NEW ADDRESS, RESPONDENT GARCIA HAD
ONLY UNTIL 15 NOVEMBER 2005 TO FILE HIS PETITION

FOR CERTIORARI DATED 11 MARCH 2005. RESPONDENT


GARCIA FAILED TO FILE HIS PETITION FOR CERTIORARI
BY SAID DATE.

ARTICLE V

II

Officers

THE COURT OF APPEALS ERRED IN AFFIRMING THE


NLRCS LIBERAL APPLICATION OF RULES CONSIDERING
THAT A LIBERAL APPLICATION OF RULES CANNOT BE
USED TO DEPRIVE A RIGHT THAT HAS ALREADY IPSO
FACTO VESTED ON PETITIONERS ETPI, ET AL.

Section 1. Number. The officers of the Company shall


be a Chairman of the Board, a President, one or more VicePresidents, a Treasurer, a Secretary, an Assistant Secretary,
and such other officers as may be from time to time be elected
or appointed by the Board of Directors. One person may hold
any two compatible offices.[95]

III
THE COURT OF APPEALS ERRED IN RULING THAT THE
NLRC DID NOT COMMIT GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
ISSUING ITS ORDER DATED 23 AUGUST 2004 AND
RESOLUTION DATED 10 JANUARY 2005 CONSIDERING
THAT RESPONDENT GARCIA MAY NOT ASSAIL THE
FINALITY OF RESOLUTION DATED 16 DECEMBER 2003
THROUGH A MERE MOTION.
IV
THE COURT OF APPEALS ERRED IN FAILING TO RULE ON
PETITIONERS COUNTER-MOTION TO CITE RESPONDENT
GARCIA IN CONTEMPT OF COURT DESPITE ITS
PREVIOUS RESOLUTION DATED 30 MAY 2005 STATING
THAT IT SHALL ADDRESS THE SAME IN THE DECISION ON
THE MERITS OF THE CASE.[86]
The issue raised by Atty. Garcia whether the
termination or removal of an officer of a corporation is an intracorporate controversy that falls under the original exclusive
jurisdiction of the regional trial courts is not novel. The
Supreme Court, in a long line of cases, has decreed that a
corporate officers dismissal or removal is always a
corporate act and/or an intra-corporate controversy, over
which the Securities and Exchange Commission [SEC] (now
the Regional Trial Court)[87] has original and exclusive
jurisdiction.[88]
We have ruled that an intra-corporate controversy is one
which pertains to any of the following relationships: (1)
between the corporation, partnership or association and the
public; (2) between the corporation, partnership or association
and the State insofar as the formers 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.[89] In Lozon v. National
Labor Relations Commission,[90] we declared that Presidential
Decree No. 902-A confers on the SEC original and exclusive
jurisdiction to hear and decide controversies and cases
involving intra-corporate and partnership relations between or
among the corporation, officers and stockholders and partners,
including their elections or appointments x x x.
Before a dismissal or removal could properly fall within
the jurisdiction of the SEC, it has to be first established that the
person removed or dismissed was a corporate officer.
[91]
Corporate officers in the context of Presidential Decree
No. 902-A[92] are those officers of the corporation who are
given that character by the Corporation Code or by the
corporations by-laws.[93] There are three specific officers
whom a corporation must have under Section 25 of the
Corporation Code.[94] These are the president, secretary and
the treasurer. The number of officers is not limited to these
three. A corporation may have such other officers as may be
provided for by its by-laws like, but not limited to, the vicepresident, cashier, auditor or general manager. The number of
corporate officers is thus limited by law and by the
corporations by-laws.

In the case before us, the by-laws of ETPI provide:

Atty. Garcia tries to deny he is an officer of ETPI. Not being a


corporate officer, he argues that the Labor Arbiter has
jurisdiction over the case. One of the corporate officers
provided for in the by-laws of ETPI is the Vice-President. It
can be gathered from Atty. Garcias complaint-affidavit that he
was Vice President for Business Support Services and Human
Resource Departments of ETPI when his employment was
terminated effective 16 April 2000. It is therefore clear from the
by-laws and from Atty. Garcia himself that he is a corporate
officer. One who is included in the by-laws of a corporation in
its roster of corporate officers is an officer of said corporation
and not a mere employee. [96] Being a corporate officer, his
removal is deemed to be an intra-corporate dispute cognizable
by the SEC and not by the Labor Arbiter.
We agree with both the NLRC and the Court of Appeals that
Atty. Garcias ouster as Vice-President, who is a corporate
officer of ETPI, partakes of the nature of an intra-corporate
controversy, jurisdiction over which is vested in the SEC (now
the RTC). The Labor Arbiter thus erred in assuming
jurisdiction over the case filed by Atty. Garcia, because he had
no jurisdiction over the subject matter of the controversy.
Having ruled which body has jurisdiction over the instant case,
we find it unnecessary, due to mootness, to further discuss and
rule on the issues raised by ETPI and Atty. Hizon regarding the
NLRC order dated 23 August 2004 granting Atty. Garcias
Motion to Set Aside Finality of Judgment with Opposition to
Motion to Discharge Appeal Bond, and its resolution dated 10
January 2005 denying their motion for reconsideration
thereon. The decision of the Labor Arbiter, who had jurisdiction
over the case, was properly dismissed by the
NLRC. Consequently, Supersedeas Bond No. JCL (15) 00823
SICI Bond No. 75069 dated 18 November 2002, posted by
ETPI as a requirement for the filing of an appeal before the
NLRC, is ordered discharged.
WHEREFORE,
premises
considered,
the
petition
for certiorari of Atty. Garcia in G.R. No. 173115 is
hereby DENIED. The petition for review on certiorari of ETPI
and Atty. Hizon in G.R. Nos. 173163-64 is PARTIALLY
GRANTED insofar as the discharge of Supersedeas Bond No.
JCL (15) 00823 SICI Bond No. 75069 dated 18 November
2002 is concerned. This ruling is without prejudice to Atty.
Garcias taking recourse to and seeking relief through the
appropriate remedy in the proper forum.
SO ORDERED.
MIRIAM B. ELLECCION VDA. DE LECCIONES,
Petitioner,
- versus NATIONAL LABOR RELATIONS COMMISSION, NNA
PHILIPPINES CO., INC. and MS. KIMI KIMURA,
Respondents.
G.R. No. 184735
Promulgated:
September 17, 2009

x --------x
We resolve the motion for reconsideration[1] of our
Resolution[2] dated December 8, 2008 denying the petition for
review on certiorari[3] filed on November 10, 2004 by petitioner
Miriam B. Elleccion Vda. de Lecciones.
The case arose on November 8, 2002 when the petitioner filed
a complaint[4] for illegal dismissal with several money claims
against the NNA Philippines Co., Inc. (respondent). The
respondent, a research and translation service company with
less than ten (10) employees, is a wholly-owned subsidiary of
NNA Japan Co., Ltd.[5] (NNA Japan).
The respondent employed the petitioner on August 1,
1997, and she held various positions in the company, the latest
of which as Administrator.[6] Additionally, she served as
Corporate Secretary until July 3, 2002. She alleged that she
usually worked from 9:00 a.m. to 10:00 p.m. - 12:00 midnight
and sometimes even until 2:00 a.m. or 9:00 a.m.[7] She
claimed that the respondent promised to compensate her for
extra hours, as well as for doing tasks other than that what she
was contracted for.
On May 17, 2002, the Board of Directors of NNA Japan
decided to streamline the operations of its subsidiaries
including the respondent, and thus issued a memorandum
directing the respondent to transfer the corporate secretarys
functions to the external counsel. The memorandum also gave
management the discretion to determine which positions
should be declared redundant.[8]
On July 4, 2002, the respondents Board of Directors held an
organizational meeting where the petitioner was not re-elected
as corporate secretary. The board also directed the
respondents President at the time, Ms. Kimi Kimura (Kimura),
to reorganize the corporation and abolish any redundant
position.[9]
On October 17, 2002, the petitioner received a notice of
termination of employment on the ground that her position as
Administrator had been declared redundant.[10] On the same
day, the respondent filed a report of the petitioners separation
from service with the Office of the Department of Labor and
Employment in the National Capital Region (DOLE-NCR).[11]
On November 15, 2002, the respondent issued the petitioner a
memorandum advising her of the release of checks in her favor
representing her salary and accrued benefits including her
separation pay.[12] On the same day, she accepted the checks
for her last salary (P23,097.13); 13th month pay (P46,084.00);
unused leave credits for seven (7) days (P8,028.10); year-end
tax refund (P803.24); and reimbursement of advances made to
the company (P71,197.05). She refused to accept the check
representing her separation pay in the amount of P244, 182.07
(based on her salary and allowances).[13]
On January 16, 2004, Labor Arbiter Aliman D. Mangandog
dismissed the complaint for lack of merit, but ordered the
respondent to pay the petitioner separation pay computed at
one (1) months salary for every year of service.[14] The
petitioner appealed the decision to the National Labor
Relations Commission (NLRC).
In a decision promulgated on May 15, 2006,[15] the NLRC
affirmed the petitioners separation from the service; modified
the monetary benefits awarded to her; and affirmed the
Arbiters denial of the petitioners claim for additional
compensation as corporate secretary on the ground that it was
an intra-corporate matter. In addition to the separation pay of
P244,182.07, the NLRC ordered the petitioner reimbursement
of cash advances made by the petitioner to the company
amounting to P248,712.72.

The petitioner moved for a partial reconsideration of the NLRC


decision, but the NLRC denied the motion on June 30, 2006.
[16] The petitioner then elevated the case to the Court of
Appeals (CA) through a petition for certiorari under Rule 65 of
the Rules of Court.
In its decision of August 28, 2008,[17] the CA denied the
petition. The appellate court held that the decision was
rendered on the basis of credible evidence and existing law.
Petitioner was validly terminated from employment. The CA
set aside the NLRCs ruling that the petitioners money claims
involved an intra-corporate matter which was outside of its
jurisdiction. It held that the labor tribunals had jurisdiction over
the claim since it was made by the petitioner as an employee,
not as a corporate officer. Nonetheless, the CA denied her
claim for overtime pay on the main ground that, as a
managerial employee, she is not entitled to overtime pay under
the law and the rules.[18]
The petitioner moved for reconsideration of the CAs decision,
but was denied through a resolution issued on September 26.
2008.[19] The petitioner appealed to this Court on November
10, 2008 pursuant to Rule 45 of the Rules of Court.[20]
In a Resolution dated December 8, 2008,[21] we denied the
petition for failure to sufficiently show any reversible error in
the questioned judgment; there was failure [by] petitioner to
show any cogent reason why the actions of the Labor Arbiter,
the NLRC and the CA, which have passed upon the same
issue, should be reversed. The petitioner failed to show that
their findings are not based on substantial evidence, or that
their decisions are contrary to applicable law and
jurisprudence.
On February 17, 2009, the petitioner moved for
reconsideration[22] of the Courts ruling, contending that: (1)
the dismissal of an employee on the ground of the redundancy
based on mere allegation and without supporting evidence is
invalid; (2) the assailed decisions run counter to rulings of the
Court that failure to appraise the employee of a fair and
reasonable criteria is a violation of due process, and; (3) the
respondent terminated the employment of the petitioner not for
any authorized cause but with evident malice and bad faith.
In view of the motion for reconsideration, the Court required
the respondent to file a comment,[23] which it did on June 1,
2009. The respondent, along with its co-respondent Kimura,
prays for the denial of the motion for its failure to raise new
arguments or compelling reasons to warrant a reversal of the
Courts resolution.
We deny the motion for reconsideration.
The arguments raised by the petitioner are not materially
different from those she presented in the compulsory
arbitration and before the CA. Nonetheless, we again carefully
examined the parties submissions, and we are convinced that
the rulings sought to be overturned are supported by
substantial evidence and are not contrary to law and applicable
jurisprudence, as we stressed in our Resolution of December
8, 2008.
The separation of the petitioner by reason of redundancy was
supported by the evidence on record. She was separated from
the service after the respondents reorganization where her
position as Administrator was declared redundant. She was
served notice within the statutory period of thirty (30) days and
so was the DOLE-NCR. The petitioner was assured of all the
benefits under the law.
The petitioner imputes bad faith and malice on the respondent
in declaring her position as Administrator redundant, but failed
to present convincing proof that the respondent abused its
prerogative in terminating her employment or that it was

motivated by ill-will in doing so. It was a business decision


arrived at in the face of financial losses being suffered by the
company at the time.[24]
As aptly cited by the CA:
The general rule is that the characterization by an employer of
an employees services as no longer necessary or sustainable
is an exercise of business judgment on the part of the
employer. The wisdom or soundness of such a characterization
or decision is not, as a general rule, subject to discretionary
review on the part of the Labor Arbiter, the NLRC and the CA.
Such characterization may, however, be rejected if the same is
found to be in violation of the law or is arbitrary or malicious.
[25]
We find no violations of law in the respondents actions against
the petitioner, nor was the respondent arbitrary or influenced
by malice in terminating the petitioners employment for
redundancy. This ground for termination is a legitimate
exercise of management prerogative unless attended to by
arbitrariness or by the failure to follow statutory requirements.
No arbitrariness or any violations took place in the present
case.
On the petitioners claim for overtime pay, the CA correctly took
cognizance of the issue, since this was raised by the petitioner
in her capacity as an employee, not as a corporate officer. At
the same time, we affirm the CAs denial of the claim, as the
petitioner was a managerial employee who is not entitled to
such pay.
Finally, as the CA did, we find no basis for the petitioners claim
for moral damages and attorneys fees.
WHEREFORE, premises considered, we hereby DENY the
petitioners motion for reconsideration for lack of substantial
arguments to warrant a reconsideration of our ruling of
December 8, 2008. This denial is immediately final, and we
shall not entertain any further pleadings. Let entry of judgment
be made in due course.
SO ORDERED.
[G.R. No. 113191. September 18, 1996]
DEPARTMENT OF FOREIGN AFFAIRS, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION, HON.
LABOR ARBITER NIEVES V. DE CASTRO and JOSE C.
MAGNAYI, respondents.
The questions raised in the petition for certiorari are a few
coincidental matters relative to the diplomatic immunity
extended to the Asian Development Bank ("ADB").
On 27 January 1993, private respondent initiated NLRC-NCR
Case No. 00-01-0690-93 for his alleged illegal dismissal by
ADB and the latter's violation of the "labor-only" contracting
law. Two summonses were served, one sent directly to the
ADB and the other through the Department of Foreign Affairs
("DFA"), both with a copy of the complaint. Forthwith, the ADB
and the DFA notified respondent Labor Arbiter that the ADB, as
well as its President and Officers, were covered by an
immunity from legal process except for borrowings, guaranties
or the sale of securities pursuant to Article 50(1) and Article 55
of the Agreement Establishing the Asian Development Bank
(the "Charter") in relation to Section 5 and Section 44 of the
Agreement Between The Bank And The Government Of The
Philippines Regarding The Bank's Headquarters (the
"Headquarters Agreement")

from suit. In time, the Labor Arbiter rendered his decision,


dated 31 August 1993, that concluded:
"WHEREFORE, above premises considered, judgment is
hereby rendered declaring the complainant as a regular
employee of respondent ADB, and the termination of his
services as illegal. Accordingly, respondent Bank is hereby
ordered:
"1. To immediately reinstate the complainant to his former
position effective September 16, 1993;
"2. To pay complainant full backwages from December 1, 1992
to September 15, 1993 in the amount of P42,750.00
(P4,500.00 x 9 months);
"3. And to pay complainants other benefits and without loss of
seniority rights and other privileges and benefits due a regular
employee of Asian Development Bank from the time he was
terminated on December 31, 1992;
"4. To pay 10% attorney's fees of the total entitlements."[1]
The ADB did not appeal the decision. Instead, on 03
November 1993, the DFA referred the matter to the National
Labor Relations Commission ("NLRC"); in its referral, the DFA
sought a "formal vacation of the void judgment." Replying to
the letter, the NLRC Chairman, wrote:
"The undersigned submits that the request for the
'investigation' of Labor Arbiter Nieves de Castro, by the
National Labor Relations Commission, has been erroneously
premised on Art. 218(c) of the Labor Code, as cited in the letter
of Secretary Padilla, considering that the provision deals with 'a
question, matter or controversy within its (the Commission)
jurisdiction' obviously referring to a labor dispute within the
ambit of Art. 217 (on jurisdiction of Labor Arbiters and the
Commission over labor cases).
"The procedure, in the adjudication of labor cases, including
raising of defenses, is prescribed by law. The defense of
immunity could have been raised before the Labor Arbiter by a
special appearance which, naturally, may not be considered as
a waiver of the very defense being raised. Any decision
thereafter is subject to legal remedies, including appeals to the
appropriate division of the Commission and/or a petition for
certiorari with the Supreme Court, under Rule 65 of the Rules
of Court. Except where an appeal is seasonably and properly
made, neither the Commission nor the undersigned may
review, or even question, the propriety of any decision by a
Labor Arbiter. Incidentally, the Commission sits en banc (all
fifteen Commissioners) only to promulgate rules of procedure
or to formulate policies (Art. 213, Labor Code).
"On the other hand, while the undersigned exercises
'administrative supervision over the Commission and its
regional branches and all its personnel, including the Executive
Labor Arbiters and Labor Arbiters' (penultimate paragraph, Art.
213, Labor Code), he does not have the competence to
investigate or review any decision of a Labor Arbiter. However,
on the purely administrative aspect of the decision-making
process, he may cause that an investigation be made of any
misconduct, malfeasance or misfeasance, upon complaint
properly made.
"If the Department of Foreign Affairs feels that the action of
Labor Arbiter Nieves de Castro constitutes misconduct,
malfeasance or misfeasance, it is suggested that an
appropriate complaint be lodged with the Office of the
Ombudsman.

The Labor Arbiter took cognizance of the complaint on the


impression that the ADB had waived its diplomatic immunity
"Thank you for your kind attention."[2]

Dissatisfied, the DFA lodged the instant petition for certiorari.


In this Court's resolution of 31 January 1994, respondents
were required to comment. Petitioner was later constrained to
make an application for a restraining order and/or writ of
preliminary injunction following the issuance, on 16 March
1994, by the Labor Arbiter of a writ of execution. In a
resolution, dated 07 April 1994, the Court issued the temporary
restraining order prayed for.
The Office of the Solicitor General (OSG), in its comment of
26 May 1994, initially assailed the claim of immunity by the
ADB. Subsequently, however, it submitted a Manifestation
(dated 20 June 1994) stating, among other things, that "after a
thorough review of the case and the records," it became
convinced that ADB, indeed, was correct in invoking its
immunity from suit under the Charter and the Headquarters
Agreement.
The Court is of the same view.
Article 50(1) of the Charter provides:
The Bank shall enjoy immunity from every form of legal
process, except in cases arising out of or in connection with
the exercise of its powers to borrow money, to guarantee
obligations, or to buy and sell or underwrite the sale of
securities.[3]
Under Article 55 thereof All Governors, Directors, alternates, officers and employees
of the Bank, including experts performing missions for the
Bank:
(1)
shall be immune from legal process with respect of
acts performed by them in their official capacity, except when
the Bank waives the immunity.[4]
Like provisions are found in the Headquarters Agreement.
Thus, its Section 5 reads:
"The Bank shall enjoy immunity from every form of legal
process, except in cases arising out of, or in connection with,
the exercise of its powers to borrow money, to guarantee
obligations, or to buy and sell or underwrite the sale of
securities.[5]
And, with respect to certain officials of the bank, Section 44 of
the agreement states:
Governors, other representatives of Members, Directors, the
President, Vice-President and executive officers as may be
agreed upon between the Government and the Bank shall
enjoy, during their stay in the Republic of the Philippines in
connection with their official duties with the Bank:
x x x

xxx

xxx

(b) Immunity from legal process of every kind in respect of


words spoken or written and all acts done by them in their
official capacity.[6]
The above stipulations of both the Charter and Headquarters
Agreement should be able, nay well enough, to establish that,
except in the specified cases of borrowing and guarantee
operations, as well as the purchase, sale and underwriting of
securities, the ADB enjoys immunity from legal process of
every form. The Banks officers, on their part, enjoy immunity
in respect of all acts performed by them in their official
capacity. The Charter and the Headquarters Agreement
granting these immunities and privileges are treaty covenants
and commitments voluntarily assumed by the Philippine
government which must be respected.
In World Health Organization vs. Aquino,[7] we have declared:

It is a recognized principle of international law and under our


system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to look
beyond a determination by the executive branch of the
government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the
government x x x it is then the duty of the courts to accept the
claim of immunity upon appropriate suggestion by the principal
law officer of the government, x x x or other officer acting under
his direction. Hence, in adherence to the settled principle that
courts may not so exercise their jurisdiction x x x as to
embarrass the executive arm of the government in conducting
foreign relations, it is accepted doctrine that `in such cases the
judicial department of government follows the action of the
political branch and will not embarrass the latter by assuming
an antagonistic jurisdiction.'"[8]
To the same effect is the decision in International Catholic
Migration Commission vs. Calleja,[9] which has similarly
deemed the Memoranda of the Legal Adviser of the
Department of Foreign Affairs to be "a categorical recognition
by the Executive Branch of Government that ICMC x x x
enjoy(s) immunities accorded to international organizations"
and which determination must be held "conclusive upon the
Courts in order not to embarrass a political department of
Government. In the instant case, the filing of the petition by
the DFA, in behalf of ADB, is itself an affirmance of the
government's own recognition of ADB's immunity.
Being an international organization that has been extended a
diplomatic status, the ADB is independent of the municipal law.
[10] In Southeast Asian Fisheries Development Center vs.
Acosta,[11] the Court has cited with approval the opinion[12] of
the then Minister of Justice; thus "One of the basic immunities of an international organization is
immunity from local jurisdiction, i.e., that it is immune from the
legal writs and processes issued by the tribunals of the country
where it is found. (See Jenks, Id., pp. 37-44). The obvious
reason for this is that the subjection of such an organization to
the authority of the local courts would afford a convenient
medium thru which the host government may interfere in their
operations or even influence or control its policies and
decisions of the organization; besides, such subjection to local
jurisdiction would impair the capacity of such body to discharge
its responsibilities impartially on behalf of its memberstates."[13]
Contrary to private respondent's assertion, the claim of
immunity is not here being raised for the first time; it has been
invoked before the forum of origin through communications
sent by petitioner and the ADB to the Labor Arbiter, as well as
before the NLRC following the rendition of the questioned
judgment by the Labor Arbiter, but evidently to no avail.
In its communication of 27 May 1993, the DFA, through the
Office of Legal Affairs, has advised the NLRC:
"Respectfully returned to the Honorable Domingo B. Mabazza,
Labor Arbitration Associate, National Labor Relations
Commission, National Capital Judicial Region, Arbitration
Branch, Associated bank Bldg., T.M. Kalaw St., Ermita, Manila,
the attached Notice of Hearing addressed to the Asian
Development Bank, in connection with the aforestated case,
for the reason stated in the Department's 1st Indorsement
dated 23 March 1993, copy attached, which is self-explanatory.
"In view of the fact that the Asian Development Bank (ADB)
invokes its immunity which is sustained by the Department of
Foreign Affairs, a continuous hearing of this case erodes the
credibility of the Philippine government before the international
community, let alone the negative implication of such a suit on

the official relationship of the Philippine government with the


ADB.
"For the Secretary of Foreign Affairs
(Sgd.)
"SIME D. HIDALGO
Assistant Secretary"[14]
The Office of the President, likewise, has issued on 18 May
1993 a letter to the Secretary of Labor, viz:
"Dear Secretary Confesor,
"I am writing to draw your attention to a case filed by a certain
Jose C. Magnayi against the Asian Development Bank and its
President, Kimimasa Tarumizu, before the National Labor
Relations Commission, National Capital Region Arbitration
Board (NLRC NCR Case No. 00-01690-93).
"Last March 8, the Labor Arbiter charged with the case, Ms.
Nieves V. de Castro, addressed a Notice of Resolution/Order
to the Bank which brought it to the attention of the Department
of Foreign Affairs on the ground that the service of such notice
was in violation of the RP-ADB Headquarters Agreement which
provided, inter-alia, for the immunity of the Bank, its President
and officers from every form of legal process, except only, in
cases of borrowings, guarantees or the sale of securities.
"The Department of Foreign Affairs, in turn, informed Labor
Arbiter Nieves V. de Castro of this fact by letter dated March
22, copied to you.
"Despite this, the labor arbiter in question persisted to send
summons, the latest dated May 4, herewith attached, regarding
the Magnayi case.
"The Supreme Court has long settled the matter of diplomatic
immunities. In WHO vs. Aquino, SCRA 48, it ruled that courts
should respect diplomatic immunities of foreign officials
recognized by the Philippine government. Such decision by
the Supreme Court forms part of the law of the land.
"Perhaps you should point out to Labor Arbiter Nieves V. de
Castro that ignorance of the law is a ground for dismissal.
"Very truly yours,
(Sgd.) JOSE B. ALEJANDRINO
Chairman, PCC-ADB"[15]
Private respondent argues that, by entering into service
contracts with different private companies, ADB has
descended to the level of an ordinary party to a commercial
transaction giving rise to a waiver of its immunity from suit. In
the case of Holy See vs. Hon. Rosario, Jr.,[16] the Court has
held:
There are two conflicting concepts of sovereign immunity,
each widely held and firmly established. According to the
classical or absolute theory, a sovereign cannot, without its
consent, be made a respondent in the Courts of another
sovereign. According to the newer or restrictive theory, the
immunity of the sovereign is recognized only with regard to
public acts or acts jure imperii of a state, but not with regard to
private act or acts jure gestionis.
x x x

xxx

xxx

Certainly, the mere entering into a contract by a foreign state


with a private party cannot be the ultimate test. Such an act
can only be the start of the inquiry. The logical question is

whether the foreign state is engaged in the activity in the


regular course of business. If the foreign state is not engaged
regularly in a business or trade, the particular act or transaction
must then be tested by its nature. If the act is in pursuit of a
sovereign activity, or an incident thereof, then it is an act jure
imperii, especially when it is not undertaken for gain or
profit.[17]
The service contracts referred to by private respondent have
not been intended by the ADB for profit or gain but are official
acts over which a waiver of immunity would not attach.
With regard to the issue of whether or not the DFA has the
legal standing to file the present petition, and whether or not
petitioner has regarded the basic rule that certiorari can be
availed of only when there is no appeal nor plain, speedy and
adequate remedy in the ordinary course of law, we hold both in
the affirmative.
The DFA's function includes, among its other mandates, the
determination of persons and institutions covered by diplomatic
immunities, a determination which, when challenged, entitles it
to seek relief from the court so as not to seriously impair the
conduct of the country's foreign relations. The DFA must be
allowed to plead its case whenever necessary or advisable to
enable it to help keep the credibility of the Philippine
government before the international community.
When
international agreements are concluded, the parties thereto are
deemed to have likewise accepted the responsibility of seeing
to it that their agreements are duly regarded. In our country,
this task falls principally on the DFA as being the highest
executive department with the competence and authority to so
act in this aspect of the international arena.[18] In Holy See vs.
Hon. Rosario, Jr.,[19] this Court has explained the matter in
good detail; viz:
"In Public International Law, when a state or international
agency wishes to plead sovereign or diplomatic immunity in a
foreign court, it requests the Foreign Office of the state where it
is sued to convey to the court that said defendant is entitled to
immunity.
"In the United States, the procedure followed is the process of
'suggestion,' where the foreign state or the international
organization sued in an American court requests the Secretary
of State to make a determination as to whether it is entitled to
immunity. If the Secretary of State finds that the defendant is
immune from suit, he, in turn, asks the Attorney General to
submit to the court a 'suggestion' that the defendant is entitled
to immunity. In England, a similar procedure is followed, only
the Foreign Office issues a certification to that effect instead of
submitting a 'suggestion' (O'Connell, I International Law 130
[1965]; Note: Immunity from Suit of Foreign Sovereign
Instrumentalities and Obligations, 50 Yale Law Journal 1088
[1941]).
"In the Philippines, the practice is for the foreign government or
the international organization to first secure an executive
endorsement of its claim of sovereign or diplomatic immunity.
But how the Philippine Foreign Office conveys its endorsement
to the courts varies. In International Catholic Migration
Commission vs. Calleja, 190 SCRA 130 (1990), the Secretary
of Foreign Affairs just sent a letter directly to the Secretary of
Labor and Employment, informing the latter that the
respondent-employer could not be sued because it enjoyed
diplomatic immunity. In World Health Organization vs. Aquino,
48 SCRA 242 (1972), the Secretary of Foreign Affairs sent the
trial court a telegram to that effect. In Baer vs. Tizon, 57 SCRA
1 (1974), the U.S. Embassy asked the Secretary of Foreign
Affairs to request the Solicitor General to make, in behalf of
the Commander of the United States Naval Base at Olongapo
City, Zambales, a 'suggestion' to respondent Judge. The

Solicitor General embodied the 'suggestion' in a manifestation


and memorandum as amicus curiae.
"In the case at bench, the Department of Foreign Affairs,
through the Office of Legal Affairs moved with this Court to be
allowed to intervene on the side of petitioner. The Court
allowed the said Department to file its memorandum in support
of petitioner's claim of sovereign immunity.
"In some cases, the defense of sovereign immunity was
submitted directly to the local courts by the respondents
through their private counsels (Raquiza vs. Bradford, 75 Phil.
50 [1945]; Miquiabas vs. Philippine-Ryukyus Command, 80
Phil. 262 [1948]; United States of America vs. Guinto, 182
SCRA 644 [1990] and companion cases). In cases where the
foreign states bypass the Foreign Office, the courts can inquire
into the facts and make their own determination as to the
nature of the acts and transactions involved."[20]
Relative to the propriety of the extraordinary remedy of
certiorari, the Court has, under special circumstances, so
allowed and entertained such a petition when (a) the
questioned order or decision is issued in excess of or without
jurisdiction,[21] or (b) where the order or decision is a patent
nullity,[22] which, verily, are the circumstances that can be said
to obtain in the present case. When an adjudicator is devoid of
jurisdiction on a matter before him, his action that assumes
otherwise would be a clear nullity.
WHEREFORE, the petition for certiorari is GRANTED, and the
decision of the Labor Arbiter, dated 31 August 1993 is
VACATED for being NULL AND VOID.
The temporary
restraining order issued by this Court on 07 April 1994 is
hereby made permanent. No costs.
SO ORDERED.
G.R. Nos. 109095-109107 February 23, 1995
ELDEPIO
LASCO,
RODOLFO
ELISAN,
URBANO
BERADOR,
FLORENTINO
ESTOBIO,
MARCELINO
MATURAN, FRAEN BALIBAG, CARMELITO GAJOL,
DEMOSTHENES
MANTO,
SATURNINO
BACOL,
SATURNINO LASCO, RAMON LOYOLA, JOSENIANO B.
ESPINA, all represented by MARIANO R. ESPINA,
petitioner,
vs.
UNITED NATIONS REVOLVING FUND FOR NATURAL
RESOURCES EXPLORATION (UNRFNRE) represented by
its operations manager, DR. KYRIACOS LOUCA, OSCAR
N. ABELLA, LEON G. GONZAGA, JR., MUSIB M. BUAT,
Commissioners of National Labor Relations Commission
(NLRC), Fifth Division, Cagayan de Oro City and IRVING
PETILLA, Labor Arbiter of Butuan City, respondents.
This is a petition for certiorari under Rule 65 of the Revised
Rules of Court to set aside the Resolution dated January 25,
1993 of the National Labor Relations Commission (NLRC),
Fifth Division, Cagayan de Oro City.
We dismiss the petition.
I
Petitioners were dismissed from their employment with private
respondent, the United Nations Revolving Fund for Natural
Resources Exploration (UNRFNRE), which is a special fund
and subsidiary organ of the United Nations. The UNRFNRE is
involved in a joint project of the Philippine Government and the
United Nations for exploration work in Dinagat Island.

Petitioners are the complainants in NLRC Cases Nos. SRAB


10-03-00067-91 to 10-03-00078-91 and SRAB 10-07-00159-91
for illegal dismissal and damages.
In its Motion to Dismiss, private respondent alleged that
respondent Labor Arbiter had no jurisdiction over its personality
since it enjoyed diplomatic immunity pursuant to the 1946
Convention on the Privileges and Immunities of the United
Nations. In support thereof, private respondent attached a
letter from the Department of Foreign Affairs dated August 26,
1991, which acknowledged its immunity from suit. The letter
confirmed that private respondent, being a special fund
administered by the United Nations, was covered by the 1946
Convention on the Privileges and Immunities of the United
Nations of which the Philippine Government was an original
signatory (Rollo, p. 21).
On November 25, 1991, respondent Labor Arbiter issued an
order dismissing the complaints on the ground that private
respondent was protected by diplomatic immunity. The
dismissal was based on the letter of the Foreign Office dated
September 10, 1991.
Petitioners' motion for reconsideration was denied. Thus, an
appeal was filed with the NLRC, which affirmed the dismissal
of the complaints in its Resolution dated January 25, 1993.
Petitioners filed the instant petition for certiorari without first
seeking a reconsideration of the NLRC resolution.
II
Article 223 of the Labor Code of the Philippines, as amended,
provides that decisions of the NLRC are final and executory.
Thus, they may only be questioned through certiorari as a
special civil action under Rule 65 of the Revised Rules of
Court.
Ordinarily, certiorari as a special civil action will not lie unless a
motion for reconsideration is first filed before the respondent
tribunal, to allow it an opportunity to correct its assigned errors
(Liberty Insurance Corporation v. Court of Appeals, 222 SCRA
37 [1993]).
In the case at bench, petitioners' failure to file a motion for
reconsideration is fatal to the instant petition. Moreover, the
petition lacks any explanation for such omission, which may
merit its being considered as falling under the recognized
exceptions to the necessity of filing such motion.
Notwithstanding, we deem it wise to give due course to the
petition because of the implications of the issue in our
international relations.
Petitioners argued that the acts of mining exploration and
exploitation are outside the official functions of an international
agency protected by diplomatic immunity. Even assuming that
private respondent was entitled to diplomatic immunity,
petitioners insisted that private respondent waived it when it
engaged in exploration work and entered into a contract of
employment with petitioners.
Petitioners, likewise, invoked the constitutional mandate that
the State shall afford full protection to labor and promote full
employment and equality of employment opportunities for all
(1987 Constitution, Art. XIII, Sec. 3).
The Office of the Solicitor General is of the view that private
respondent is covered by the mantle of diplomatic immunity.
Private respondent is a specialized agency of the United
Nations. Under Article 105 of the Charter of the United Nations:

1.
The Organization shall enjoy in the territory of its
Members such privileges and immunities as are necessary for
the fulfillment of its purposes.
2.
Representatives of the Members of the United
Nations and officials of the Organization shall similarly enjoy
such privileges and immunities as are necessary for the
independent exercise of their functions in connection with the
organization.
Corollary to the cited article is the Convention on the Privileges
and Immunities of the Specialized Agencies of the United
Nations, to which the Philippines was a signatory (Vol. 1,
Philippine Treaty Series, p. 621). We quote Sections 4 and 5 of
Article III thereof:
Sec. 4. The specialized agencies, their property and assets,
wherever located and by whomsoever held shall enjoy
immunity from every form of legal process except insofar as in
any particular case they have expressly waived their immunity.
It is, however, understood that no waiver of immunity shall
extend to any measure of execution (Emphasis supplied).
Sec. 5. The premises of the specialized agencies shall be
inviolable. The property and assets of the specialized
agencies, wherever located and by whomsoever held, shall be
immune from search, requisition, confiscation, expropriation
and any other form of interference, whether by executive,
administrative, judicial or legislative action (Emphasis
supplied).
As a matter of state policy as expressed in the Constitution, the
Philippine Government adopts the generally accepted
principles of international law (1987 Constitution, Art. II, Sec.
2). Being a member of the United Nations and a party to the
Convention on the Privileges and Immunities of the Specialized
Agencies of the United Nations, the Philippine Government
adheres to the doctrine of immunity granted to the United
Nations and its specialized agencies. Both treaties have the
force and effect of law.
In World Health Organization v. Aquino, 48 SCRA 242, (1972),
we had occasion to rule that:
It is a recognized principle of international law and under our
system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to look
beyond a determination by the executive branch of the
government, and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the
courts to accept the claim of immunity upon appropriate
suggestion by the principal law officer of the government, the
Solicitor General or other officer acting under his direction.
Hence, in adherence to the settled principle that courts may
not so exercise their jurisdiction by seizure and detention of
property, as to embarrass the executive arm of the government
in conducting foreign relations, it is accepted doctrine that "in
such cases the judicial department of (this) government follows
the action of the political branch and will not embarrass the
latter by assuming an antagonistic jurisdiction (Emphasis
supplied).
We recognize the growth of international organizations
dedicated to specific universal endeavors, such as health,
agriculture, science and technology and environment. It is not
surprising that their existence has evolved into the concept of
international immunities. The reason behind the grant of
privileges and immunities to international organizations, its
officials and functionaries is to secure them legal and practical
independence in fulfilling their duties (Jenks, International
Immunities 17 [1961]).

Immunity is necessary to assure unimpeded performance of


their functions. The purpose is "to shield the affairs of
international organizations, in accordance with international
practice, from political pressure or control by the host country
to the prejudice of member States of the organization, and to
ensure the unhampered performance of their functions"
(International Catholic Migration Commission v. Calleja, 190
SCRA 130 [1990]).
In the International Catholic Migration Commission case, we
held that there is no conflict between the constitutional duty of
the State to protect the rights of workers and to promote their
welfare, and the grant of immunity to international
organizations. Clauses on jurisdictional immunity are now
standard in the charters of the international organizations to
guarantee the smooth discharge of their functions.
The diplomatic immunity of private respondent was sufficiently
established by the letter of the Department of Foreign Affairs,
recognizing and confirming the immunity of UNRFNRE in
accordance with the 1946 Convention on Privileges and
Immunities of the United Nations where the Philippine
Government was a party. The issue whether an international
organization is entitled to diplomatic immunity is a "political
question" and such determination by the executive branch is
conclusive on the courts and quasi-judicial agencies (The Holy
See v. Hon. Eriberto U. Rosario, Jr., G.R. No. 101949, Dec. 1,
1994; International Catholic Migration Commission v. Calleja,
supra).
Our courts can only assume jurisdiction over private
respondent if it expressly waived its immunity, which is not so
in the case at bench (Convention on the Privileges and
Immunities of the Specialized Agencies of the United Nations,
Art. III, Sec. 4).
Private respondent is not engaged in a commercial venture in
the Philippines. Its presence here is by virtue of a joint project
entered into by the Philippine Government and the United
Nations for mineral exploration in Dinagat Island. Its mission is
not to exploit our natural resources and gain pecuniarily
thereby but to help improve the quality of life of the people,
including that of petitioners.
This is not to say that petitioner have no recourse. Section 31
of the Convention on the Privileges and Immunities of the
Specialized Agencies of the United Nations states that "each
specialized agency shall make a provision for appropriate
modes of settlement of: (a) disputes arising out of contracts or
other disputes of private character to which the specialized
agency is a party."
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
[G.R. No. 157010. June 21, 2005]
PHILIPPINE NATIONAL BANK, petitioner, vs. FLORENCE
O. CABANSAG, respondent.
The Court reiterates the basic policy that all Filipino workers,
whether employed locally or overseas, enjoy the protective
mantle of Philippine labor and social legislations. Our labor
statutes may not be rendered ineffective by laws or judgments
promulgated, or stipulations agreed upon, in a foreign country.
The Case
Before us is a Petition for Review on Certiorari[1] under Rule 45
of the Rules of Court, seeking to reverse and set aside the July
16, 2002 Decision[2] and the January 29, 2003 Resolution [3] of
the Court of Appeals (CA) in CA-GR SP No. 68403. The
assailed Decision dismissed the CA Petition (filed by herein

petitioner), which had sought to reverse the National Labor


Relations Commission (NLRC)s June 29, 2001 Resolution,
[4]
affirming Labor Arbiter Joel S. Lustrias January 18, 2000
Decision.[5]

and, on March 8, 1999, she was issued by the Philippine


Overseas Employment Administration, an Overseas
Employment Certificate, certifying that she was a bona fide
contract worker for Singapore.

The assailed CA Resolution denied herein petitioners Motion


for Reconsideration.

xxx

The Facts
The facts are narrated by the Court of Appeals as follows:
In late 1998, [herein Respondent Florence Cabansag] arrived
in Singapore as a tourist. She applied for employment, with
the Singapore Branch of the Philippine National Bank, a private
banking corporation organized and existing under the laws of
the Philippines, with principal offices at the PNB Financial
Center, Roxas Boulevard, Manila. At the time, the Singapore
PNB Branch was under the helm of Ruben C. Tobias, a lawyer,
as General Manager, with the rank of Vice-President of the
Bank. At the time, too, the Branch Office had two (2) types of
employees: (a) expatriates or the regular employees, hired in
Manila and assigned abroad including Singapore, and (b)
locally (direct) hired. She applied for employment as Branch
Credit Officer, at a total monthly package of $SG4,500.00,
effective upon assumption of duties after approval. Ruben C.
Tobias found her eminently qualified and wrote on October 26,
1998, a letter to the President of the Bank in Manila,
recommending the appointment of Florence O. Cabansag, for
the position.
xxx

xxx

xxx

The President of the Bank was impressed with the credentials


of Florence O. Cabansag that he approved the
recommendation of Ruben C. Tobias. She then filed an
Application, with the Ministry of Manpower of the Government
of Singapore, for the issuance of an Employment Pass as an
employee of the Singapore PNB Branch. Her application was
approved for a period of two (2) years.
On December 7, 1998, Ruben C. Tobias wrote a letter to
Florence O. Cabansag offering her a temporary appointment,
as Credit Officer, at a basic salary of Singapore Dollars
4,500.00, a month and, upon her successful completion of her
probation to be determined solely, by the Bank, she may be
extended at the discretion of the Bank, a permanent
appointment and that her temporary appointment was subject
to the following terms and conditions:
1.
You will be on probation for a period of three (3)
consecutive months from the date of your assumption of duty.
2.
You will observe the Banks rules and regulations and
those that may be adopted from time to time.
3.
You will keep in strictest confidence all matters
related to transactions between the Bank and its clients.

xxx

xxx

Barely three (3) months in office, Florence O. Cabansag


submitted to Ruben C. Tobias, on March 9, 1999, her initial
Performance Report. Ruben C. Tobias was so impressed
with the Report that he made a notation and, on said Report:
GOOD WORK. However, in the evening of April 14, 1999,
while Florence O. Cabansag was in the flat, which she and
Cecilia Aquino, the Assistant Vice-President and Deputy
General Manager of the Branch and Rosanna Sarmiento, the
Chief Dealer of the said Branch, rented, she was told by the
two (2) that Ruben C. Tobias has asked them to tell Florence
O. Cabansag to resign from her job. Florence O. Cabansag
was perplexed at the sudden turn of events and the runabout
way Ruben C. Tobias procured her resignation from the Bank.
The next day, Florence O. Cabansag talked to Ruben C.
Tobias and inquired if what Cecilia Aquino and Rosanna
Sarmiento had told her was true. Ruben C. Tobias confirmed
the veracity of the information, with the explanation that her
resignation was imperative as a cost-cutting measure of the
Bank. Ruben C. Tobias, likewise, told Florence O. Cabansag
that the PNB Singapore Branch will be sold or transformed into
a remittance office and that, in either way, Florence O.
Cabansag had to resign from her employment. The more
Florence O. Cabansag was perplexed. She then asked Ruben
C. Tobias that she be furnished with a Formal Advice from the
PNB Head Office in Manila. However, Ruben C. Tobias flatly
refused. Florence O. Cabansag did not submit any letter of
resignation.
On April 16, 1999, Ruben C. Tobias again summoned
Florence O. Cabansag to his office and demanded that she
submit her letter of resignation, with the pretext that he needed
a Chinese-speaking Credit Officer to penetrate the local
market, with the information that a Chinese-speaking Credit
Officer had already been hired and will be reporting for work
soon. She was warned that, unless she submitted her letter of
resignation, her employment record will be blemished with the
notation DISMISSED spread thereon. Without giving any
definitive answer, Florence O. Cabansag asked Ruben C.
Tobias that she be given sufficient time to look for another job.
Ruben C. Tobias told her that she should be out of her
employment by May 15, 1999.
However, on April 19, 1999, Ruben C. Tobias again
summoned Florence O. Cabansag and adamantly ordered her
to submit her letter of resignation. She refused. On April 20,
1999, she received a letter from Ruben C. Tobias terminating
her employment with the Bank.
xxx

xxx

xxx

4.
You will devote your full time during business hours in
promoting the business and interest of the Bank.

On January 18, 2000, the Labor Arbiter rendered judgment in


favor of the Complainant and against the Respondents, the
decretal portion of which reads as follows:

5.
You will not, without prior written consent of the Bank,
be employed in anyway for any purpose whatsoever outside
business hours by any person, firm or company.

WHEREFORE, considering the foregoing premises, judgment


is hereby rendered finding respondents guilty of Illegal
dismissal and devoid of due process, and are hereby ordered:

6.
Termination of your employment with the Bank may
be made by either party after notice of one (1) day in writing
during probation, one month notice upon confirmation or the
equivalent of one (1) days or months salary in lieu of notice.

1. To reinstate complainant to her former or substantially


equivalent position without loss of seniority rights, benefits and
privileges;

Florence O. Cabansag accepted the position and assumed


office. In the meantime, the Philippine Embassy in Singapore
processed the employment contract of Florence O. Cabansag

2. Solidarily liable to pay complainant as follows:


a) To pay complainant her backwages from 16 April 1999 up
to her actual reinstatement. Her backwages as of the date of

the promulgation of this decision amounted to SGD 40,500.00


or its equivalent in Philippine Currency at the time of payment;
b)
Mid-year bonus in the amount of SGD 2,250.00 or its
equivalent in Philippine Currency at the time of payment;
c)
Allowance for Sunday banking in the amount of SGD
120.00 or its equivalent in Philippine Currency at the time of
payment;
d)
Monetary equivalent of leave credits earned on Sunday
banking in the amount of SGD 1,557.67 or its equivalent in
Philippine Currency at the time of payment;
e) Monetary equivalent of unused sick leave benefits in the
amount of SGD 1,150.60 or its equivalent in Philippine
Currency at the time of payment.
f)
Monetary equivalent of unused vacation leave benefits in
the amount of SGD 319.85 or its equivalent in Philippine
Currency at the time of payment.
g)
13th month pay in the amount of SGD 4,500.00 or its
equivalent in Philippine Currency at the time of payment;
3. Solidarily to pay complainant actual damages in the
amount of SGD 1,978.00 or its equivalent in Philippine
Currency at the time of payment, and moral damages in the
amount of PhP 200,000.00, exemplary damages in the amount
of PhP 100,000.00;
4. To pay complainant the amount of SGD 5,039.81 or its
equivalent in Philippine Currency at the time of payment,
representing attorneys fees.
SO ORDERED. [6] [Emphasis in the original.]
PNB appealed the labor arbiters Decision to the NLRC. In a
Resolution dated June 29, 2001, the Commission affirmed that
Decision, but reduced the moral damages to P100,000 and the
exemplary damages to P50,000. In a subsequent Resolution,
the NLRC denied PNBs Motion for Reconsideration.
Ruling of the Court of Appeals
In disposing of the Petition for Certiorari, the CA noted that
petitioner bank had failed to adduce in evidence the
Singaporean law supposedly governing the latters
employment Contract with respondent. The appellate court
found that the Contract had actually been processed by the
Philippine Embassy in Singapore and approved by the
Philippine Overseas Employment Administration (POEA),
which then used that Contract as a basis for issuing an
Overseas Employment Certificate in favor of respondent.
According to the CA, even though respondent secured an
employment pass from the Singapore Ministry of Employment,
she did not thereby waive Philippine labor laws, or the
jurisdiction of the labor arbiter or the NLRC over her Complaint
for illegal dismissal. In so doing, neither did she submit herself
solely to the Ministry of Manpower of Singapores jurisdiction
over disputes arising from her employment. The appellate
court further noted that a cursory reading of the Ministrys letter
will readily show that no such waiver or submission is stated or
implied.
Finally, the CA held that petitioner had failed to establish a just
cause for the dismissal of respondent. The bank had also
failed to give her sufficient notice and an opportunity to be
heard and to defend herself. The CA ruled that she was
consequently entitled to reinstatement and back wages,
computed from the time of her dismissal up to the time of her
reinstatement.
Hence, this Petition.[7]

Issues
Petitioner submits the following issues for our consideration:
1. Whether or not the arbitration branch of the NLRC in the
National Capital Region has jurisdiction over the instant
controversy;
2. Whether or not the arbitration of the NLRC in the National
Capital Region is the most convenient venue or forum to hear
and decide the instant controversy; and
3. Whether or not the respondent was illegally dismissed,
and therefore, entitled to recover moral and exemplary
damages and attorneys fees.[8]
In addition, respondent assails, in her Comment,[9] the propriety
of Rule 45 as the procedural mode for seeking a review of the
CA Decision affirming the NLRC Resolution. Such issue
deserves scant consideration. Respondent miscomprehends
the Courts discourse in St. Martin Funeral Home v. NLRC,
[10]
which has indeed affirmed that the proper mode of review of
NLRC decisions, resolutions or orders is by a special civil
action for certiorari under Rule 65 of the Rules of Court. The
Supreme
Court
and
the
Court
of
Appeals
haveconcurrent original jurisdiction
over
such
petitions
for certiorari. Thus, in observance of the doctrine on the
hierarchy of courts, these petitions should be initially filed with
the CA.[11]
Rightly, the bank elevated the NLRC Resolution to the CA by
way of a Petition for Certiorari. In seeking a review by this
Court of the CA Decision -- on questions of jurisdiction, venue
and validity of employment termination -- petitioner is likewise
correct in invoking Rule 45.[12]
It is true, however, that in a petition for review on certiorari, the
scope of the Supreme Courts judicial review of decisions of
the Court of Appeals is generally confined only to errors of law.
It does not extend to questions of fact. This doctrine applies
with greater force in labor cases. Factual questions are for the
labor tribunals to resolve. [13] In the present case, the labor
arbiter and the NLRC have already determined the factual
issues. Their findings, which are supported by substantial
evidence, were affirmed by the CA. Thus, they are entitled to
great respect and are rendered conclusive upon this Court,
absent a clear showing of palpable error or arbitrary disregard
of evidence.[14]
The Courts Ruling
The Petition has no merit.
First Issue:
Jurisdiction
The jurisdiction of labor arbiters and the NLRC is specified in
Article 217 of the Labor Code as follows:
ART. 217. Jurisdiction of Labor Arbiters and the Commission.
(a) Except as otherwise provided under this Code the Labor
Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases


that workers may file involving wage, rates of pay, hours of
work and other terms and conditions of employment

was illegally terminated, she already possessed the POEA


employment Certificate.

6. Except claims for Employees Compensation, Social


Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount
of exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.

Moreover, petitioner admits that it is a Philippine corporation


doing business through a branch office in Singapore.
[18]
Significantly, respondents employment by the Singapore
branch office had to be approved by Benjamin P. Palma Gil,
[19]
the president of the bank whose principal offices were in
Manila. This circumstance militates against petitioners
contention that respondent was locally hired; and totally
governed by and subject to the laws, common practices and
customs of Singapore, not of the Philippines. Instead, with
more reason does this fact reinforce the presumption that
respondent falls under the legal definition of migrant worker, in
this case one deployed in Singapore. Hence, petitioner cannot
escape the application of Philippine laws or the jurisdiction of
the NLRC and the labor arbiter.

(b)
The commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters.

In any event, we recall the following policy pronouncement of


the Court in Royal Crown Internationale v. NLRC:[20]

xxx

x x x. Whether employed locally or overseas, all Filipino


workers enjoy the protective mantle of Philippine labor and
social legislation, contract stipulations to the contrary
notwithstanding. This pronouncement is in keeping with the
basic public policy of the State to afford protection to labor,
promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations
between workers and employers. For the State assures the
basic rights of all workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions
of work [Article 3 of the Labor Code of the Philippines; See
also Section 18, Article II and Section 3, Article XIII, 1987
Constitution]. This ruling is likewise rendered imperative by
Article 17 of the Civil Code which states that laws which have
for their object public order, public policy and good customs
shall not be rendered ineffective by laws or judgments
promulgated, or by determination or conventions agreed upon
in a foreign country.

4. Claims for actual, moral, exemplary and other forms of


damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and
lockouts; and

xxx

x x x.

More specifically, Section 10 of RA 8042 reads in part:


SECTION 10. Money Claims. Notwithstanding any
provision of law to the contrary, the Labor Arbiters of the
National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within
ninety (90) calendar days after the filing of the complaint, the
claims arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for
overseas deployment including claims for actual, moral,
exemplary and other forms of damages.
xxx

xxx

x x x

Based on the foregoing provisions, labor arbiters clearly


have original and exclusive jurisdiction over claims arising from
employer-employee
relations,
including termination
disputesinvolving all workers, among whom are overseas
Filipino workers (OFW).[15]
We are not unmindful of the fact that respondent was directly
hired, while on a tourist status in Singapore, by the PNB
branch in that city state. Prior to employing respondent,
petitioner had to obtain an employment pass for her from the
Singapore Ministry of Manpower. Securing the pass was a
regulatory requirement pursuant to the immigration regulations
of that country.[16]
Similarly, the Philippine government requires non-Filipinos
working in the country to first obtain a local work permit in
order to be legally employed here. That permit, however, does
not automatically mean that the non-citizen is thereby bound
by local laws only, as averred by petitioner. It does not at all
imply a waiver of ones national laws on labor. Absent any
clear and convincing evidence to the contrary, such permit
simply means that its holder has a legal status as a worker in
the issuing country.
Noteworthy is the fact that respondent likewise applied for and
secured an Overseas Employment Certificate from the POEA
through the Philippine Embassy in Singapore. The Certificate,
issued on March 8, 1999, declared her a bona fide contract
worker for Singapore. Under Philippine law, this document
authorized her working status in a foreign country and entitled
her to all benefits and processes under our statutes. Thus,
even assuming arguendo that she was considered at the start
of her employment as a direct hire governed by and subject
to the laws, common practices and customs prevailing in
Singapore[17] she subsequently became a contract worker or an
OFW who was covered by Philippine labor laws and policies
upon certification by the POEA. At the time her employment

Second Issue:
Proper Venue
Section 1(a) of Rule IV of the NLRC Rules of Procedure reads:
Section 1. Venue (a) All cases which Labor Arbiters have
authority to hear and decide may be filed in the Regional
Arbitration Branch having jurisdiction over the workplace of the
complainant/petitioner; Provided, however that cases of
Overseas Filipino Worker (OFW) shall be filed before the
Regional Arbitration Branch where the complainant resides or
where the principal office of the respondent/employer is
situated, at the option of the complainant.
For purposes of venue, workplace shall be understood as the
place or locality where the employee is regularly assigned
when the cause of action arose. It shall include the place
where the employee is supposed to report back after a
temporary detail, assignment or travel. In the case of field
employees, as well as ambulant or itinerant workers, their
workplace is where they are regularly assigned, or where they
are supposed to regularly receive their salaries/wages or work
instructions from, and report the results of their assignment to
their employers.
Under the Migrant Workers and Overseas Filipinos Act of
1995 (RA 8042), a migrant worker refers to a person who is
to be engaged, is engaged or has been engaged in a
remunerated activity in a state of which he or she is not a legal
resident; to be used interchangeably with overseas Filipino
worker.[21] Undeniably, respondent was employed by petitioner
in its branch office in Singapore. Admittedly, she is a Filipino

and not a legal resident of that state. She thus falls within the
category of migrant worker or overseas Filipino worker.
As such, it is her option to choose the venue of her Complaint
against petitioner for illegal dismissal. The law gives her two
choices: (1) at the Regional Arbitration Branch (RAB) where
she resides or (2) at the RAB where the principal office of her
employer is situated. Since her dismissal by petitioner,
respondent has returned to the Philippines -- specifically to her
residence at Filinvest II, Quezon City. Thus, in filing her
Complaint before the RAB office in Quezon City, she has made
a valid choice of proper venue.
Third Issue:
Illegal Dismissal
The appellate court was correct in holding that respondent was
already a regular employee at the time of her dismissal,
because her three-month probationary period of employment
had already ended. This ruling is in accordance with Article
281 of the Labor Code: An employee who is allowed to work
after a probationary period shall be considered a regular
employee. Indeed, petitioner recognized respondent as such
at the time it dismissed her, by giving her one months salary in
lieu of a one-month notice, consistent with provision No. 6 of
her employment Contract.
Notice and Hearing
Not Complied With
As a regular employee, respondent was entitled to all rights,
benefits and privileges provided under our labor laws. One of
her fundamental rights is that she may not be dismissed
without due process of law. The twin requirements of notice
and hearing constitute the essential elements of procedural
due process, and neither of these elements can be eliminated
without running afoul of the constitutional guarantee.[22]

discharge this burden means that the dismissal was not


justified, and that the employee is entitled to reinstatement and
back wages.[29]
Notably, petitioner has not asserted any of the grounds
provided by law as a valid reason for terminating the
employment of respondent. It merely insists that her dismissal
was validly effected pursuant to the provisions of her
employment Contract, which she had voluntarily agreed to be
bound to.
Truly, the contracting parties may establish such stipulations,
clauses, terms and conditions as they want, and their
agreement would have the force of law between them.
However, petitioner overlooks the qualification that those terms
and conditions agreed upon must not be contrary to law,
morals, customs, public policy or public order.[30] As explained
earlier, the employment Contract between petitioner and
respondent is governed by Philippine labor laws. Hence, the
stipulations, clauses, and terms and conditions of the Contract
must not contravene our labor law provisions.
Moreover, a contract of employment is imbued with public
interest. The Court has time and time again reminded parties
that they are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by
simply contracting with each other.[31] Also, while a contract is
the law between the parties, the provisions of positive law that
regulate such contracts are deemed included and shall limit
and govern the relations between the parties.[32]
Basic in our jurisprudence is the principle that when there is no
showing of any clear, valid, and legal cause for the termination
of employment, the law considers the matter a case of illegal
dismissal.[33]
Awards for Damages
Justified

In dismissing employees, the employer must furnish them two


written notices: 1) one to apprise them of the particular acts or
omissions for which their dismissal is sought; and 2) the other
to inform them of the decision to dismiss them. As to the
requirement of a hearing, its essence lies simply in the
opportunity to be heard.[23]

Finally, moral damages are recoverable when the dismissal of


an employee is attended by bad faith or constitutes an act
oppressive to labor or is done in a manner contrary to morals,
good customs or public policy.[34] Awards for moral and
exemplary damages would be proper if the employee was
harassed and arbitrarily dismissed by the employer.[35]

The evidence in this case is crystal-clear. Respondent was not


notified of the specific act or omission for which her dismissal
was being sought. Neither was she given any chance to be
heard, as required by law. At any rate, even if she were given
the opportunity to be heard, she could not have defended
herself effectively, for she knew no cause to answer to.

In affirming the awards of moral and exemplary damages, we


quote with approval the following ratiocination of the labor
arbiter:

All that petitioner tendered to respondent was a notice of her


employment termination effective the very same day, together
with the equivalent of a one-month pay. This Court has already
held that nothing in the law gives an employer the option to
substitute the required prior notice and opportunity to be heard
with the mere payment of 30 days salary.[24]
Well-settled is the rule that the employer shall be sanctioned
for noncompliance with the requirements of, or for failure to
observe, due process that must be observed in dismissing an
employee.[25]
No Valid Cause
for Dismissal
Moreover, Articles 282,[26] 283[27] and 284[28] of the Labor Code
provide the valid grounds or causes for an employees
dismissal. The employer has the burden of proving that it was
done for any of those just or authorized causes. The failure to

The records also show that [respondents] dismissal was


effected by [petitioners] capricious and high-handed manner,
anti-social and oppressive, fraudulent and in bad faith, and
contrary to morals, good customs and public policy. Bad faith
and fraud are shown in the acts committed by [petitioners]
before, during and after [respondents] dismissal in addition to
the manner by which she was dismissed. First, [respondent]
was pressured to resign for two different and contradictory
reasons, namely, cost-cutting and the need for a
Chinese[-]speaking credit officer, for which no written advice
was given despite complainants request. Such wavering
stance or vacillating position indicates bad faith and a
dishonest purpose. Second, she was employed on account of
her qualifications, experience and readiness for the position of
credit officer and pressured to resign a month after she was
commended for her good work. Third, the demand for
[respondents] instant resignation on 19 April 1999 to give way
to her replacement who was allegedly reporting soonest, is
whimsical, fraudulent and in bad faith, because on 16 April
1999 she was given a period of [sic] until 15 May 1999 within
which to leave. Fourth, the pressures made on her to resign
were highly oppressive, anti-social and caused her absolute
torture, as [petitioners] disregarded her situation as an

overseas worker away from home and family, with no prospect


for another job. She was not even provided with a return trip
fare. Fifth, the notice of termination is an utter manifestation of
bad faith and whim as it totally disregards [respondents] right
to security of tenure and due process. Such notice together
with the demands for [respondents] resignation contravenes
the fundamental guarantee and public policy of the Philippine
government on security of tenure.
[Respondent] likewise established that as a proximate result
of her dismissal and prior demands for resignation, she
suffered and continues to suffer mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock
and social humiliation. Her standing in the social and business
community as well as prospects for employment with other
entities have been adversely affected by her dismissal.
[Petitioners] are thus liable for moral damages under Article
2217 of the Civil Code.
xxx

xxx

xxx

[Petitioners] likewise acted in a wanton, oppressive or


malevolent manner in terminating [respondents] employment
and are therefore liable for exemplary damages. This should
served [sic] as protection to other employees of [petitioner]
company, and by way of example or correction for the public
good so that persons similarly minded as [petitioners] would be
deterred from committing the same acts.[36]
The Court also affirms the award of attorneys fees. It is settled
that when an action is instituted for the recovery of wages, or
when employees are forced to litigate and consequently incur
expenses to protect their rights and interests, the grant of
attorneys fees is legally justifiable.[37]
WHEREFORE, the Petition is DENIED and the assailed
Decision and Resolution AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 120077

October 13, 2000

(3) Order of March 30, 1995.6 Denying the motion for


reconsideration of the petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter
referred to as "Santos") was an overseas worker employed as
a printer at the Mazoon Printing Press, Sultanate of Oman.
Subsequently, in June 1988, he was directly hired by the
Palace Hotel, Beijing, People's Republic of China and later
terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter
referred to as "MHC") and the Manila Hotel International
Company, Limited (hereinafter referred to as "MHICL").
When the case was filed in 1990, MHC was still a governmentowned and controlled corporation duly organized and existing
under the laws of the Philippines.
MHICL is a corporation duly organized and existing under the
laws of Hong Kong.7 MHC is an "incorporator" of MHICL,
owning 50% of its capital stock.8
By virtue of a "management agreement"9 with the Palace Hotel
(Wang Fu Company Limited), MHICL 10 trained the personnel
and staff of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the
Sultanate of Oman, respondent Santos received a letter dated
May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager,
Palace Hotel, Beijing, China. Mr. Schmidt informed respondent
Santos that he was recommended by one Nestor Buenio, a
friend of his.
Mr. Shmidt offered respondent Santos the same position as
printer, but with a higher monthly salary and increased
benefits. The position was slated to open on October 1, 1988.11
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and
signified his acceptance of the offer.

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL.


LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER
CEFERINA
J.
DIOSANA
AND
MARCELO
G.
SANTOS, respondents.

On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk
mailed a ready to sign employment contract to respondent
Santos. Mr. Henk advised respondent Santos that if the
contract was acceptable, to return the same to Mr. Henk in
Manila, together with his passport and two additional pictures
for his visa to China.

PARDO, J.:

On May 30, 1988, respondent Santos resigned from the


Mazoon Printing Press, effective June 30, 1988, under the
pretext that he was needed at home to help with the family's
piggery and poultry business.

The case before the Court is a petition for certiorari 1 to annul


the following orders of the National Labor Relations
Commission (hereinafter referred to as "NLRC") for having
been issued without or with excess jurisdiction and with grave
abuse of discretion:2
(1) Order of May 31, 1993.3 Reversing and setting aside its
earlier resolution of August 28, 1992.4 The questioned order
declared that the NLRC, not the Philippine Overseas
Employment Administration (hereinafter referred to as
"POEA"), had jurisdiction over private respondent's complaint;
(2) Decision of December 15, 1994.5 Directing petitioners to
jointly and severally pay private respondent twelve thousand
and six hundred dollars (US$ 12,600.00) representing salaries
for the unexpired portion of his contract; three thousand six
hundred dollars (US$3,600.00) as extra four months salary for
the two (2) year period of his contract, three thousand six
hundred dollars (US$3,600.00) as "14th month pay" or a total
of nineteen thousand and eight hundred dollars
(US$19,800.00) or its peso equivalent and attorney's fees
amounting to ten percent (10%) of the total award; and

On June 4, 1988, respondent Santos wrote the Palace Hotel


and acknowledged Mr. Henk's letter. Respondent Santos
enclosed four (4) signed copies of the employment contract
(dated June 4, 1988) and notified them that he was going to
arrive in Manila during the first week of July 1988.
The employment contract of June 4, 1988 stated that his
employment would commence September 1, 1988 for a period
of two years.12 It provided for a monthly salary of nine hundred
dollars (US$900.00) net of taxes, payable fourteen (14) times a
year.13
On June 30, 1988, respondent Santos was deemed resigned
from the Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing,
China. He started to work at the Palace Hotel.14

Subsequently, respondent Santos signed an amended


"employment agreement" with the Palace Hotel, effective
November 5, 1988. In the contract, Mr. Shmidt represented the
Palace Hotel. The Vice President (Operations and
Development) of petitioner MHICL Miguel D. Cergueda signed
the employment agreement under the word "noted".

The Palace Hotel and Mr. Shmidt were not served with
summons and neither participated in the proceedings before
the Labor Arbiter.18

From June 8 to 29, 1989, respondent Santos was in the


Philippines on vacation leave. He returned to China and
reassumed his post on July 17, 1989.

"WHEREFORE, judgment is hereby rendered:

On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain


Joanna suggested in a handwritten note that respondent
Santos be given one (1) month notice of his release from
employment.
On August 10, 1989, the Palace Hotel informed respondent
Santos by letter signed by Mr. Shmidt that his employment at
the Palace Hotel print shop would be terminated due to
business reverses brought about by the political upheaval in
China.15 We quote the letter:16
"After the unfortunate happenings in China and especially
Beijing (referring to Tiannamen Square incidents), our business
has been severely affected. To reduce expenses, we will not
open/operate printshop for the time being.
"We sincerely regret that a decision like this has to be made,
but rest assured this does in no way reflect your past
performance which we found up to our expectations."
"Should a turnaround in the business happen, we will contact
you directly and give you priority on future assignment."
On September 5, 1989, the Palace Hotel terminated the
employment of respondent Santos and paid all benefits due
him, including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the
Philippines.
On October 24, 1989, respondent Santos, through his lawyer,
Atty. Ednave wrote Mr. Shmidt, demanding full compensation
pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit:17
His service with the Palace Hotel, Beijing was not abruptly
terminated but we followed the one-month notice clause and
Mr. Santos received all benefits due him.
"For your information the Print Shop at the Palace Hotel is still
not operational and with a low business outlook, retrenchment
in various departments of the hotel is going on which is a
normal management practice to control costs.
"When going through the latest performance ratings, please
also be advised that his performance was below average and a
Chinese National who is doing his job now shows a better
approach.
"In closing, when Mr. Santos received the letter of notice, he
hardly showed up for work but still enjoyed free
accommodation/laundry/meals up to the day of his departure."
On February 20, 1990, respondent Santos filed a complaint for
illegal dismissal with the Arbitration Branch, National Capital
Region, National Labor Relations Commission (NLRC). He
prayed for an award of nineteen thousand nine hundred and
twenty three dollars (US$19,923.00) as actual damages, forty
thousand pesos (P40,000.00) as exemplary damages and
attorney's fees equivalent to 20% of the damages prayed for.
The complaint named MHC, MHICL, the Palace Hotel and Mr.
Shmidt as respondents.

On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided


the case against petitioners, thus:19

"1. directing all the respondents to pay complainant jointly and


severally;
"a) $20,820 US dollars or its equivalent in Philippine currency
as unearned salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
"d) Ten (10) percent of the total award as attorney's fees.
"SO ORDERED."
On July 23, 1991, petitioners appealed to the NLRC, arguing
that the POEA, not the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution,
stating:20
"WHEREFORE, let the appealed Decision be, as it is hereby,
declared null and void for want of jurisdiction. Complainant is
hereby enjoined to file his complaint with the POEA.
"SO ORDERED."
On September 18, 1992, respondent Santos moved for
reconsideration of the afore-quoted resolution. He argued that
the case was not cognizable by the POEA as he was not an
"overseas contract worker."21
On May 31, 1993, the NLRC granted the motion and reversed
itself. The NLRC directed Labor Arbiter Emerson Tumanon to
hear the case on the question of whether private respondent
was retrenched or dismissed.22
On January 13, 1994, Labor Arbiter Tumanon completed the
proceedings based on the testimonial and documentary
evidence presented to and heard by him.23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial
Arbiter of the National Capital Region, Arbitration Branch, and
the case was transferred to Labor Arbiter Jose G. de Vera.24
On November 25, 1994, Labor Arbiter de Vera submitted his
report.25 He found that respondent Santos was illegally
dismissed from employment and recommended that he be paid
actual damages equivalent to his salaries for the unexpired
portion of his contract.26
On December 15, 1994, the NLRC ruled in favor of private
respondent, to wit:27
"WHEREFORE, finding that the report and recommendations
of Arbiter de Vera are supported by substantial evidence,
judgment is hereby rendered, directing the respondents to
jointly and severally pay complainant the following computed
contractual benefits: (1) US$12,600.00 as salaries for the
unexpired portion of the parties' contract; (2) US$3,600.00 as
extra four (4) months salary for the two (2) years period (sic) of
the parties' contract; (3) US$3,600.00 as "14th month pay" for
the aforesaid two (2) years contract stipulated by the parties or
a total of US$19,800.00 or its peso equivalent, plus (4)
attorney's fees of 10% of complainant's total award.
"SO ORDERED."

On February 2, 1995, petitioners filed a motion for


reconsideration arguing that Labor Arbiter de Vera's
recommendation had no basis in law and in fact.28
On March 30, 1995, the NLRC denied the motion for
reconsideration.29
Hence, this petition.30
On October 9, 1995, petitioners filed with this Court an urgent
motion for the issuance of a temporary restraining order and/or
writ of preliminary injunction and a motion for the annulment of
the entry of judgment of the NLRC dated July 31, 1995.31

employment contract as such was perfected in foreign soil.


This calls to fore the application of the principle of lex loci
contractus (the law of the place where the contract was
made).38
The employment contract was not perfected in the Philippines.
Respondent Santos signified his acceptance by writing a letter
while he was in the Republic of Oman. This letter was sent to
the Palace Hotel in the People's Republic of China.

On November 20, 1995, the Court denied petitioner's urgent


motion. The Court required respondents to file their respective
comments, without giving due course to the petition.32

No power to determine the facts. Neither can the NLRC


determine the facts surrounding the alleged illegal dismissal as
all acts complained of took place in Beijing, People's Republic
of China. The NLRC was not in a position to determine
whether the Tiannamen Square incident truly adversely
affected operations of the Palace Hotel as to justify respondent
Santos' retrenchment.

On March 8, 1996, the Solicitor General filed a manifestation


stating that after going over the petition and its annexes, they
can not defend and sustain the position taken by the NLRC in
its assailed decision and orders. The Solicitor General prayed
that he be excused from filing a comment on behalf of the
NLRC33

Principle of effectiveness, no power to execute decision.


Even assuming that a proper decision could be reached by the
NLRC, such would not have any binding effect against the
employer, the Palace Hotel. The Palace Hotel is a corporation
incorporated under the laws of China and was not even served
with summons. Jurisdiction over its person was not acquired.

On April 30,1996, private respondent Santos filed his


comment.34

This is not to say that Philippine courts and agencies have no


power to solve controversies involving foreign employers.
Neither are we saying that we do not have power over an
employment contract executed in a foreign country. If Santos
were an "overseas contract worker", a Philippine forum,
specifically the POEA, not the NLRC, would protect him.39 He
is not an "overseas contract worker" a fact which he admits
with conviction.40

On June 26, 1996, the Court granted the manifestation of the


Solicitor General and required the NLRC to file its own
comment to the petition.35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens

Even assuming that the NLRC was the proper forum, even on
the merits, the NLRC's decision cannot be sustained.

The NLRC was a seriously inconvenient forum.

II. MHC Not Liable

We note that the main aspects of the case transpired in two


foreign jurisdictions and the case involves purely foreign
elements. The only link that the Philippines has with the case is
that respondent Santos is a Filipino citizen. The Palace Hotel
and MHICL are foreign corporations. Not all cases involving
our citizens can be tried here.

Even if we assume two things: (1) that the NLRC had


jurisdiction over the case, and (2) that MHICL was liable for
Santos' retrenchment, still MHC, as a separate and distinct
juridical entity cannot be held liable.

The employment contract. Respondent Santos was hired


directly by the Palace Hotel, a foreign employer, through
correspondence sent to the Sultanate of Oman, where
respondent Santos was then employed. He was hired without
the intervention of the POEA or any authorized recruitment
agency of the government.36
Under the rule of forum non conveniens, a Philippine court or
agency may assume jurisdiction over the case if it chooses to
do so provided: (1) that the Philippine court is one to which the
parties may conveniently resort to; (2) that the Philippine court
is in a position to make an intelligent decision as to the law and
the facts; and (3) that the Philippine court has or is likely to
have power to enforce its decision. 37 The conditions are
unavailing in the case at bar.

True, MHC is an incorporator of MHICL and owns fifty percent


(50%) of its capital stock. However, this is not enough to pierce
the veil of corporate fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is
resorted to when the corporate fiction is used to defeat public
convenience, justify wrong, protect fraud or defend a crime. 41
It is done only when a corporation is a mere alter ego or
business conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,42 we held that "the
mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a
corporation is not of itself a sufficient reason for disregarding
the fiction of separate corporate personalities."

Not Convenient. We fail to see how the NLRC is a


convenient forum given that all the incidents of the case
from the time of recruitment, to employment to dismissal
occurred outside the Philippines. The inconvenience is
compounded by the fact that the proper defendants, the Palace
Hotel and MHICL are not nationals of the Philippines.
Neither .are they "doing business in the Philippines." Likewise,
the main witnesses, Mr. Shmidt and Mr. Henk are nonresidents of the Philippines.

The tests in determining whether the corporate veil may be


pierced are: First, the defendant must have control or complete
domination of the other corporation's finances, policy and
business practices with regard to the transaction attacked.
There must be proof that the other corporation had no separate
mind, will or existence with respect the act complained
of. Second, control must be used by the defendant to commit
fraud or wrong. Third, the aforesaid control or breach of duty
must be the proximate cause of the injury or loss complained
of. The absence of any of the elements prevents the piercing of
the corporate veil.43

No power to determine applicable law. Neither can an


intelligent decision be made as to the law governing the

It is basic that a corporation has a personality separate and


distinct from those composing it as well as from that of any

other legal entity to which it may be related.44 Clear and


convincing evidence is needed to pierce the veil of corporate
fiction.45 In this case, we find no evidence to show that MHICL
and MHC are one and the same entity.
III. MHICL not Liable

existed between MHICL, MHC and respondent Santos, Labor


Arbiter Ceferina J. Diosana clearly had no jurisdiction over
respondent's claim in NLRC NCR Case No. 00-02-01058-90.
Labor Arbiters have exclusive and original jurisdiction only over
the following:53

Respondent Santos predicates MHICL's liability on the fact that


MHICL "signed" his employment contract with the Palace
Hotel. This fact fails to persuade us.

"1. Unfair labor practice cases;

First, we note that the Vice President (Operations and


Development) of MHICL, Miguel D. Cergueda signed the
employment contract as a mere witness. He merely signed
under the word "noted".

"3. If accompanied with a claim for reinstatement, those cases


that workers may file involving wages, rates of pay, hours of
work and other terms and conditions of employment;

When one "notes" a contract, one is not expressing his


agreement or approval, as a party would. 46 In Sichangco v.
Board of Commissioners of Immigration,47 the Court
recognized that the term "noted" means that the person so
noting has merely taken cognizance of the existence of an act
or declaration, without exercising a judicious deliberation or
rendering a decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the
document. The "witnessing part" of the document is that which,
"in a deed or other formal instrument is that part which comes
after the recitals, or where there are no recitals, after the
parties (emphasis ours)."48 As opposed to a party to a contract,
a witness is simply one who, "being present, personally sees or
perceives a thing; a beholder, a spectator, or
eyewitness."49 One who "notes" something just makes a "brief
written statement"50 a memorandum or observation.
Second, and more importantly, there was no existing employeremployee relationship between Santos and MHICL. In
determining the existence of an employer-employee
relationship, the following elements are considered:51
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and
"(4) the power to control employee's conduct."
MHICL did not have and did not exercise any of the
aforementioned powers. It did not select respondent Santos as
an employee for the Palace Hotel. He was referred to the
Palace Hotel by his friend, Nestor Buenio. MHICL did not
engage respondent Santos to work. The terms of employment
were negotiated and finalized through correspondence
between respondent Santos, Mr. Schmidt and Mr. Henk, who
were officers and representatives of the Palace Hotel and not
MHICL. Neither did respondent Santos adduce any proof that
MHICL had the power to control his conduct. Finally, it was the
Palace Hotel, through Mr. Schmidt and not MHICL that
terminated respondent Santos' services.
Neither is there evidence to suggest that MHICL was a "laboronly contractor."52 There is no proof that MHICL "supplied"
respondent Santos or even referred him for employment to the
Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel
and MHICL are one and the same entity. The fact that the
Palace Hotel is a member of the "Manila Hotel Group" is not
enough to pierce the corporate veil between MHICL and the
Palace Hotel.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and
considering further that no employer-employee relationship

"2. Termination disputes;

"4. Claims for actual, moral, exemplary and other forms of


damages arising from employer-employee relations;
"5. Cases arising from any violation of Article 264 of this Code,
including questions involving legality of strikes and lockouts;
and
"6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement."
In all these cases, an employer-employee relationship is an
indispensable jurisdictional requirement.
The jurisdiction of labor arbiters and the NLRC under Article
217 of the Labor Code is limited to disputes arising from an
employer-employee relationship which can be resolved by
reference to the Labor Code, or other labor statutes, or their
collective bargaining agreements.54
"To determine which body has jurisdiction over the present
controversy, we rely on the sound judicial principle that
jurisdiction over the subject matter is conferred by law and is
determined by the allegations of the complaint irrespective of
whether the plaintiff is entitled to all or some of the claims
asserted therein."55
The lack of jurisdiction of the Labor Arbiter was obvious from
the allegations of the complaint. His failure to dismiss the case
amounts to grave abuse of discretion.56
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for
certiorari and ANNULS the orders and resolutions of the
National Labor Relations Commission dated May 31, 1993,
December 15, 1994 and March 30, 1995 in NLRC NCR CA No.
002101-91 (NLRC NCR Case No. 00-02-01058-90).
No costs.
SO ORDERED.
G.R. No. 76607 February 26, 1990
UNITED STATES OF AMERICA, FREDERICK M. SMOUSE
AND
YVONNE
REEVES, petitioners,
vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch
LVII, Regional Trial Court, Angeles City, ROBERTO T.
VALENCIA, EMERENCIANA C. TANGLAO, AND PABLO C.
DEL PILAR, respondents.
G.R. No. 79470 February 26, 1990
UNITED STATES OF AMERICA, ANTHONY LAMACHIA,
T/SGT. USAF, WILFREDO BELSA, PETER ORASCION AND

ROSE
CARTALLA, petitioners,
vs.
HON. RODOLFO D. RODRIGO, as Presiding Judge of
Branch 7, Regional Trial Court (BAGUIO CITY), La
Trinidad, Benguet and FABIAN GENOVE, respondents.
G.R. No. 80018 February 26, 1990
UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D.
DYE
and
STEVEN
F.
BOSTICK, petitioners,
vs.
HON. JOSEFINA D. CEBALLOS, As Presiding Judge,
Regional Trial Court, Branch 66, Capas, Tarlac, and LUIS
BAUTISTA, respondents.
G.R. No. 80258 February 26, 1990
UNITED STATES OF AMERICA, MAJOR GENERAL
MICHAEL P. C. CARNS, AIC ERNEST E. RIVENBURGH, AIC
ROBIN BLEVINS, SGT. NOEL A. GONZALES, SGT.
THOMAS MITCHELL, SGT. WAYNE L. BENJAMIN, ET
AL., petitioners,
vs.
HON. CONCEPCION S. ALARCON VERGARA, as Presiding
Judge, Branch 62 REGIONAL TRIAL COURT, Angeles City,
and RICKY SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE
RIVERA, EDWIN MARIANO, AKA JESSIE DOLORES
SANGALANG, ET AL., respondents.
These cases have been consolidated because they all involve
the doctrine of state immunity. The United States of America
was not impleaded in the complaints below but has moved to
dismiss on the ground that they are in effect suits against it to
which it has not consented. It is now contesting the denial of its
motions by the respondent judges.
In G.R. No. 76607, the private respondents are suing several
officers of the U.S. Air Force stationed in Clark Air Base in
connection with the bidding conducted by them for contracts
for barber services in the said base.
On February 24, 1986, the Western Pacific Contracting Office,
Okinawa Area Exchange, U.S. Air Force, solicited bids for such
contracts through its contracting officer, James F. Shaw.
Among those who submitted their bids were private
respondents Roberto T. Valencia, Emerenciana C. Tanglao,
and Pablo C. del Pilar. Valencia had been a concessionaire
inside Clark for 34 years; del Pilar for 12 years; and Tanglao for
50 years.
The bidding was won by Ramon Dizon, over the objection of
the private respondents, who claimed that he had made a bid
for four facilities, including the Civil Engineering Area, which
was not included in the invitation to bid.
The private respondents complained to the Philippine Area
Exchange (PHAX). The latter, through its representatives,
petitioners Yvonne Reeves and Frederic M. Smouse explained
that the Civil Engineering concession had not been awarded to
Dizon as a result of the February 24, 1986 solicitation. Dizon
was already operating this concession, then known as the
NCO club concession, and the expiration of the contract had
been extended from June 30, 1986 to August 31, 1986. They
further explained that the solicitation of the CE barbershop
would be available only by the end of June and the private
respondents would be notified.
On June 30, 1986, the private respondents filed a complaint in
the court below to compel PHAX and the individual petitioners
to cancel the award to defendant Dizon, to conduct a rebidding
for the barbershop concessions and to allow the private
respondents by a writ of preliminary injunction to continue
operating the concessions pending litigation. 1

Upon the filing of the complaint, the respondent court issued


an ex parte order directing the individual petitioners to maintain
the status quo.
On July 22, 1986, the petitioners filed a motion to dismiss and
opposition to the petition for preliminary injunction on the
ground that the action was in effect a suit against the United
States of America, which had not waived its non-suability. The
individual defendants, as official employees of the U.S. Air
Force, were also immune from suit.
On the same date, July 22, 1986, the trial court denied the
application for a writ of preliminary injunction.
On October 10, 1988, the trial court denied the petitioners'
motion to dismiss, holding in part as follows:
From the pleadings thus far presented to this Court by the
parties, the Court's attention is called by the relationship
between the plaintiffs as well as the defendants, including the
US Government, in that prior to the bidding or solicitation in
question, there was a binding contract between the plaintiffs as
well as the defendants, including the US Government. By
virtue of said contract of concession it is the Court's
understanding that neither the US Government nor the herein
principal defendants would become the employer/s of the
plaintiffs but that the latter are the employers themselves of the
barbers, etc. with the employer, the plaintiffs herein, remitting
the stipulated percentage of commissions to the Philippine
Area Exchange. The same circumstance would become in
effect when the Philippine Area Exchange opened for bidding
or solicitation the questioned barber shop concessions. To this
extent, therefore, indeed a commercial transaction has been
entered, and for purposes of the said solicitation, would
necessarily be entered between the plaintiffs as well as the
defendants.
The Court, further, is of the view that Article XVIII of the RP-US
Bases Agreement does not cover such kind of services falling
under the concessionaireship, such as a barber shop
concession. 2
On December 11, 1986, following the filing of the herein
petition for certiorari and prohibition with preliminary injunction,
we issued a temporary restraining order against further
proceedings in the court below. 3
In G.R. No. 79470, Fabian Genove filed a complaint for
damages against petitioners Anthony Lamachia, Wilfredo
Belsa, Rose Cartalla and Peter Orascion for his dismissal as
cook in the U.S. Air Force Recreation Center at the John Hay
Air Station in Baguio City. It had been ascertained after
investigation, from the testimony of Belsa Cartalla and
Orascion, that Genove had poured urine into the soup stock
used in cooking the vegetables served to the club customers.
Lamachia, as club manager, suspended him and thereafter
referred the case to a board of arbitrators conformably to the
collective bargaining agreement between the Center and its
employees. The board unanimously found him guilty and
recommended his dismissal. This was effected on March 5,
1986, by Col. David C. Kimball, Commander of the 3rd Combat
Support Group, PACAF Clark Air Force Base. Genove's
reaction was to file Ms complaint in the Regional Trial Court of
Baguio City against the individual petitioners. 4
On March 13, 1987, the defendants, joined by the United
States of America, moved to dismiss the complaint, alleging
that Lamachia, as an officer of the U.S. Air Force stationed at
John Hay Air Station, was immune from suit for the acts done
by him in his official capacity. They argued that the suit was in
effect against the United States, which had not given its
consent to be sued.

This motion was denied by the respondent judge on June 4,


1987, in an order which read in part:
It is the understanding of the Court, based on the allegations of
the complaint which have been hypothetically admitted by
defendants upon the filing of their motion to dismiss that
although defendants acted initially in their official capacities,
their going beyond what their functions called for brought them
out of the protective mantle of whatever immunities they may
have had in the beginning. Thus, the allegation that the acts
complained of were illegal, done. with extreme bad faith and
with pre-conceived sinister plan to harass and finally dismiss
the plaintiff, gains significance. 5

and caused extensive injuries to them. The defendants deny


this and claim the plaintiffs were arrested for theft and were
bitten by the dogs because they were struggling and resisting
arrest, The defendants stress that the dogs were called off and
the plaintiffs were immediately taken to the medical center for
treatment of their wounds.
In a motion to dismiss the complaint, the United States of
America and the individually named defendants argued that
the suit was in effect a suit against the United States, which
had not given its consent to be sued. The defendants were
also immune from suit under the RP-US Bases Treaty for acts
done by them in the performance of their official functions.

The petitioners then came to this Court seeking certiorari and


prohibition with preliminary injunction.

The motion to dismiss was denied by the trial court in its order
dated August 10, 1987, reading in part as follows:

In G.R. No. 80018, Luis Bautista, who was employed as a


barracks boy in Camp O' Donnell, an extension of Clark Air
Base, was arrested following a buy-bust operation conducted
by the individual petitioners herein, namely, Tomi J. King,
Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air
Force and special agents of the Air Force Office of Special
Investigators (AFOSI). On the basis of the sworn statements
made by them, an information for violation of R.A. 6425,
otherwise known as the Dangerous Drugs Act, was filed
against Bautista in the Regional Trial Court of Tarlac. The
above-named officers testified against him at his trial. As a
result of the filing of the charge, Bautista was dismissed from
his employment. He then filed a complaint for damages against
the individual petitioners herein claiming that it was because of
their acts that he was removed. 6

The defendants certainly cannot correctly argue that they are


immune from suit. The allegations, of the complaint which is
sought to be dismissed, had to be hypothetically admitted and
whatever ground the defendants may have, had to be
ventilated during the trial of the case on the merits. The
complaint alleged criminal acts against the individually-named
defendants and from the nature of said acts it could not be said
that they are Acts of State, for which immunity should be
invoked. If the Filipinos themselves are duty bound to respect,
obey and submit themselves to the laws of the country, with
more reason, the members of the United States Armed Forces
who are being treated as guests of this country should respect,
obey and submit themselves to its laws. 10

During the period for filing of the answer, Mariano Y. Navarro a


special counsel assigned to the International Law Division,
Office of the Staff Judge Advocate of Clark Air Base, entered a
special appearance for the defendants and moved for an
extension within which to file an "answer and/or other
pleadings." His reason was that the Attorney General of the
United States had not yet designated counsel to represent the
defendants, who were being sued for their official acts. Within
the extended period, the defendants, without the assistance of
counsel or authority from the U.S. Department of Justice, filed
their answer. They alleged therein as affirmative defenses that
they had only done their duty in the enforcement of the laws of
the Philippines inside the American bases pursuant to the RPUS Military Bases Agreement.
On May 7, 1987, the law firm of Luna, Sison and Manas,
having been retained to represent the defendants, filed with
leave of court a motion to withdraw the answer and dismiss the
complaint. The ground invoked was that the defendants were
acting in their official capacity when they did the acts
complained of and that the complaint against them was in
effect a suit against the United States without its consent.
The motion was denied by the respondent judge in his order
dated September 11, 1987, which held that the claimed
immunity under the Military Bases Agreement covered only
criminal and not civil cases. Moreover, the defendants had
come under the jurisdiction of the court when they submitted
their answer. 7
Following the filing of the herein petition for certiorari and
prohibition with preliminary injunction, we issued on October
14, 1987, a temporary restraining order. 8
In G.R. No. 80258, a complaint for damages was filed by the
private respondents against the herein petitioners (except the
United States of America), for injuries allegedly sustained by
the plaintiffs as a result of the acts of the defendants. 9 There is
a conflict of factual allegations here. According to the plaintiffs,
the defendants beat them up, handcuffed them and unleashed
dogs on them which bit them in several parts of their bodies

and so was the motion for reconsideration. The defendants


submitted their answer as required but subsequently filed their
petition for certiorari and prohibition with preliminary injunction
with this Court. We issued a temporary restraining order on
October 27, 1987. 11
II
The rule that a state may not be sued without its consent, now
expressed in Article XVI, Section 3, of the 1987 Constitution, is
one of the generally accepted principles of international law
that we have adopted as part of the law of our land under
Article II, Section 2. This latter provision merely reiterates a
policy earlier embodied in the 1935 and 1973 Constitutions and
also intended to manifest our resolve to abide by the rules of
the international community.
Even without such affirmation, we would still be bound by the
generally accepted principles of international law under the
doctrine of incorporation. Under this doctrine, as accepted by
the majority of states, such principles are deemed incorporated
in the law of every civilized state as a condition and
consequence of its membership in the society of nations. Upon
its admission to such society, the state is automatically
obligated to comply with these principles in its relations with
other states.
As applied to the local state, the doctrine of state immunity is
based on the justification given by Justice Holmes that "there
can be no legal right against the authority which makes the law
on which the right depends." 12 There are other practical
reasons for the enforcement of the doctrine. In the case of the
foreign state sought to be impleaded in the local jurisdiction,
the added inhibition is expressed in the maxim par in parem,
non habet imperium. All states are sovereign equals and
cannot assert jurisdiction over one another. A contrary
disposition would, in the language of a celebrated case,
"unduly vex the peace of nations." 13
While the doctrine appears to prohibit only suits against the
state without its consent, it is also applicable to complaints filed
against officials of the state for acts allegedly performed by
them in the discharge of their duties. The rule is that if the

judgment against such officials will require the state itself to


perform an affirmative act to satisfy the same, such as the
appropriation of the amount needed to pay the damages
awarded against them, the suit must be regarded as against
the state itself although it has not been formally
impleaded. 14 In such a situation, the state may move to
dismiss the complaint on the ground that it has been filed
without its consent.
The doctrine is sometimes derisively called "the royal
prerogative of dishonesty" because of the privilege it grants the
state to defeat any legitimate claim against it by simply
invoking its non-suability. That is hardly fair, at least in
democratic societies, for the state is not an unfeeling tyrant
unmoved by the valid claims of its citizens. In fact, the doctrine
is not absolute and does not say the state may not be sued
under any circumstance. On the contrary, the rule says that the
state may not be sued without its consent, which clearly
imports that it may be sued if it consents.
The consent of the state to be sued may be manifested
expressly or impliedly. Express consent may be embodied in a
general law or a special law. Consent is implied when the state
enters into a contract or it itself commences litigation.
The general law waiving the immunity of the state from suit is
found in Act No. 3083, under which the Philippine government
"consents and submits to be sued upon any moneyed claim
involving liability arising from contract, express or implied,
which could serve as a basis of civil action between private
parties." In Merritt v. Government of the Philippine Islands, 15 a
special law was passed to enable a person to sue the
government for an alleged tort. When the government enters
into a contract, it is deemed to have descended to the level of
the other contracting party and divested of its sovereign
immunity from suit with its implied consent.16 Waiver is also
implied when the government files a complaint, thus opening
itself to a counterclaim. 17
The above rules are subject to qualification. Express consent is
effected only by the will of the legislature through the medium
of a duly enacted statute. 18 We have held that not all contracts
entered into by the government will operate as a waiver of its
non-suability; distinction must be made between its sovereign
and proprietary acts. 19 As for the filing of a complaint by the
government, suability will result only where the government is
claiming affirmative relief from the defendant. 20
In the case of the United States of America, the customary rule
of international law on state immunity is expressed with more
specificity in the RP-US Bases Treaty. Article III thereof
provides as follows:
It is mutually agreed that the United States shall have the
rights, power and authority within the bases which are
necessary for the establishment, use, operation and defense
thereof or appropriate for the control thereof and all the rights,
power and authority within the limits of the territorial waters and
air space adjacent to, or in the vicinity of, the bases which are
necessary to provide access to them or appropriate for their
control.
The petitioners also rely heavily on Baer v. Tizon, 21 along with
several other decisions, to support their position that they are
not suable in the cases below, the United States not having
waived its sovereign immunity from suit. It is emphasized that
in Baer, the Court held:
The invocation of the doctrine of immunity from suit of a foreign
state without its consent is appropriate. More specifically,
insofar as alien armed forces is concerned, the starting point
is Raquiza v. Bradford, a 1945 decision. In dismissing a
habeas corpus petition for the release of petitioners confined
by American army authorities, Justice Hilado speaking for the

Court, cited Coleman v. Tennessee, where it was explicitly


declared: 'It is well settled that a foreign army, permitted to
march through a friendly country or to be stationed in it, by
permission of its government or sovereign, is exempt from the
civil and criminal jurisdiction of the place.' Two years later, in
Tubb and Tedrow v. Griess, this Court relied on the ruling in
Raquiza v. Bradford and cited in support thereof excerpts from
the works of the following authoritative writers: Vattel,
Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and
McNair and Lauterpacht. Accuracy demands the clarification
that after the conclusion of the Philippine-American Military
Bases Agreement, the treaty provisions should control on such
matter, the assumption being that there was a manifestation of
the submission to jurisdiction on the part of the foreign power
whenever appropriate. More to the point is Syquia v. Almeda
Lopez, where plaintiffs as lessors sued the Commanding
General of the United States Army in the Philippines, seeking
the restoration to them of the apartment buildings they owned
leased to the United States armed forces stationed in the
Manila area. A motion to dismiss on the ground of non-suability
was filed and upheld by respondent Judge. The matter was
taken to this Court in a mandamus proceeding. It failed. It was
the ruling that respondent Judge acted correctly considering
that the 4 action must be considered as one against the U.S.
Government. The opinion of Justice Montemayor continued: 'It
is clear that the courts of the Philippines including the
Municipal Court of Manila have no jurisdiction over the present
case for unlawful detainer. The question of lack of jurisdiction
was raised and interposed at the very beginning of the action.
The U.S. Government has not given its consent to the filing of
this suit which is essentially against her, though not in name.
Moreover, this is not only a case of a citizen filing a suit against
his own Government without the latter's consent but it is of a
citizen firing an action against a foreign government without
said government's consent, which renders more obvious the
lack of jurisdiction of the courts of his country. The principles of
law behind this rule are so elementary and of such general
acceptance that we deem it unnecessary to cite authorities in
support thereof then came Marvel Building Corporation v.
Philippine War Damage Commission, where respondent, a
United States Agency established to compensate damages
suffered by the Philippines during World War II was held as
falling within the above doctrine as the suit against it would
eventually be a charge against or financial liability of the United
States Government because ... , the Commission has no funds
of its own for the purpose of paying money judgments.' The
Syquia ruling was again explicitly relied upon in Marquez Lim
v. Nelson, involving a complaint for the recovery of a motor
launch, plus damages, the special defense interposed being
'that the vessel belonged to the United States Government,
that the defendants merely acted as agents of said
Government, and that the United States Government is
therefore the real party in interest.' So it was in Philippine Alien
Property Administration v. Castelo, where it was held that a suit
against Alien Property Custodian and the Attorney General of
the United States involving vested property under the Trading
with the Enemy Act is in substance a suit against the United
States. To the same effect is Parreno v. McGranery, as the
following excerpt from the opinion of justice Tuazon clearly
shows: 'It is a widely accepted principle of international law,
which is made a part of the law of the land (Article II, Section 3
of the Constitution), that a foreign state may not be brought to
suit before the courts of another state or its own courts without
its consent.' Finally, there is Johnson v. Turner, an appeal by
the defendant, then Commanding General, Philippine
Command (Air Force, with office at Clark Field) from a decision
ordering the return to plaintiff of the confiscated military
payment certificates known as scrip money. In reversing the
lower court decision, this Tribunal, through Justice
Montemayor, relied on Syquia v. Almeda Lopez, explaining why
it could not be sustained.

It bears stressing at this point that the above observations do


not confer on the United States of America a blanket immunity
for all acts done by it or its agents in the Philippines. Neither
may the other petitioners claim that they are also insulated
from suit in this country merely because they have acted as
agents of the United States in the discharge of their official
functions.
There is no question that the United States of America, like any
other state, will be deemed to have impliedly waived its nonsuability if it has entered into a contract in its proprietary or
private capacity. It is only when the contract involves its
sovereign or governmental capacity that no such waiver may
be implied. This was our ruling in United States of America v.
Ruiz, 22 where the transaction in question dealt with the
improvement of the wharves in the naval installation at Subic
Bay. As this was a clearly governmental function, we held that
the contract did not operate to divest the United States of its
sovereign immunity from suit. In the words of Justice Vicente
Abad Santos:
The traditional rule of immunity exempts a State from being
sued in the courts of another State without its consent or
waiver. This rule is a necessary consequence of the principles
of independence and equality of States. However, the rules of
International Law are not petrified; they are constantly
developing and evolving. And because the activities of states
have multiplied, it has been necessary to distinguish them
between sovereign and governmental acts (jure imperii) and
private, commercial and proprietary acts (jure gestionis). The
result is that State immunity now extends only to acts jure
imperii The restrictive application of State immunity is now the
rule in the United States, the United kingdom and other states
in Western Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only
when the proceedings arise out of commercial transactions of
the foreign sovereign, its commercial activities or economic
affairs. Stated differently, a State may be said to have
descended to the level of an individual and can thus be
deemed to have tacitly given its consent to be sued only when
it enters into business contracts. It does not apply where the
contract relates to the exercise of its sovereign functions. In
this case the projects are an integral part of the naval base
which is devoted to the defense of both the United States and
the Philippines, indisputably a function of the government of
the highest order; they are not utilized for nor dedicated to
commercial or business purposes.
The other petitioners in the cases before us all aver they have
acted in the discharge of their official functions as officers or
agents of the United States. However, this is a matter of
evidence. The charges against them may not be summarily
dismissed on their mere assertion that their acts are imputable
to the United States of America, which has not given its
consent to be sued. In fact, the defendants are sought to be
held answerable for personal torts in which the United States
itself is not involved. If found liable, they and they alone must
satisfy the judgment.
In Festejo v. Fernando, 23 a bureau director, acting without any
authority whatsoever, appropriated private land and converted
it into public irrigation ditches. Sued for the value of the lots
invalidly taken by him, he moved to dismiss the complaint on
the ground that the suit was in effect against the Philippine
government, which had not given its consent to be sued. This
Court sustained the denial of the motion and held that the
doctrine of state immunity was not applicable. The director was
being sued in his private capacity for a personal tort.

With these considerations in mind, we now proceed to resolve


the cases at hand.
III
It is clear from a study of the records of G.R. No. 80018 that
the individually-named petitioners therein were acting in the
exercise of their official functions when they conducted the
buy-bust operation against the complainant and thereafter
testified against him at his trial. The said petitioners were in
fact connected with the Air Force Office of Special
Investigators and were charged precisely with the function of
preventing the distribution, possession and use of prohibited
drugs and prosecuting those guilty of such acts. It cannot for a
moment be imagined that they were acting in their private or
unofficial capacity when they apprehended and later testified
against the complainant. It follows that for discharging their
duties as agents of the United States, they cannot be directly
impleaded for acts imputable to their principal, which has not
given its consent to be sued. As we observed in Sanders v.
Veridiano: 24
Given the official character of the above-described letters, we
have to conclude that the petitioners were, legally speaking,
being sued as officers of the United States government. As
they have acted on behalf of that government, and within the
scope of their authority, it is that government, and not the
petitioners personally, that is responsible for their acts.
The private respondent invokes Article 2180 of the Civil Code
which holds the government liable if it acts through a special
agent. The argument, it would seem, is premised on the
ground that since the officers are designated "special agents,"
the United States government should be liable for their torts.
There seems to be a failure to distinguish between suability
and liability and a misconception that the two terms are
synonymous. Suability depends on the consent of the state to
be sued, liability on the applicable law and the established
facts. The circumstance that a state is suable does not
necessarily mean that it is liable; on the other hand, it can
never be held liable if it does not first consent to be sued.
Liability is not conceded by the mere fact that the state has
allowed itself to be sued. When the state does waive its
sovereign immunity, it is only giving the plaintiff the chance to
prove, if it can, that the defendant is liable.
The said article establishes a rule of liability, not suability. The
government may be held liable under this rule only if it first
allows itself to be sued through any of the accepted forms of
consent.
Moreover, the agent performing his regular functions is not a
special agent even if he is so denominated, as in the case at
bar. No less important, the said provision appears to regulate
only the relations of the local state with its inhabitants and,
hence, applies only to the Philippine government and not to
foreign governments impleaded in our courts.
We reject the conclusion of the trial court that the answer filed
by the special counsel of the Office of the Sheriff Judge
Advocate of Clark Air Base was a submission by the United
States government to its jurisdiction. As we noted in Republic
v. Purisima, 25 express waiver of immunity cannot be made by
a mere counsel of the government but must be effected
through a duly-enacted statute. Neither does such answer
come under the implied forms of consent as earlier discussed.
But even as we are certain that the individual petitioners in
G.R. No. 80018 were acting in the discharge of their official
functions, we hesitate to make the same conclusion in G.R.
No. 80258. The contradictory factual allegations in this case
deserve in our view a closer study of what actually happened
to the plaintiffs. The record is too meager to indicate if the

defendants were really discharging their official duties or had


actually exceeded their authority when the incident in question
occurred. Lacking this information, this Court cannot directly
decide this case. The needed inquiry must first be made by the
lower court so it may assess and resolve the conflicting claims
of the parties on the basis of the evidence that has yet to be
presented at the trial. Only after it shall have determined in
what capacity the petitioners were acting at the time of the
incident in question will this Court determine, if still necessary,
if the doctrine of state immunity is applicable.
In G.R. No. 79470, private respondent Genove was employed
as a cook in the Main Club located at the U.S. Air Force
Recreation Center, also known as the Open Mess Complex, at
John Hay Air Station. As manager of this complex, petitioner
Lamachia is responsible for eleven diversified activities
generating an annual income of $2 million. Under his executive
management are three service restaurants, a cafeteria, a
bakery, a Class VI store, a coffee and pantry shop, a main
cashier cage, an administrative office, and a decentralized
warehouse which maintains a stock level of $200,000.00 per
month in resale items. He supervises 167 employees, one of
whom was Genove, with whom the United States government
has concluded a collective bargaining agreement.
From these circumstances, the Court can assume that the
restaurant services offered at the John Hay Air Station partake
of the nature of a business enterprise undertaken by the United
States government in its proprietary capacity. Such services
are not extended to the American servicemen for free as a
perquisite of membership in the Armed Forces of the United
States. Neither does it appear that they are exclusively offered
to these servicemen; on the contrary, it is well known that they
are available to the general public as well, including the tourists
in Baguio City, many of whom make it a point to visit John Hay
for this reason. All persons availing themselves of this facility
pay for the privilege like all other customers as in ordinary
restaurants. Although the prices are concededly reasonable
and relatively low, such services are undoubtedly operated for
profit, as a commercial and not a governmental activity.
The consequence of this finding is that the petitioners cannot
invoke the doctrine of state immunity to justify the dismissal of
the damage suit against them by Genove. Such defense will
not prosper even if it be established that they were acting as
agents of the United States when they investigated and later
dismissed Genove. For that matter, not even the United States
government itself can claim such immunity. The reason is that
by entering into the employment contract with Genove in the
discharge of its proprietary functions, it impliedly divested itself
of its sovereign immunity from suit.
But these considerations notwithstanding, we hold that the
complaint against the petitioners in the court below must still
be dismissed. While suable, the petitioners are nevertheless
not liable. It is obvious that the claim for damages cannot be
allowed on the strength of the evidence before us, which we
have carefully examined.
The dismissal of the private respondent was decided upon only
after a thorough investigation where it was established beyond
doubt that he had polluted the soup stock with urine. The
investigation, in fact, did not stop there. Despite the definitive
finding of Genove's guilt, the case was still referred to the
board of arbitrators provided for in the collective bargaining
agreement. This board unanimously affirmed the findings of the
investigators and recommended Genove's dismissal. There
was nothing arbitrary about the proceedings. The petitioners
acted quite properly in terminating the private respondent's
employment for his unbelievably nauseating act. It is surprising
that he should still have the temerity to file his complaint for
damages after committing his utterly disgusting offense.

Concerning G.R. No. 76607, we also find that the barbershops


subject of the concessions granted by the United States
government are commercial enterprises operated by private
person's. They are not agencies of the United States Armed
Forces nor are their facilities demandable as a matter of right
by the American servicemen. These establishments provide for
the grooming needs of their customers and offer not only the
basic haircut and shave (as required in most military
organizations) but such other amenities as shampoo,
massage, manicure and other similar indulgences. And all for a
fee. Interestingly, one of the concessionaires, private
respondent Valencia, was even sent abroad to improve his
tonsorial business, presumably for the benefit of his customers.
No less significantly, if not more so, all the barbershop
concessionaires are under the terms of their contracts,
required to remit to the United States government fixed
commissions in consideration of the exclusive concessions
granted to them in their respective areas.
This being the case, the petitioners cannot plead any immunity
from the complaint filed by the private respondents in the court
below. The contracts in question being decidedly commercial,
the conclusion reached in the United States of America v.
Ruiz case cannot be applied here.
The Court would have directly resolved the claims against the
defendants as we have done in G.R. No. 79470, except for the
paucity of the record in the case at hand. The evidence of the
alleged irregularity in the grant of the barbershop concessions
is not before us. This means that, as in G.R. No. 80258, the
respondent court will have to receive that evidence first, so it
can later determine on the basis thereof if the plaintiffs are
entitled to the relief they seek. Accordingly, this case must also
be remanded to the court below for further proceedings.
IV
There are a number of other cases now pending before us
which also involve the question of the immunity of the United
States from the jurisdiction of the Philippines. This is cause for
regret, indeed, as they mar the traditional friendship between
two countries long allied in the cause of democracy. It is hoped
that the so-called "irritants" in their relations will be resolved in
a spirit of mutual accommodation and respect, without the
inconvenience and asperity of litigation and always with justice
to both parties.
WHEREFORE, after considering all the above premises, the
Court hereby renders judgment as follows:
1. In G.R. No. 76607, the petition is DISMISSED and the
respondent judge is directed to proceed with the hearing and
decision of Civil Case No. 4772. The temporary restraining
order dated December 11, 1986, is LIFTED.
2. In G.R. No. 79470, the petition is GRANTED and Civil Case
No. 829-R(298) is DISMISSED.
3. In G.R. No. 80018, the petition is GRANTED and Civil Case
No. 115-C-87 is DISMISSED. The temporary restraining order
dated October 14, 1987, is made permanent.
4. In G.R. No. 80258, the petition is DISMISSED and the
respondent court is directed to proceed with the hearing and
decision of Civil Case No. 4996. The temporary restraining
order dated October 27, 1987, is LIFTED.
All without any pronouncement as to costs.
SO ORDERED.
G.R. No. L-35131 November 29, 1972

THE WORLD HEALTH ORGANIZATION and DR. LEONCE


VERSTUYFT, petitioners,
vs.
HON. BENJAMIN H. AQUINO, as Presiding Judge of
Branch VIII, Court of First Instance of Rizal, MAJOR
WILFREDO CRUZ, MAJOR ANTONIO G. RELLEVE, and
CAPTAIN PEDRO S. NAVARRO of the Constabulary
Offshore Action Center (COSAC), respondents..
An original action for certiorari and prohibition to set aside
respondent judge's refusal to quash a search warrant issued
by him at the instance of respondents COSAC (Constabulary
Offshore Action Center) officers for the search and seizure of
the personal effects of petitioner official of the WHO (World
Health Organization) notwithstanding his being entitled to
diplomatic immunity, as duly recognized by the executive
branch of the Philippine Government and to prohibit
respondent judge from further proceedings in the matter.
Upon filing of the petition, the Court issued on June 6, 1972 a
restraining order enjoining respondents from executing the
search warrant in question.
Respondents COSAC officers filed their answer joining issue
against petitioners and seeking to justify their act of applying
for and securing from respondent judge the warrant for the
search and seizure of ten crates consigned to petitioner
Verstuyft and stored at the Eternit Corporation warehouse on
the ground that they "contain large quantities of highly dutiable
goods" beyond the official needs of said petitioner "and the
only lawful way to reach these articles and effects for purposes
of taxation is through a search warrant." 1
The Court thereafter called for the parties' memoranda in lieu
of oral argument, which were filed on August 3, 1972 by
respondents and on August 21, 1972 by petitioners, and the
case was thereafter deemed submitted for decision.
It is undisputed in the record that petitioner Dr. Leonce
Verstuyft, who was assigned on December 6, 1971 by the
WHO from his last station in Taipei to the Regional Office in
Manila as Acting Assistant Director of Health Services, is
entitled to diplomatic immunity, pursuant to the Host
Agreement executed on July 22, 1951 between the Philippine
Government and the World Health Organization.
Such diplomatic immunity carries with it, among other
diplomatic privileges and immunities, personal inviolability,
inviolability of the official's properties, exemption from local
jurisdiction, and exemption from taxation and customs duties.
When petitioner Verstuyft's personal effects contained in twelve
(12) crates entered the Philippines as unaccompanied
baggage on January 10, 1972, they were accordingly allowed
free entry from duties and taxes. The crates were directly
stored at the Eternit Corporation's warehouse at Mandaluyong,
Rizal, "pending his relocation into permanent quarters upon the
offer of Mr. Berg, Vice President of Eternit who was once a
patient of Dr. Verstuyft in the Congo." 2
Nevertheless, as above stated, respondent judge issued on
March 3, 1972 upon application on the same date of
respondents COSAC officers search warrant No. 72-138 for
alleged violation of Republic Act 4712 amending section 3601
of the Tariff and Customs Code 3 directing the search and
seizure of the dutiable items in said crates.
Upon protest of March 6, 1972 of Dr. Francisco Dy, WHO
Regional Director for the Western Pacific with station in Manila,
Secretary of Foreign Affairs Carlos P. Romulo, personally wired
on the same date respondent Judge advising that "Dr. Verstuyft
is entitled to immunity from search in respect of his personal
baggage as accorded to members of diplomatic missions"
pursuant to the Host Agreement and requesting suspension of

the search warrant order "pending clarification of the matter


from the ASAC."
Respondent judge set the Foreign Secretary's request for
hearing and heard the same on March 16, 1972, but
notwithstanding the official plea of diplomatic immunity
interposed by a duly authorized representative of the
Department of Foreign Affairs who furnished the respondent
judge with a list of the articles brought in by petitioner Verstuyft,
respondent judge issued his order of the same date
maintaining the effectivity of the search warrant issued by him,
unless restrained by a higher court. 4
Petitioner Verstuyft's special appearance on March 24, 1972
for the limited purpose of pleading his diplomatic immunity and
motion to quash search warrant of April 12, 1972 failed to
move respondent judge.
At the hearing thereof held on May 8, 1972, the Office of the
Solicitor General appeared and filed an extended comment
stating the official position of the executive branch of the
Philippine Government that petitioner Verstuyft is entitled to
diplomatic immunity, he did not abuse his diplomatic
immunity, 5 and that court proceedings in the receiving or host
State are not the proper remedy in the case of abuse of
diplomatic immunity. 6
The Solicitor General accordingly joined petitioner Verstuyft's
prayer for the quashal of the search warrant. Respondent
judge nevertheless summarily denied quashal of the search
warrant per his order of May 9, 1972 "for the same reasons
already stated in (his) aforesaid order of March 16, 1972"
disregarding Foreign Secretary Romulo's plea of diplomatic
immunity on behalf of Dr. Verstuyft.
Hence, the petition at bar. Petitioner Verstuyft has in this Court
been joined by the World Health Organization (WHO) itself in
full assertion of petitioner Verstuyft's being entitled "to all
privileges and immunities, exemptions and facilities accorded
to diplomatic envoys in accordance with international law"
under section 24 of the Host Agreement.
The writs of certiorari and prohibition should issue as prayed
for.
1. The executive branch of the Philippine Government
has expressly recognized that petitioner Verstuyft is entitled to
diplomatic immunity, pursuant to the provisions of the Host
Agreement. The Department of Foreign Affairs formally advised
respondent judge of the Philippine Government's official
position that accordingly "Dr. Verstuyft cannot be the subject of
a Philippine court summons without violating an obligation in
international law of the Philippine Government" and asked for
the quashal of the search warrant, since his personal effects
and baggages after having been allowed free entry from all
customs duties and taxes, may not be baselessly claimed to
have been "unlawfully imported" in violation of the tariff and
customs code as claimed by respondents COSAC officers. The
Solicitor-General,
as
principal
law officer
of
the
Government, 7 likewise expressly affirmed said petitioner's right
to diplomatic immunity and asked for the quashal of the search
warrant.
It is a recognized principle of international law and under our
system of separation of powers that diplomatic immunity is
essentially a political question and courts should refuse to look
beyond a determination by the executive branch of the
government, 8 and where the plea of diplomatic immunity is
recognized and affirmed by the executive branch of the
government as in the case at bar, it is then the duty of the
courts to accept the claim of immunity upon appropriate
suggestion by the principal law officer of the government, the
Solicitor General in this case, or other officer acting under his
direction. 9 Hence, in adherence to the settled principle that

courts may not so exercise their jurisdiction by seizure and


detention of property, as to embarrass the executive arm of the
government in conducting foreign relations, it is accepted
doctrine that "in such cases the judicial department of (this)
government follows the action of the political branch and will
not embarrass the latter by assuming an antagonistic
jurisdiction." 10
2. The unfortunate fact that respondent judge chose to rely on
the suspicion of respondents COSAC officers "that the other
remaining crates unopened contain contraband items" 11 rather
than on the categorical assurance of the Solicitor-General that
petitioner Verstuyft did not abuse his diplomatic
immunity, 12 which was based in turn on the official positions
taken by the highest executive officials with competence and
authority to act on the matter, namely, the Secretaries of
Foreign Affairs and of Finance, could not justify respondent
judge's denial of the quashal of the search warrant.
As already stated above, and brought to respondent court's
attention, 13 the Philippine Government is bound by the
procedure laid down in Article VII of the Convention on the
Privileges and Immunities of the Specialized Agencies of the
United Nations 14 for consultations between the Host State and
the United Nations agency concerned to determine, in the first
instance the fact of occurrence of the abuse alleged, and if so,
to ensure that no repetition occurs and for other recourses.
This is a treaty commitment voluntarily assumed by the
Philippine Government and as such, has the force and effect of
law.
Hence, even assuming arguendo as against the categorical
assurance of the executive branch of government that
respondent judge had some ground to prefer respondents
COSAC officers' suspicion that there had been an abuse of
diplomatic immunity, the continuation of the search warrant
proceedings before him was not the proper remedy. He should,
nevertheless, in deference to the exclusive competence and
jurisdiction of the executive branch of government to act on the
matter, have acceded to the quashal of the search warrant,
and forwarded his findings or grounds to believe that there had
been such abuse of diplomatic immunity to the Department of
Foreign Affairs for it to deal with, in accordance with the
aforementioned Convention, if so warranted.
3. Finally, the Court has noted with concern the apparent lack
of coordination between the various departments involved in
the subject-matter of the case at bar, which made it possible
for a small unit, the COSAC, to which respondents officers
belong, seemingly to disregard and go against the authoritative
determination and pronouncements of both the Secretaries of
Foreign Affairs and of Finance that petitioner Verstuyft is
entitled to diplomatic immunity, as confirmed by the SolicitorGeneral as the principal law officer of the Government. Such
executive determination properly implemented should have
normally constrained respondents officers themselves to obtain
the quashal of the search warrant secured by them rather than
oppose such quashal up to this Court, to the embarrassment of
said department heads, if not of the Philippine Government
itself vis a vis the petitioners. 15
The seriousness of the matter is underscored when the
provisions of Republic Act 75 enacted since October 21, 1946
to safeguard the jurisdictional immunity of diplomatic officials in
the Philippines are taken into account. Said Act declares as
null and void writs or processes sued out or prosecuted
whereby inter alia the person of an ambassador or public
minister is arrested or imprisoned or his goods or chattels are
seized or attached and makes it a penal offense for "every
person by whom the same is obtained or prosecuted, whether
as party or as attorney, and every officer concerned in
executing it" to obtain or enforce such writ or process. 16

The Court, therefore, holds that respondent judge acted


without jurisdiction and with grave abuse of discretion in not
ordering the quashal of the search warrant issued by him in
disregard of the diplomatic immunity of petitioner Verstuyft.
ACCORDINGLY, the writs of certiorari and prohibition prayed
for are hereby granted, and the temporary restraining order
heretofore issued against execution or enforcement of the
questioned search warrant, which is hereby declared null and
void, is hereby made permanent. The respondent court is
hereby commanded to desist from further proceedings in the
matter. No costs, none having been prayed for.
The clerk of court is hereby directed to furnish a copy of this
decision to the Secretary of Justice for such action as he may
find appropriate with regard to the matters mentioned in
paragraph 3 hereof. So ordered.
[G.R. No. 120135. March 31, 2003]
BANK OF AMERICA NT&SA, BANK OF AMERICA
INTERNATIONAL,
LTD., petitioners,
vs. COURT
OF
APPEALS, HON. MANUEL PADOLINA, EDUARDO
LITONJUA,
SR.,
and
AURELIO
K.
LITONJUA,
JR., respondents.
This is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the November 29, 1994 decision of
the Court of Appeals[1] and the April 28, 1995 resolution
denying petitioners motion for reconsideration.
The factual background of the case is as follows:
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J.
Litonjua (Litonjuas, for brevity) filed a Complaint[2] before the
Regional Trial Court of Pasig against the Bank of America
NT&SA and Bank of America International, Ltd. (defendant
banks for brevity) alleging that: they were engaged in the
shipping business; they owned two vessels: Don Aurelio and El
Champion, through their wholly-owned corporations; they
deposited their revenues from said business together with
other funds with the branches of said banks in the United
Kingdom and Hongkong up to 1979; with their business doing
well, the defendant banks induced them to increase the
number of their ships in operation, offering them easy loans to
acquire said vessels;[3] thereafter, the defendant banks
acquired, through their (Litonjuas) corporations as the
borrowers: (a) El Carrier[4]; (b) El General[5]; (c) El Challenger[6];
and (d) El Conqueror[7]; the vessels were registered in the
names of their corporations; the operation and the funds
derived therefrom were placed under the complete and
exclusive control and disposition of the petitioners;[8] and the
possession the vessels was also placed by defendant banks in
the hands of persons selected and designated by them
(defendant banks).[9]
The Litonjuas claimed that defendant banks as trustees did not
fully render an account of all the income derived from the
operation of the vessels as well as of the proceeds of the
subsequent foreclosure sale;[10] because of the breach of their
fiduciary duties and/or negligence of the petitioners and/or the
persons designated by them in the operation of private
respondents six vessels, the revenues derived from the
operation of all the vessels declined drastically; the loans
acquired for the purchase of the four additional vessels then
matured and remained unpaid, prompting defendant banks to
have all the six vessels, including the two vessels originally
owned by the private respondents, foreclosed and sold at
public auction to answer for the obligations incurred for and in
behalf of the operation of the vessels; they (Litonjuas) lost
sizeable amounts of their own personal funds equivalent to ten
percent (10%) of the acquisition cost of the four vessels and
were left with the unpaid balance of their loans with defendant
banks.[11] The Litonjuas prayed for the accounting of the

revenues derived in the operation of the six vessels and of the


proceeds of the sale thereof at the foreclosure proceedings
instituted by petitioners; damages for breach of trust;
exemplary damages and attorneys fees.[12]
Defendant banks filed a Motion to Dismiss on grounds
of forum non conveniens and lack of cause of action against
them.[13]
On December 3, 1993, the trial court issued an Order denying
the Motion to Dismiss, thus:
WHEREFORE, and in view of the foregoing consideration, the
Motion to Dismiss is hereby DENIED. The defendant is
therefore, given a period of ten (10) days to file its Answer to
the complaint.
SO ORDERED.[14]
Instead of filing an answer the defendant banks went to the
Court of Appeals on a Petition for Review on
Certiorari[15] which was aptly treated by the appellate court as
a petition for certiorari. They assailed the above-quoted order
as well as the subsequent denial of their Motion for
Reconsideration.[16] The appellate court dismissed the petition
and denied petitioners Motion for Reconsideration.[17]
Hence, herein petition anchored on the following grounds:
1. RESPONDENT COURT OF APPEALS FAILED TO
CONSIDER
THE
FACT
THAT
THE
SEPARATE
PERSONALITIES OF THE PRIVATE RESPONDENTS (MERE
STOCKHOLDERS) AND THE FOREIGN CORPORATIONS
(THE REAL BORROWERS) CLEARLY SUPPORT, BEYOND
ANY DOUBT, THE PROPOSITION THAT THE PRIVATE
RESPONDENTS HAVE NO PERSONALITIES TO SUE.
2. THE RESPONDENT COURT OF APPEALS FAILED TO
REALIZE THAT WHILE THE PRINCIPLE OF FORUM NON
CONVENIENS IS NOT MANDATORY, THERE ARE,
HOWEVER, SOME GUIDELINES TO FOLLOW IN
DETERMINING WHETHER THE CHOICE OF FORUM
SHOULD BE DISTURBED. UNDER THE CIRCUMSTANCES
SURROUNDING THE INSTANT CASE, DISMISSAL OF THE
COMPLAINT ON THE GROUND OF FORUM NONCONVENIENS IS MORE APPROPRIATE AND PROPER.
3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED
TO FINAL JUDGMENT IN THE PHILIPPINES. IN FACT, THE
PENDENCY OF FOREIGN ACTION MAY BE THE LEGAL
BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY
THE PRIVATE RESPONDENT. COROLLARY TO THIS, THE
RESPONDENT COURT OF APPEALS FAILED TO
CONSIDER THE FACT THAT PRIVATE RESPONDENTS ARE
GUILTY OF FORUM SHOPPING. [18]
As to the first assigned error: Petitioners argue that the
borrowers and the registered owners of the vessels are the
foreign corporations and not private respondents Litonjuas who
are mere stockholders; and that the revenues derived from the
operations of all the vessels are deposited in the accounts of
the corporations. Hence, petitioners maintain that these
foreign corporations are the legal entities that have the
personalities to sue and not herein private respondents; that
private respondents, being mere shareholders, have no claim
on the vessels as owners since they merely have an inchoate
right to whatever may remain upon the dissolution of the said
foreign corporations and after all creditors have been fully paid
and satisfied;[19] and that while private respondents may have
allegedly spent amounts equal to 10% of the acquisition costs
of the vessels in question, their 10% however represents their
investments as stockholders in the foreign corporations.[20]

Anent the second assigned error, petitioners posit that while


the application of the principle of forum non conveniens is
discretionary on the part of the Court, said discretion is limited
by the guidelines pertaining to the private as well as public
interest factors in determining whether plaintiffs choice of
forum should be disturbed, as elucidated in Gulf Oil Corp. vs.
Gilbert[21] and Piper Aircraft Co. vs. Reyno,[22] to wit:
Private interest factors include: (a) the relative ease of access
to sources of proof; (b) the availability of compulsory process
for the attendance of unwilling witnesses; (c) the cost of
obtaining attendance of willing witnesses; or (d) all other
practical problems that make trial of a case easy, expeditious
and inexpensive. Public interest factors include: (a) the
administrative difficulties flowing from court congestion; (b) the
local interest in having localized controversies decided at
home; (c) the avoidance of unnecessary problems in conflict of
laws or in the application of foreign law; or (d) the unfairness of
burdening citizens in an unrelated forum with jury duty. [23]
In support of their claim that the local court is not the proper
forum, petitioners allege the following:
i)
The Bank of America Branches involved, as clearly
mentioned in the Complaint, are based in Hongkong and
England. As such, the evidence and the witnesses are not
readily available in the Philippines;
ii)
The loan transactions were obtained, perfected,
performed, consummated and partially paid outside the
Philippines;
iii) The
monies
were
advanced
outside
the
Philippines. Furthermore, the mortgaged vessels were part
of an offshore fleet, not based in the Philippines;
iv) All the loans involved were granted to the Private
Respondents foreign CORPORATIONS;
v) The Restructuring Agreements were ALL governed by
the laws of England;
vi) The subsequent sales of the mortgaged vessels and
the application of the sales proceeds occurred and transpired
outside the Philippines, and the deliveries of the sold
mortgaged vessels were likewise made outside the Philippines;
vii) The revenues of the vessels and the proceeds of the
sales of these vessels were ALL deposited to the Accounts of
the foreign CORPORATIONS abroad; and
viii) Bank of America International Ltd. is not licensed nor
engaged in trade or business in the Philippines.[24]
Petitioners argue further that the loan agreements, security
documentation and all subsequent restructuring agreements
uniformly, unconditionally and expressly provided that they will
be governed by the laws of England; [25] that Philippine Courts
would then have to apply English law in resolving whatever
issues may be presented to it in the event it recognizes and
accepts herein case; that it would then be imposing a
significant and unnecessary expense and burden not only
upon the parties to the transaction but also to the local
court. Petitioners insist that the inconvenience and difficulty of
applying English law with respect to a wholly foreign
transaction in a case pending in the Philippines may be
avoided by its dismissal on the ground of forum non
conveniens. [26]
Finally, petitioners claim that private respondents have already
waived their alleged causes of action in the case at bar for their
refusal to contest the foreign civil cases earlier filed by the
petitioners against them in Hongkong and England, to wit:

1.) Civil action in England in its High Court of Justice,


Queens Bench Division Commercial Court (1992-Folio No.
2098) against (a) LIBERIAN TRANSPORT NAVIGATION. SA.;
(b) ESHLEY COMPANIA NAVIERA SA., (c) EL CHALLENGER
SA; (d) ESPRIONA SHIPPING CO. SA; (e) PACIFIC
NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA;
(g) EDUARDO K. LITONJUA & (h) AURELIO K. LITONJUA.
2.) Civil action in England in its High Court of Justice,
Queens Bench Division, Commercial Court (1992-Folio No.
2245) against (a) EL CHALLENGER S.A., (b) ESPRIONA
SHIPPING COMPANY S.A., (c) EDUARDO KATIPUNAN
LITONJUA and (d) AURELIO KATIPUNAN LITONJUA.
3.) Civil action in the Supreme Court of Hongkong High
Court (Action No. 4039 of 1992), against (a) ESHLEY
COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c)
ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC
NAVIGATORS CORPORATION (e) EDDIE NAVIGATION
CORPORATION
S.A.,
(f)
LITONJUA CHARTERING
(EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA,
JR., and (h) EDUARDO KATIPUNAN LITONJUA.
4.) A civil action in the Supreme Court of Hong Kong High
Court (Action No. 4040 of 1992), against (a) ESHLEY
COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c)
ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC
NAVIGATORS CORPORATION (e) EDDIE NAVIGATION
CORPORATION
S.A.,
(f)
LITONJUA CHARTERING
(EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA,
RJ., and (h) EDUARDO KATIPUNAN LITONJUA.
and that private respondents alleged cause of action is already
barred by the pendency of another action or by litis
pendentia as shown above.[27]
On the other hand, private respondents contend that certain
material facts and pleadings are omitted and/or
misrepresented in the present petition for certiorari; that the
prefatory statement failed to state that part of the security of
the foreign loans were mortgages on a 39-hectare piece of real
estate located in the Philippines;[28] that while the complaint
was filed only by the stockholders of the corporate borrowers,
the latter are wholly-owned by the private respondents who are
Filipinos and therefore under Philippine laws, aside from the
said corporate borrowers being but their alter-egos, they have
interests of their own in the vessels.[29] Private respondents
also argue that the dismissal by the Court of Appeals of the
petition for certiorari was justified because there was neither
allegation nor any showing whatsoever by the petitioners that
they had no appeal, nor any plain, speedy, and adequate
remedy in the ordinary course of law from the Order of the trial
judge denying their Motion to Dismiss; that the remedy
available to the petitioners after their Motion to Dismiss was
denied was to file an Answer to the complaint;[30] that as upheld
by the Court of Appeals, the decision of the trial court in not
applying the principle of forum non conveniens is in the lawful
exercise of its discretion.[31] Finally, private respondents aver
that the statement of petitioners that the doctrine of res
judicata also applies to foreign judgment is merely an opinion
advanced by them and not based on a categorical ruling of this
Court;[32] and that herein private respondents did not actually
participate in the proceedings in the foreign courts.[33]
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to
dismiss cannot be the subject of petition for certiorari.
Petitioners should have filed an answer to the complaint,
proceed to trial and await judgment before making an
appeal. As repeatedly held by this Court:
An order denying a motion to dismiss is interlocutory and
cannot be the subject of the extraordinary petition for certiorari

or mandamus. The remedy of the aggrieved party is to file an


answer and to interpose as defenses the objections raised in
his motion to dismiss, proceed to trial, and in case of an
adverse decision, to elevate the entire case by appeal in due
course. xxx Under certain situations, recourse to certiorari or
mandamus is considered appropriate, i.e., (a) when the trial
court issued the order without or in excess of jurisdiction; (b)
where there is patent grave abuse of discretion by the trial
court; or (c) appeal would not prove to be a speedy and
adequate remedy as when an appeal would not promptly
relieve a defendant from the injurious effects of the patently
mistaken order maintaining the plaintiffs baseless action and
compelling the defendant needlessly to go through a protracted
trial and clogging the court dockets by another futile case.[34]
Records show that the trial court acted within its jurisdiction
when it issued the assailed Order denying petitioners motion
to dismiss. Does the denial of the motion to dismiss constitute
a patent grave abuse of discretion? Would appeal, under the
circumstances, not prove to be a speedy and adequate
remedy? We will resolve said questions in conjunction with the
issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion
in refusing to dismiss the complaint on the ground that plaintiffs
have no cause of action against defendants since plaintiffs are
merely stockholders of the corporations which are the
registered owners of the vessels and the borrowers of
petitioners?
No. Petitioners argument that private respondents, being mere
stockholders of the foreign corporations, have no personalities
to sue, and therefore, the complaint should be dismissed, is
untenable. A case is dismissible for lack of personality to sue
upon proof that the plaintiff is not the real party-ininterest. Lack of personality to sue can be used as a ground
for a Motion to Dismiss based on the fact that the complaint, on
the face thereof, evidently states no cause of action. [35] In San
Lorenzo Village Association, Inc. vs. Court of Appeals,[36] this
Court clarified that a complaint states a cause of action where
it contains three essential elements of a cause of action,
namely: (1) the legal right of the plaintiff, (2) the correlative
obligation of the defendant, and (3) the act or omission of the
defendant in violation of said legal right. If these elements are
absent, the complaint becomes vulnerable to a motion to
dismiss on the ground of failure to state a cause of action.[37] To
emphasize, it is not the lack or absence of cause of action that
is a ground for dismissal of the complaint but rather the fact
that the complaint states no cause of action.[38] Failure to state
a cause of action refers to the insufficiency of allegation in the
pleading, unlike lack of cause of action which refers to the
insufficiency of factual basis for the action. Failure to state a
cause of action may be raised at the earliest stages of an
action through a motion to dismiss the complaint, while lack of
cause of action may be raised any time after the questions of
fact have been resolved on the basis of stipulations,
admissions or evidence presented.[39]
In the case at bar, the complaint contains the three elements of
a cause of action. It alleges that: (1) plaintiffs, herein private
respondents, have the right to demand for an accounting from
defendants (herein petitioners), as trustees by reason of the
fiduciary relationship that was created between the parties
involving the vessels in question; (2) petitioners have the
obligation, as trustees, to render such an accounting; and (3)
petitioners failed to do the same.
Petitioners insist that they do not have any obligation to the
private respondents as they are mere stockholders of the
corporation; that the corporate entities have juridical
personalities separate and distinct from those of the private
respondents. Private respondents maintain that the
corporations are wholly owned by them and prior to the

incorporation of such entities, they were clients of petitioners


which induced them to acquire loans from said petitioners to
invest on the additional ships.
We agree with private respondents. As held in the San
Lorenzo case,[40]
xxx assuming that the allegation of facts constituting plaintiffs
cause of action is not as clear and categorical as would
otherwise be desired, any uncertainty thereby arising should
be so resolved as to enable a full inquiry into the merits of the
action.
As this Court has explained in the San Lorenzo case, such a
course, would preclude multiplicity of suits which the law
abhors, and conduce to the definitive determination and
termination of the dispute. To do otherwise, that is, to abort the
action on account of the alleged fatal flaws of the complaint
would obviously be indecisive and would not end the
controversy, since the institution of another action upon a
revised complaint would not be foreclosed.[41]
Second Issue. Should the complaint be dismissed on the
ground of forum non-conveniens?
No. The doctrine of forum non-conveniens, literally meaning
the forum is inconvenient, emerged in private international law
to deter the practice of global forum shopping, [42] that is to
prevent non-resident litigants from choosing the forum or place
wherein to bring their suit for malicious reasons, such as to
secure
procedural advantages,
to annoy and harass the defendant,
to avoid
overcrowded dockets, or to select a more friendly
venue. Under this doctrine, a court, in conflicts of law cases,
may refuse impositions on its jurisdiction where it is not the
most convenient or available forum and the parties are not
precluded from seeking remedies elsewhere.[43]
Whether a suit should be entertained or dismissed on the basis
of said doctrine depends largely upon the facts of the particular
case and is addressed to the sound discretion of the trial court.
[44]
In the case of Communication Materials and Design, Inc.
vs. Court of Appeals,[45] this Court held that xxx [a] Philippine
Court may assume jurisdiction over the case if it chooses to do
so; provided, that the following requisites are met: (1) that the
Philippine Court is one to which the parties may conveniently
resort to; (2) that the Philippine Court is in a position to make
an intelligent decision as to the law and the facts; and, (3) that
the Philippine Court has or is likely to have power to enforce its
decision.[46] Evidently, all these requisites are present in the
instant case.
Moreover, this Court enunciated in Philsec. Investment
Corporation vs. Court of Appeals, [47] that the doctrine of forum
non conveniens should not be used as a ground for a motion to
dismiss because Sec. 1, Rule 16 of the Rules of Court does
not include said doctrine as a ground. This Court further ruled
that while it is within the discretion of the trial court to abstain
from assuming jurisdiction on this ground, it should do so only
after vital facts are established, to determine whether special
circumstances require the courts desistance; and that the
propriety of dismissing a case based on this principle of forum
non conveniens requires a factual determination, hence it is
more properly considered a matter of defense.[48]
Third issue. Are private respondents guilty of forum shopping
because of the pendency of foreign action?
No. Forum shopping exists where the elements of litis
pendentia are present and where a final judgment in one case
will amount to res judicata in the other.[49] Parenthetically,
forlitis pendentia to be a ground for the dismissal of an action
there must be: (a) identity of the parties or at least such as to
represent the same interest in both actions; (b) identity of rights

asserted and relief prayed for, the relief being founded on the
same acts; and (c) the identity in the two cases should be such
that the judgment which may be rendered in one would,
regardless of which party is successful, amount to res
judicata in the other.[50]
In case at bar, not all the requirements for litis pendentia are
present. While there may be identity of parties,
notwithstanding the presence of other respondents,[51] as well
as the reversal in positions of plaintiffs and defendants [52], still
the other requirements necessary for litis pendentia were not
shown by petitioner. It merely mentioned that civil cases were
filed in Hongkong and England without however showing the
identity of rights asserted and the reliefs sought for as well as
the presence of the elements of res judicata should one of the
cases be adjudged.
As the Court of Appeals aptly observed:
xxx [T]he petitioners, by simply enumerating the civil actions
instituted abroad involving the parties herein xxx, failed to
provide this Court with relevant and clear specifications that
would show the presence of the above-quoted elements or
requisites for res judicata. While it is true that the petitioners in
their motion for reconsideration (CA Rollo, p. 72), after
enumerating the various civil actions instituted abroad, did aver
that Copies of the foreign judgments are hereto attached and
made integral parts hereof as Annexes B, C, D and E,
they failed, wittingly or inadvertently, to include a single foreign
judgment in their pleadings submitted to this Court as annexes
to their petition. How then could We have been expected to
rule on this issue even if We were to hold that foreign
judgments could be the basis for the application of the
aforementioned principle of res judicata?[53]
Consequently, both courts correctly denied the dismissal of
herein subject complaint.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioners.
SO ORDERED.
G.R. No. 166920

February 19, 2007

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and


JENS
PETER
HENRICHSEN, Petitioners,
vs.
KLAUS K. SCHONFELD, Respondent.
Before us is a Petition for Review on Certiorari under Rule 45
of the Revised Rules of Court of the Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 76563. The CA decision
reversed the Resolution of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 029319-01, which,
in turn, affirmed the Decision of the Labor Arbiter in NLRC
NCR Case No. 30-12-04787-00 dismissing the complaint of
respondent Klaus K. Schonfeld.
The antecedent facts are as follows:
Respondent is a Canadian citizen and was a resident of New
Westminster, British Columbia, Canada. He had been a
consultant in the field of environmental engineering and water
supply and sanitation. Pacicon Philippines, Inc. (PPI) is a
corporation duly established and incorporated in accordance
with the laws of the Philippines. The primary purpose of PPI
was to engage in the business of providing specialty and
technical services both in and out of the Philippines. 2 It is a
subsidiary of Pacific Consultants International of Japan (PCIJ).
The president of PPI, Jens Peter Henrichsen, who was also
the director of PCIJ, was based in Tokyo, Japan. Henrichsen

commuted from Japan to Manila and vice versa, as well as in


other countries where PCIJ had business.
In 1997, PCIJ decided to engage in consultancy services for
water and sanitation in the Philippines. In October 1997,
respondent was employed by PCIJ, through Henrichsen, as
Sector Manager of PPI in its Water and Sanitation Department.
However, PCIJ assigned him as PPI sector manager in the
Philippines. His salary was to be paid partly by PPI and PCIJ.
On January 7, 1998, Henrichsen transmitted a letter of
employment to respondent in Canada, requesting him to
accept the same and affix his conformity thereto. Respondent
made some revisions in the letter of employment and signed
the contract.3 He then sent a copy to Henrichsen. The letter of
employment reads:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7

10. Shipment of Personal


Effects: The maximum allowance is US$4,000.00.
11. Mobilization
Travel: Mobilization travel will be from New Westminster, B.C.,
Canada.
This letter is send (sic) to you in duplicate; we kindly request
you to sign and return one copy to us.
Yours sincerely,
Pacific Consultants International
Jens Peter Henrichsen
Above terms and conditions accepted
Date: 2 March 1998
(Sgd.)
Klaus Schonfeld

January 1998

as annotated and initialed4

Dear Mr. Schonfeld,

Section 21 of the General Conditions of Employment


appended to the letter of employment reads:

Letter of Employment
This Letter of Employment with the attached General
Conditions of Employment constitutes the agreement under
which you will be engaged by our Company on the terms and
conditions defined hereunder. In case of any discrepancies or
contradictions between this Letter of Employment and the
General Conditions of Employment, this Letter of Employment
will prevail.
You will, from the date of commencement, be ["seconded"] to
our subsidiary Pacicon Philippines, Inc. in Manila, hereinafter
referred as Pacicon. Pacicon will provide you with a separate
contract, which will define that part of the present terms and
conditions for which Pacicon is responsible. In case of any
discrepancies or contradictions between the present Letter of
Employment and the contract with Pacicon Philippines, Inc. or
in the case that Pacicon should not live up to its obligations,
this Letter of Employment will prevail.
1. Project Country: The Philippines with possible short-term
assignments in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.

21 Arbitration
Any question of interpretation, understanding or fulfillment of
the conditions of employment, as well as any question arising
between the Employee and the Company which is in
consequence of or connected with his employment with the
Company and which can not be settled amicably, is to be
finally settled, binding to both parties through written
submissions, by the Court of Arbitration in London.5
Respondent arrived in the Philippines and assumed his
position as PPI Sector Manager. He was accorded the status
of a resident alien.
As required by Rule XIV (Employment of Aliens) of the
Omnibus Rules Implementing the Labor Code, PPI applied for
an Alien Employment Permit (Permit) for respondent before the
Department of Labor and Employment (DOLE). It appended
respondents
contract
of
employment
to
the
application.1awphi1.net
On February 26, 1999, the DOLE granted the application and
issued the Permit to respondent. It reads:

4. Position: Sector Manager, Water and Sanitation.

Republic
of
Department
of
National Capital Region

the

5. Commencement: 1st October 1997.

ALIEN EMPLOYMENT PERMIT

6. Remuneration: US$7,000.00 per month. The amount will be


paid partly as a local salary (US$2,100.00 per month) by
Pacicon and partly as an offshore salary (US$4,900.00) by PCI
to bank accounts to be nominated by you.

ISSUED TO: SCHONFELD, KLAUS KURT

Labor

&

Philippines
Employment

DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian


POSITION: VP WATER & SANITATION

A performance related component corresponding to 17.6% of


the total annual remuneration, subject to satisfactory
performance against agreed tasks and targets, paid offshore.

EMPLOYER: PACICON PHILIPPINES, INC.

7. Accommodation: The company will provide partly furnished


accommodation to a rent including association fees, taxes and
VAT not exceeding the Pesos equivalent of US$2,900.00 per
month.

PERMIT

8. Transportation: Included for in the remuneration.


9. Leave Travels: You are entitled to two leave travels per year.

ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave.,


Makati City

ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:


VALID UNTIL: January 7, 2000 (Sgd.)
APPROVED: BIENVENIDO S. LAGUESMA

By:
MAXIMO
REGIONAL DIRECTOR

B.

ANITO

(Emphasis supplied)6
Respondent received his compensation from PPI for the
following periods: February to June 1998, November to
December 1998, and January to August 1999. He was also
reimbursed by PPI for the expenses he incurred in connection
with his work as sector manager. He reported for work in
Manila except for occasional assignments abroad, and
received instructions from Henrichsen.7
On May 5, 1999, respondent received a letter from Henrichsen
informing him that his employment had been terminated
effective August 4, 1999 for the reason that PCIJ and PPI had
not been successful in the water and sanitation sector in the
Philippines.8 However, on July 24, 1999, Henrichsen, by
electronic mail,9 requested respondent to stay put in his job
after August 5, 1999, until such time that he would be able to
report on certain projects and discuss all the opportunities he
had developed.10 Respondent continued his work with PPI until
the end of business hours on October 1, 1999.
Respondent filed with PPI several money claims, including
unpaid salary, leave pay, air fare from Manila to Canada, and
cost of shipment of goods to Canada. PPI partially settled
some of his claims (US$5,635.99), but refused to pay the rest.
On December 5, 2000, respondent filed a Complaint11 for
Illegal Dismissal against petitioners PPI and Henrichsen with
the Labor Arbiter. It was docketed as NLRC-NCR Case No. 3012-04787-00.
In his Complaint, respondent alleged that he was illegally
dismissed; PPI had not notified the DOLE of its decision to
close one of its departments, which resulted in his dismissal;
and they failed to notify him that his employment was
terminated after August 4, 1999. Respondent also claimed for
separation pay and other unpaid benefits. He alleged that the
company acted in bad faith and disregarded his rights. He
prayed for the following reliefs:
1. Judgment be rendered in his favor ordering the respondents
to reinstate complainant to his former position without loss of
seniority and other privileges and benefits, and to pay his full
backwages from the time compensation was with held (sic)
from him up to the time of his actual reinstatement. In the
alternative, if reinstatement is no longer feasible, respondents
must pay the complainant full backwages, and separation pay
equivalent to one month pay for every year of service, or in the
amount of US$16,400.00 as separation pay;
2. Judgment be rendered ordering the respondents to pay the
outstanding monetary obligation to complainant in the amount
of US$10,131.76 representing the balance of unpaid salaries,
leave pay, cost of his air travel and shipment of goods from
Manila to Canada; and
3. Judgment be rendered ordering the respondent company to
pay the complainant damages in the amount of no less than
US $10,000.00 and to pay 10% of the total monetary award as
attorneys fees, and costs.
Other reliefs just and equitable under the premises are,
likewise, prayed for.12 1awphi1.net
Petitioners filed a Motion to Dismiss the complaint on the
following grounds: (1) the Labor Arbiter had no jurisdiction over
the subject matter; and (2) venue was improperly laid. It
averred that respondent was a Canadian citizen, a transient
expatriate who had left the Philippines. He was employed and
dismissed by PCIJ, a foreign corporation with principal office in
Tokyo, Japan. Since respondents cause of action was based

on his letter of employment executed in Tokyo, Japan dated


January 7, 1998, under the principle of lex loci contractus, the
complaint should have been filed in Tokyo, Japan. Petitioners
claimed that respondent did not offer any justification for filing
his complaint against PPI before the NLRC in the Philippines.
Moreover, under Section 12 of the General Conditions of
Employment appended to the letter of employment dated
January 7, 1998, complainant and PCIJ had agreed that any
employment-related dispute should be brought before the
London Court of Arbitration. Since even the Supreme Court
had already ruled that such an agreement on venue is valid,
Philippine courts have no jurisdiction.13
Respondent opposed the Motion, contending that he was
employed by PPI to work in the Philippines under contract
separate from his January 7, 1998 contract of employment with
PCIJ. He insisted that his employer was PPI, a Philippineregistered corporation; it is inconsequential that PPI is a
wholly-owned subsidiary of PCIJ because the two corporations
have separate and distinct personalities; and he received
orders and instructions from Henrichsen who was the president
of PPI. He further insisted that the principles of forum non
conveniens and lex loci contractus do not apply, and that
although he is a Canadian citizen, Philippine Labor Laws apply
in this case.
Respondent adduced in evidence the following contract of
employment dated January 9, 1998 which he had entered into
with Henrichsen:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Manila 9 January, 1998
Dear Mr. Schonfeld,
Letter of Employment
This Letter of Employment with the attached General
Conditions of Employment constitutes the agreement, under
which you will be engaged by Pacicon Philippines, Inc. on the
terms and conditions defined hereunder.
1. Project Country: The Philippines with possible assignments
in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.
4. Position: Sector Manager Water and Sanitation Sector.
5. Commencement: 1 January, 1998.
6. Remuneration: US$3,100.00 per month payable to a bank
account to be nominated by you.
7. Accommodation: The company will provide partly furnished
accommodation to a rent including association fees, taxes and
VAT not exceeding the Pesos equivalent of US$2300.00 per
month.
8. Transportation: Included for in the remuneration.
9. Shipment of Personal The maximum allowance is
US$2500.00 in Effects: connection with initial shipment of
personal effects from Canada.
10. Mobilization Travel: Mobilization travel will be from New
Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request


you to sign and return one copy to us.
Yours sincerely,
Pacicon Philippines, Inc.
Jens Peter Henrichsen
President14
According to respondent, the material allegations of the
complaint, not petitioners defenses, determine which quasijudicial body has jurisdiction. Section 21 of the Arbitration
Clause in the General Conditions of Employment does not
provide for an exclusive venue where the complaint against
PPI for violation of the Philippine Labor Laws may be filed.
Respondent pointed out that PPI had adopted two inconsistent
positions: it was first alleged that he should have filed his
complaint in Tokyo, Japan; and it later insisted that the
complaint should have been filed in the London Court of
Arbitration.15
In their reply, petitioners claimed that respondents employer
was PCIJ, which had exercised supervision and control over
him, and not PPI. Respondent was dismissed by PPI via a
letter of Henrichsen under the letterhead of PCIJ in
Japan.16 The letter of employment dated January 9, 1998
which respondent relies upon did not bear his (respondents)
signature nor that of Henrichsen.
On August 2, 2001, the Labor Arbiter rendered a decision
granting petitioners Motion to Dismiss. The dispositive portion
reads:
WHEREFORE, finding merit in respondents Motion to Dismiss,
the same is hereby granted. The instant complaint filed by the
complainant is dismissed for lack of merit.
SO ORDERED.17
The Labor Arbiter found, among others, that the January 7,
1998 contract of employment between respondent and PCIJ
was controlling; the Philippines was only the "duty station"
where Schonfeld was required to work under the General
Conditions of Employment. PCIJ remained respondents
employer despite his having been sent to the Philippines.
Since the parties had agreed that any differences regarding
employer-employee relationship should be submitted to the
jurisdiction of the court of arbitration in London, this agreement
is controlling.
On appeal, the NLRC agreed with the disquisitions of the
Labor Arbiter and affirmed the latters decision in toto.18
Respondent then filed a petition for certiorari under Rule 65
with the CA where he raised the following arguments:
I
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL
LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT AFFIRMED THE LABOR
ARBITERS DECISION CONSIDERING THAT:
A. PETITIONERS TRUE EMPLOYER IS NOT PACIFIC
CONSULTANTS
INTERNATIONAL
OF
JAPAN
BUT
RESPONDENT COMPANY, AND THEREFORE, THE LABOR
ARBITER HAS JURISDICTION OVER THE INSTANT CASE;
AND
B. THE PROPER VENUE FOR THE PRESENT COMPLAINT
IS THE ARBITRATION BRANCH OF THE NLRC AND NOT
THE COURT OF ARBITRATION IN LONDON.
II

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL


LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION WHEN IT AFFIRMED THE DISMISSAL OF
THE COMPLAINT CONSIDERING THAT PETITIONERS
TERMINATION FROM EMPLOYMENT IS ILLEGAL:
A. THE CLOSURE OF RESPONDENT COMPANYS WATER
AND SANITATION SECTOR WAS NOT BONA FIDE.
B. ASSUMING ARGUENDO THAT THE CLOSURE OF
RESPONDENT COMPANYS WATER AND SANITATION
SECTOR WAS JUSTIFIABLE, PETITIONERS DISMISSAL
WAS INEFFECTUAL AS THE DEPARTMENT OF LABOR AND
EMPLOYMENT (DOLE) AND PETITIONER WAS NOT
NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED
CLOSURE.19
Respondent averred that the absence or existence of a written
contract of employment is not decisive of whether he is an
employee of PPI. He maintained that PPI, through its president
Henrichsen, directed his work/duties as Sector Manager of
PPI; proof of this was his letter-proposal to the Development
Bank of the Philippines for PPI to provide consultancy services
for the Construction Supervision of the Water Supply and
Sanitation component of the World Bank-Assisted LGU Urban
Water and Sanitation Project.20 He emphasized that as gleaned
from Alien Employment Permit (AEP) No. M-029908-5017
issued to him by DOLE on February 26, 1999, he is an
employee of PPI. It was PPI president Henrichsen who
terminated his employment; PPI also paid his salary and
reimbursed his expenses related to transactions abroad. That
PPI is a wholly-owned subsidiary of PCIJ is of no moment
because the two corporations have separate and distinct
personalities.
The CA found the petition meritorious. Applying the four-fold
test21 of determining an employer-employee relationship, the
CA declared that respondent was an employee of PPI. On the
issue of venue, the appellate court declared that, even under
the January 7, 1998 contract of employment, the parties were
not precluded from bringing a case related thereto in other
venues. While there was, indeed, an agreement that issues
between the parties were to be resolved in the London Court of
Arbitration, the venue is not exclusive, since there is no
stipulation that the complaint cannot be filed in any other forum
other than in the Philippines.
On November 25, 2004, the CA rendered its decision granting
the petition, the decretal portion of which reads:
WHEREFORE, the petition is GRANTED in that the assailed
Resolutions of the NLRC are hereby REVERSED and SET
ASIDE. Let this case be REMANDED to the Labor Arbiter a
quo for disposition of the case on the merits.
SO ORDERED.22
A motion for the reconsideration of the above decision was
filed by PPI and Henrichsen, which the appellate court denied
for lack of merit.23
In the present recourse, PPI and Henrichsen, as petitioners,
raise the following issues:
I
THE COURT OF APPEALS GRAVELY ERRED IN RULING
THAT AN EMPLOYMENT RELATIONSHIP EXISTED
BETWEEN PETITIONERS AND RESPONDENT DESPITE
THE UNDISPUTED FACT THAT RESPONDENT, A FOREIGN
NATIONAL, WAS HIRED ABROAD BY A FOREIGN
CORPORATION,
EXECUTED
HIS
EMPLOYMENT
CONTRACT ABROAD, AND WAS MERELY "SECONDED" TO

PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN


MANILA.

show the exclusive and restrictive nature of the stipulation on


venue.

II

Petitioners insist that the U.S. Labor-Management Act applies


only to U.S. workers and employers, while the Labor Code of
the Philippines applies only to Filipino employers and
Philippine-based employers and their employees, not to PCIJ.
In fine, the jurisdictions of the NLRC and Labor Arbiter do not
extend to foreign workers who executed employment
agreements with foreign employers abroad, although
"seconded" to the Philippines.25

THE COURT OF APPEALS GRAVELY ERRED IN RULING


THAT THE LABOR ARBITER A QUO HAS JURISDICTION
OVER RESPONDENTS CLAIM DESPITE THE UNDISPUTED
FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS
HIRED ABROAD BY A FOREIGN CORPORATION,
EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND
HAD AGREED THAT ANY DISPUTE BETWEEN THEM
"SHALL BE FINALLY SETTLED BY THE COURT OF
ARBITRATION IN LONDON."24
Petitioners fault the CA for reversing the findings of the Labor
Arbiter and the NLRC. Petitioners aver that the findings of the
Labor Arbiter, as affirmed by the NLRC, are conclusive on the
CA. They maintain that it is not within the province of the
appellate court in a petition for certiorari to review the facts and
evidence on record since there was no conflict in the factual
findings and conclusions of the lower tribunals. Petitioners
assert that such findings and conclusions, having been made
by agencies with expertise on the subject matter, should be
deemed binding and conclusive. They contend that it was the
PCIJ which employed respondent as an employee; it merely
seconded him to petitioner PPI in the Philippines, and assigned
him to work in Manila as Sector Manager. Petitioner PPI, being
a wholly-owned subsidiary of PCIJ, was never the employer of
respondent.
Petitioners assert that the January 9, 1998 letter of
employment which respondent presented to prove his
employment with petitioner PPI is of doubtful authenticity since
it was unsigned by the purported parties. They insist that PCIJ
paid respondents salaries and only coursed the same through
petitioner PPI. PPI, being its subsidiary, had supervision and
control over respondents work, and had the responsibilities of
monitoring the "daily administration" of respondent.
Respondent cannot rely on the pay slips, expenses claim
forms, and reimbursement memoranda to prove that he was an
employee of petitioner PPI because these documents are of
doubtful authenticity.
Petitioners further contend that, although Henrichsen was both
a director of PCIJ and president of PPI, it was he who signed
the termination letter of respondent upon instructions of PCIJ.
This is buttressed by the fact that PCIJs letterhead was used
to inform him that his employment was terminated. Petitioners
further assert that all work instructions came from PCIJ and
that petitioner PPI only served as a "conduit." Respondents
Alien Employment Permit stating that petitioner PPI was his
employer is but a necessary consequence of his being
"seconded" thereto. It is not sufficient proof that petitioner PPI
is respondents employer. The entry was only made to comply
with the DOLE requirements.
There being no evidence that petitioner PPI is the employer of
respondent, the Labor Arbiter has no jurisdiction over
respondents complaint.
Petitioners aver that since respondent is a Canadian citizen,
the CA erred in ignoring their claim that the principlesof forum
non conveniens and lex loci contractus are applicable. They
also point out that the principal office, officers and staff of PCIJ
are stationed in Tokyo, Japan; and the contract of employment
of respondent was executed in Tokyo, Japan.
Moreover, under Section 21 of the General Conditions for
Employment incorporated in respondents January 7, 1998
letter of employment, the dispute between respondent and
PCIJ should be settled by the court of arbitration of London.
Petitioners claim that the words used therein are sufficient to

In his Comment,26 respondent maintains that petitioners raised


factual issues in their petition which are proscribed under
Section 1, Rule 45 of the Rules of Court. The finding of the CA
that he had been an employee of petitioner PPI and not of
PCIJ is buttressed by his documentary evidence which both
the Labor Arbiter and the NLRC ignored; they erroneously
opted to dismiss his complaint on the basis of the letter of
employment and Section 21 of the General Conditions of
Employment. In contrast, the CA took into account the
evidence on record and applied case law correctly.
The petition is denied for lack of merit.
It must be stressed that in resolving a petition for certiorari, the
CA is not proscribed from reviewing the evidence on record.
Under Section 9 of Batas Pambansa Blg. 129, as amended by
R.A. No. 7902, the CA is empowered to pass upon the
evidence, if and when necessary, to resolve factual issues.27 If
it appears that the Labor Arbiter and the NLRC misappreciated
the evidence to such an extent as to compel a contrary
conclusion if such evidence had been properly appreciated, the
factual findings of such tribunals cannot be given great respect
and finality.28
Inexplicably, the Labor Arbiter and the NLRC ignored the
documentary evidence which respondent appended to his
pleadings showing that he was an employee of petitioner PPI;
they merely focused on the January 7, 1998 letter of
employment and Section 21 of the General Conditions of
Employment.
Petitioner PPI applied for the issuance of an AEP to
respondent before the DOLE. In said application, PPI averred
that respondent is its employee. To show that this was the
case, PPI appended a copy of respondents employment
contract. The DOLE then granted the application of PPI and
issued the permit.
It bears stressing that under the Omnibus Rules Implementing
the Labor Code, one of the requirements for the issuance of an
employment permit is the employment contract. Section 5,
Rule XIV (Employment of Aliens) of the Omnibus Rules
provides:
SECTION 1. Coverage. This rule shall apply to all aliens
employed or seeking employment in the Philippines and the
present or prospective employers.
SECTION 2. Submission of list. All employers employing
foreign nationals, whether resident or non-resident, shall
submit a list of nationals to the Bureau indicating their names,
citizenship, foreign and local address, nature of employment
and status of stay in the Philippines.
SECTION 3. Registration of resident aliens. All employed
resident aliens shall register with the Bureau under such
guidelines as may be issued by it.
SECTION 4. Employment permit required for entry. No alien
seeking employment, whether as a resident or non-resident,
may enter the Philippines without first securing an employment
permit from the Ministry. If an alien enters the country under a

non-working visa and wishes to be employed thereafter, he


may only be allowed to be employed upon presentation of a
duly approved employment permit.
SECTION 5. Requirements for employment permit applicants.
The application for an employment permit shall be
accompanied by the following:
(a) Curriculum vitae duly signed by the applicant indicating his
educational background, his work experience and other data
showing that he possesses technical skills in his trade or
profession.
(b) Contract of employment between the employer and the
principal which shall embody the following, among others:
1. That the non-resident alien worker shall comply with all
applicable laws and rules and regulations of the Philippines;
2. That the non-resident alien worker and the employer shall
bind themselves to train at least two (2) Filipino understudies
for a period to be determined by the Minister; and
3. That he shall not engage in any gainful employment other
than that for which he was issued a permit.
(c) A designation by the employer of at least two (2)
understudies for every alien worker. Such understudies must
be the most ranking regular employees in the section or
department for which the expatriates are being hired to insure
the actual transfer of technology.
Under Section 6 of the Rule, the DOLE may issue an alien
employment permit based only on the following:
(a) Compliance by the applicant and his employer with the
requirements of Section 2 hereof;
(b) Report of the Bureau Director as to the availability or nonavailability of any person in the Philippines who is competent
and willing to do the job for which the services of the applicant
are desired;
(c) His assessment as to whether or not the employment of the
applicant will redound to the national interest;
(d) Admissibility of the alien as certified by the Commission on
Immigration and Deportation;
(e) The recommendation of the Board of Investments or other
appropriate government agencies if the applicant will be
employed in preferred areas of investments or in accordance
with the imperative of economic development.
Thus, as claimed by respondent, he had an employment
contract with petitioner PPI; otherwise, petitioner PPI would not
have filed an application for a Permit with the DOLE.
Petitioners are thus estopped from alleging that the PCIJ, not
petitioner PPI, had been the employer of respondent all along.
We agree with the conclusion of the CA that there was an
employer-employee relationship between petitioner PPI and
respondent using the four-fold test. Jurisprudence is firmly
settled that whenever the existence of an employment
relationship is in dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d)
the employers power to control the employees conduct. It is
the so-called "control test" which constitutes the most
important index of the existence of the employer-employee
relationshipthat is, whether the employer controls or has
reserved the right to control the employee not only as to the
result of the work to be done but also as to the means and
methods by which the same is to be accomplished. Stated
otherwise, an employer-employee relationship exists where the

person for whom the services are performed reserves the right
to control not only the end to be achieved but also the means
to be used in reaching such end.29 We quote with approval the
following ruling of the CA:
[T]here is, indeed, substantial evidence on record which would
erase any doubt that the respondent company is the true
employer of petitioner. In the case at bar, the power to control
and supervise petitioners work performance devolved upon
the respondent company. Likewise, the power to terminate the
employment relationship was exercised by the President of the
respondent company. It is not the letterhead used by the
company in the termination letter which controls, but the
person who exercised the power to terminate the employee. It
is also inconsequential if the second letter of employment
executed in the Philippines was not signed by the petitioner. An
employer-employee relationship may indeed exist even in the
absence of a written contract, so long as the four elements
mentioned in the Mafinco case are all present.30
The settled rule on stipulations regarding venue, as held by
this Court in the vintage case of Philippine Banking
Corporation v. Tensuan,31 is that while they are considered
valid and enforceable, venue stipulations in a contract do not,
as a rule, supersede the general rule set forth in Rule 4 of the
Revised Rules of Court in the absence of qualifying or
restrictive words. They should be considered merely as an
agreement or additional forum, not as limiting venue to the
specified place. They are not exclusive but, rather permissive.
If the intention of the parties were to restrict venue, there must
be accompanying language clearly and categorically
expressing their purpose and design that actions between
them be litigated only at the place named by them.32
In the instant case, no restrictive words like "only," "solely,"
"exclusively in this court," "in no other court save ,"
"particularly," "nowhere else but/except ," or words of equal
import were stated in the contract.33 It cannot be said that the
court of arbitration in London is an exclusive venue to bring
forth any complaint arising out of the employment contract.
Petitioners contend that respondent should have filed his
Complaint in his place of permanent residence, or where the
PCIJ holds its principal office, at the place where the contract
of employment was signed, in London as stated in their
contract. By enumerating possible venues where respondent
could have filed his complaint, however, petitioners themselves
admitted that the provision on venue in the employment
contract is indeed merely permissive.
Petitioners insistence on the application of the principle of
forum non conveniens must be rejected. The bare fact that
respondent is a Canadian citizen and was a repatriate does not
warrant the application of the principle for the following
reasons:
First. The Labor Code of the Philippines does not include
forum non conveniens as a ground for the dismissal of the
complaint.34
Second. The propriety of dismissing a case based on this
principle requires a factual determination; hence, it is properly
considered as defense.35
Third. In Bank of America, NT&SA, Bank of America
International, Ltd. v. Court of Appeals,36 this Court held that:
x x x [a] Philippine Court may assume jurisdiction over the
case if it chooses to do so; provided, that the following
requisites are met: (1) that the Philippine Court is one to which
the parties may conveniently resort to; (2) that the Philippine
Court is in a position to make an intelligent decision as to the
law and the facts; and, (3) that the Philippine Court has or is
likely to have power to enforce its decision. x x x

Admittedly, all the foregoing requisites are present in this case.


WHEREFORE, the petition is DENIED. The Decision of the
Court of Appeals in CA-G.R. SP No. 76563 is AFFIRMED. This
case is REMANDED to the Labor Arbiter for disposition of the
case on the merits. Cost against petitioners.
SO ORDERED.
[G.R. No. 103493. June 19, 1997]
PHILSEC
INVESTMENT
CORPORATION,
BPIINTERNATIONAL FINANCE LIMITED, and ATHONA
HOLDINGS,
N.V., petitioners,
vs. THE
HONORABLE
COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA
O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H.
CRAIG,respondents.
This case presents for determination the conclusiveness of a
foreign judgment upon the rights of the parties under the same
cause of action asserted in a case in our local
court. Petitioners brought this case in the Regional Trial Court
of Makati, Branch 56, which, in view of the pendency at the
time of the foreign action, dismissed Civil Case No. 16563 on
the ground of litis pendentia, in addition to forum non
conveniens. On appeal, the Court of Appeals affirmed. Hence
this petition for review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat
obtained separate loans from petitioners Ayala International
Finance Limited (hereafter called AYALA) [1] and Philsec
Investment Corporation (hereafter called PHILSEC) in the sum
of US$2,500,000.00, secured by shares of stock owned by
Ducat with a market value of P14,088,995.00. In order to
facilitate the payment of the loans, private respondent 1488,
Inc., through its president, private respondent Drago Daic,
assumed Ducats obligation under an Agreement, dated
January 27, 1983, whereby 1488, Inc. executed a Warranty
Deed with Vendors Lien by which it sold to petitioner Athona
Holdings, N.V. (hereafter called ATHONA) a parcel of land in
Harris County, Texas, U.S.A., for US$2,807,209.02, while
PHILSEC and AYALA extended a loan to ATHONA in the
amount of US$2,500,000.00 as initial payment of the purchase
price. The balance of US$307,209.02 was to be paid by means
of a promissory note executed by ATHONA in favor of 1488,
Inc. Subsequently, upon their receipt of the US$2,500,000.00
from 1488, Inc., PHILSEC and AYALA released Ducat from his
indebtedness and delivered to 1488, Inc. all the shares of stock
in their possession belonging to Ducat.
As ATHONA failed to pay the interest on the balance of
US$307,209.02, the entire amount covered by the note
became due and demandable. Accordingly, on October 17,
1985, private respondent 1488, Inc. sued petitioners PHILSEC,
AYALA, and ATHONA in the United States for payment of the
balance of US$307,209.02 and for damages for breach of
contract and for fraud allegedly perpetrated by petitioners in
misrepresenting the marketability of the shares of stock
delivered to 1488, Inc. under the Agreement. Originally
instituted in the United States District Court of Texas, 165th
Judicial District, where it was docketed as Case No. 85-57746,
the venue of the action was later transferred to the United
States District Court for the Southern District of Texas, where
1488, Inc. filed an amended complaint, reiterating its
allegations in the original complaint. ATHONA filed an answer
with counterclaim, impleading private respondents herein as
counterdefendants, for allegedly conspiring in selling the
property at a price over its market value. Private respondent
Perlas, who had allegedly appraised the property, was later
dropped as counterdefendant. ATHONA sought the recovery of
damages and excess payment allegedly made to 1488, Inc.
and, in the alternative, the rescission of sale of the

property. For their part, PHILSEC and AYALA filed a motion to


dismiss on the ground of lack of jurisdiction over their person,
but, as their motion was denied, they later filed a joint answer
with counterclaim against private respondents and Edgardo V.
Guevarra, PHILSECs own former president, for the rescission
of the sale on the ground that the property had been
overvalued. On March 13, 1990, the United States District
Court for the Southern District of Texas dismissed the
counterclaim against Edgardo V. Guevarra on the ground that it
was frivolous and [was] brought against him simply to
humiliate and embarrass him. For this reason, the U.S. court
imposed so-called Rule 11 sanctions on PHILSEC and AYALA
and ordered them to pay damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending
in the United States, petitioners filed a complaint For Sum of
Money with Damages and Writ of Preliminary Attachment
against private respondents in the Regional Trial Court of
Makati, where it was docketed as Civil Case No. 16563. The
complaint reiterated the allegation of petitioners in their
respective counterclaims in Civil Action No. H-86-440 of the
United States District Court of Southern Texas that private
respondents committed fraud by selling the property at a price
400 percent more than its true value of US$800,000.00.
Petitioners claimed that, as a result of private respondents
fraudulent misrepresentations, ATHONA, PHILSEC, and
AYALA were induced to enter into the Agreement and to
purchase the Houston property. Petitioners prayed that private
respondents be ordered to return to ATHONA the
excess payment of US$1,700,000.00 and to pay damages. On
April 20, 1987, the trial court issued a writ of preliminary
attachment against the real and personal properties of private
respondents.[2]
Private respondent Ducat moved to dismiss Civil Case No.
16563 on the grounds of (1) litis pendentia, vis-a-vis Civil
Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S.,
(2)forum non conveniens, and (3) failure of petitioners
PHILSEC and BPI-IFL to state a cause of action. Ducat
contended that the alleged overpricing of the property
prejudiced only petitioner ATHONA, as buyer, but not PHILSEC
and BPI-IFL which were not parties to the sale and whose only
participation was to extend financial accommodation to
ATHONA under a separate loan agreement. On the other
hand, private respondents 1488, Inc. and its president Daic
filed a joint Special Appearance and Qualified Motion to
Dismiss, contending that the action being in personam,
extraterritorial service of summons by publication was
ineffectual and did not vest the court with jurisdiction over
1488, Inc., which is a non-resident foreign corporation, and
Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducats motion to
dismiss, stating that the evidentiary requirements of the
controversy may be more suitably tried before the forum of
the litis pendentia in the U.S., under the principle in private
international law of forum non conveniens, even as it noted
that Ducat was not a party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and
Daics motion to dismiss. On March 9, 1988, the trial
court[3] granted the motion to dismiss filed by 1488, Inc. and
Daic on the ground of litis pendentia considering that
the main factual element of the cause of action in this case
which is the validity of the sale of real property in the United
States between defendant 1488 and plaintiff ATHONA is the
subject matter of the pending case in the United States District
Court which, under the doctrine of forum non conveniens, is
the better (if not exclusive) forum to litigate matters needed to
determine the assessment and/or fluctuations of the fair market
value of real estate situated in Houston, Texas, U.S.A. from the

date of the transaction in 1983 up to the present and verily, . . .


(emphasis by trial court)
The trial court also held itself without jurisdiction over 1488,
Inc. and Daic because they were non-residents and the action
was not an action in rem or quasi in rem, so that extraterritorial
service of summons was ineffective. The trial court
subsequently lifted the writ of attachment it had earlier issued
against the shares of stocks of 1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the
trial court erred in applying the principle of litis pendentia
and forum non conveniens and in ruling that it had no
jurisdiction over the defendants, despite the previous
attachment of shares of stocks belonging to 1488, Inc. and
Daic.
On January 6, 1992, the Court of Appeals [4] affirmed the
dismissal of Civil Case No. 16563 against Ducat, 1488, Inc.,
and Daic on the ground of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic,
while the defendants are Philsec, the Ayala International
Finance Ltd. (BPI-IFLs former name) and the Athona Holdings,
NV. The case at bar involves the same parties. The
transaction sued upon by the parties, in both cases is the
Warranty Deed executed by and between Athona Holdings and
1488 Inc. In the U.S. case, breach of contract and the
promissory note are sued upon by 1488 Inc., which likewise
alleges fraud employed by herein appellants, on the
marketability of Ducats securities given in exchange for the
Texas property. The recovery of a sum of money and damages,
for fraud purportedly committed by appellees, in overpricing the
Texas land, constitute the action before the Philippine court,
which likewise stems from the same Warranty Deed.
The Court of Appeals also held that Civil Case No. 16563 was
an action in personam for the recovery of a sum of money for
alleged tortious acts, so that service of summons by
publication did not vest the trial court with jurisdiction over
1488, Inc. and Drago Daic. The dismissal of Civil Case No.
16563 on the ground of forum non conveniens was likewise
affirmed by the Court of Appeals on the ground that the case
can be better tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only one main
transaction, and involve foreign elements, to wit: 1) the
property subject matter of the sale is situated in Texas, U.S.A.;
2) the seller, 1488 Inc. is a non-resident foreign corporation; 3)
although the buyer, Athona Holdings, a foreign corporation
which does not claim to be doing business in the Philippines, is
wholly owned by Philsec, a domestic corporation, Athona
Holdings is also owned by BPI-IFL, also a foreign corporation;
4) the Warranty Deed was executed in Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION
BETWEEN THE SAME PARTIES FOR THE SAME CAUSE
(LITIS PENDENTIA) RELIED UPON BY THE COURT OF
APPEALS IN AFFIRMING THE TRIAL COURTS DISMISSAL
OF THE CIVIL ACTION IS NOT APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO
RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING
THE DISMISSAL BY THE TRIAL COURT OF THE CIVIL
ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE
COURT OF APPEALS ERRED IN NOT HOLDING THAT
PHILIPPINE
PUBLIC
POLICY
REQUIRED
THE
ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL
COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL
ACTION FOR THERE IS EVERY REASON TO PROTECT

AND VINDICATE PETITIONERS RIGHTS FOR TORTIOUS


OR WRONGFUL ACTS OR CONDUCT PRIVATE
RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT
ALIENS) INFLICTED UPON THEM HERE IN THE
PHILIPPINES.
We will deal with these contentions in the order in which they
are made.
First. It is important to note in connection with the first point
that while the present case was pending in the Court of
Appeals, the United States District Court for the Southern
District of Texas rendered judgment[5] in the case before it. The
judgment, which was in favor of private respondents, was
affirmed on appeal by the Circuit Court of Appeals. [6] Thus, the
principal issue to be resolved in this case is whether Civil Case
No. 16536 is barred by the judgment of the U.S. court.
Private respondents contend that for a foreign judgment to be
pleaded as res judicata, a judgment admitting the foreign
decision is not necessary. On the other hand, petitioners
argue that the foreign judgment cannot be given the effect of
res judicata without giving them an opportunity to impeach it on
grounds stated in Rule 39, 50 of the Rules of Court, to
wit: want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact.
Petitioners contention is meritorious. While this Court has
given the effect of res judicata to foreign judgments in several
cases,[7] it was after the parties opposed to the judgment had
been given ample opportunity to repel them on grounds
allowed under the law.[8] It is not necessary for this purpose to
initiate a separate action or proceeding for enforcement of the
foreign judgment. What is essential is that there is opportunity
to challenge the foreign judgment, in order for the court to
properly determine its efficacy. This is because in this
jurisdiction, with respect to actions in personam, as
distinguished from actions in rem, a foreign judgment merely
constitutes prima facie evidence of the justness of the claim of
a party and, as such, is subject to proof to the contrary.[9] Rule
39, 50 provides:
SEC. 50. Effect of foreign judgments. - The effect of a
judgment of a tribunal of a foreign country, having jurisdiction
to pronounce the judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is
conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is
presumptive evidence of a right as between the parties and
their successors in interest by a subsequent title; but the
judgment may be repelled by evidence of a want of jurisdiction,
want of notice to the party, collusion, fraud, or clear mistake of
law or fact.
Thus, in the case of General Corporation of the Philippines v.
Union Insurance Society of Canton, Ltd.,[10] which private
respondents invoke for claiming conclusive effect for the
foreign judgment in their favor, the foreign judgment was
considered res judicata because this Court found from the
evidence as well as from appellants own pleadings [11] that the
foreign court did not make a clear mistake of law or fact or
that its judgment was void for want of jurisdiction or because of
fraud or collusion by the defendants. Trial had been previously
held in the lower court and only afterward was a decision
rendered, declaring the judgment of the Supreme Court of the
State of Washington to have the effect of res judicatain the
case before the lower court. In the same vein, in Philippine
International Shipping Corp. v. Court of Appeals,[12] this Court
held that the foreign judgment was valid and enforceable in the
Philippines there being no showing that it was vitiated by want
of notice to the party, collusion, fraud or clear mistake of law or

fact. The prima facie presumption under the Rule had not
been rebutted.
In the case at bar, it cannot be said that petitioners were given
the opportunity to challenge the judgment of the U.S. court as
basis for declaring it res judicata or conclusive of the rights of
private respondents. The proceedings in the trial court were
summary. Neither the trial court nor the appellate court was
even furnished copies of the pleadings in the U.S. court or
apprised of the evidence presented thereat, to assure a proper
determination of whether the issues then being litigated in the
U.S. court were exactly the issues raised in this case such that
the judgment that might be rendered would constitute res
judicata. As the trial court stated in its disputed order dated
March 9, 1988:
On the plaintiffs claim in its Opposition that the causes of
action of this case and the pending case in the United States
are not identical, precisely the Order of January 26, 1988 never
found that the causes of action of this case and the case
pending before the USA Court, were identical. (emphasis
added)
It was error therefore for the Court of Appeals to summarily rule
that petitioners action is barred by the principle of res judicata.
Petitioners in fact questioned the jurisdiction of the U.S. court
over their persons, but their claim was brushed aside by both
the trial court and the Court of Appeals.[13]
Moreover, the Court notes that on April 22, 1992, 1488, Inc.
and Daic filed a petition for the enforcement of judgment in the
Regional Trial Court of Makati, where it was docketed as Civil
Case No. 92-1070 and assigned to Branch 134, although the
proceedings were suspended because of the pendency of this
case. To sustain the appellate courts ruling that the foreign
judgment constitutes res judicata and is a bar to the claim of
petitioners would effectively preclude petitioners from repelling
the judgment in the case for enforcement. An absurdity could
then arise: a foreign judgment is not subject to challenge by
the plaintiff against whom it is invoked, if it is pleaded to resist
a claim as in this case, but it may be opposed by the defendant
if the foreign judgment is sought to be enforced against him in
a separate proceeding. This is plainly untenable. It has been
held therefore that:
[A] foreign judgment may not be enforced if it is not recognized
in the jurisdiction where affirmative relief is being
sought. Hence, in the interest of justice, the complaint
should be considered as a petition for the recognition of the
Hongkong judgment under Section 50 (b), Rule 39 of the
Rules of Court in order that the defendant, private respondent
herein, may present evidence of lack of jurisdiction, notice,
collusion, fraud or clear mistake of fact and law, if applicable.[14]
Accordingly, to insure the orderly administration of justice, this
case and Civil Case No. 92-1070 should be consolidated.
[15]
After all, the two have been filed in the Regional Trial Court
of Makati, albeit in different salas, this case being assigned to
Branch 56 (Judge Fernando V. Gorospe), while Civil Case No.
92-1070 is pending in Branch 134 of Judge Ignacio
Capulong. In such proceedings, petitioners should have the
burden of impeaching the foreign judgment and only in the
event they succeed in doing so may they proceed with their
action against private respondents.
Second. Nor is the trial courts refusal to take cognizance of
the case justifiable under the principle of forum non
conveniens. First, a motion to dismiss is limited to the grounds
under Rule 16, 1, which does not include forum non
conveniens.[16] The propriety of dismissing a case based on this
principle requires a factual determination, hence, it is more
properly considered a matter of defense. Second, while it is
within the discretion of the trial court to abstain from assuming

jurisdiction on this ground, it should do so only after vital facts


are established, to determine whether special circumstances
require the courts desistance.[17]
In this case, the trial court abstained from taking jurisdiction
solely on the basis of the pleadings filed by private
respondents in connection with the motion to dismiss. It failed
to consider that one of the plaintiffs (PHILSEC) is a domestic
corporation and one of the defendants (Ventura Ducat) is a
Filipino, and that it was the extinguishment of the latters debt
which was the object of the transaction under litigation. The
trial court arbitrarily dismissed the case even after finding that
Ducat was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the
trial court to hold that jurisdiction over 1488, Inc. and Daic
could not be obtained because this is an action
in personamand summons were served by extraterritorial
service. Rule 14, 17 on extraterritorial service provides that
service of summons on a non-resident defendant may be
effected out of the Philippines by leave of Court where, among
others, the property of the defendant has been attached within
the Philippines.[18] It is not disputed that the properties, real
and personal, of the private respondents had been attached
prior to service of summons under the Order of the trial court
dated April 20, 1987.[19]
Fourth. As for the temporary restraining order issued by the
Court on June 29, 1994, to suspend the proceedings in Civil
Case No. 92-1445 filed by Edgardo V. Guevarra to enforce socalled Rule 11 sanctions imposed on the petitioners by the
U.S. court, the Court finds that the judgment sought to be
enforced is severable from the main judgment under
consideration in Civil Case No. 16563. The separability of
Guevarras claim is not only admitted by petitioners, [20] it
appears from the pleadings that petitioners only belatedly
impleaded Guevarra as defendant in Civil Case No. 16563.
[21]
Hence, the TRO should be lifted and Civil Case No. 921445 allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is
REVERSED and Civil Case No. 16563 is REMANDED to the
Regional Trial Court of Makati for consolidation with Civil Case
No. 92-1070 and for further proceedings in accordance with
this decision. The temporary restraining order issued on June
29, 1994 is hereby LIFTED.
SO ORDERED.
G.R. No. 157376

October 2, 2007

CORAZON
C.
SIM, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
EQUITABLE PCI-BANK, respondents*.
Corazon Sim (petitioner) filed a case for illegal dismissal with
the Labor Arbiter, alleging that she was initially employed by
Equitable PCI-Bank (respondent) in 1990 as Italian Remittance
Marketing Consultant to the Frankfurt Representative Office.
Eventually, she was promoted to Manager position, until
September 1999, when she received a letter from Remegio
David -- the Senior Officer, European Head of PCIBank, and
Managing Director of PCIB- Europe -- informing her that she
was being dismissed due to loss of trust and confidence based
on alleged mismanagement and misappropriation of funds.
Respondent denied any employer-employee relationship
between them, and sought the dismissal of the complaint.
On September 3, 2001, the Labor Arbiter rendered its Decision
dismissing the case for want of jurisdiction and/or lack of
merit.1 According to the Labor Arbiter:

It should be stressed at this juncture that the labor relations


system in the Philippines has no extra-territorial jurisdiction. It
is limited to the relationship between labor and capital within
the Philippines. Since complainant was hired and assigned in a
foreign land, although by a Philippine Corporation, it follows
that the law that govern their relationship is the law of the place
where the employment was executed and her place of work or
assignment. On this premise, the Italian law allegedly provides
severance pay which was applied and extended to herein
complainant (Annex "P", respondent's position paper).
As can be gleaned from the foregoing, a further elucidation on
the matter would be an exercise in futility. Hence, this case
should be dismissed for want of jurisdiction.
Assuming for the sake of argument that this Office has
jurisdiction over this case, still, this Office is inclined to rule in
favor of the respondent.
Complainant, as General Manager is an employee whom the
respondent company reposed its trust and confidence. In other
words, she held a position of trust. It is well-settled doctrine
that the basic premise for dismissal on the ground of loss of
confidence is that the employee concerned holds a position of
trust and confidence. (National Sugar Refineries Corporation
vs. NLRC, 286 SCRA 478.)
xxx
In this case, the respondent company had strong reason to
believe that the complainant was guilty of the offense charged
against her.2
On appeal, the National Labor Relations Commission (NLRC)
affirmed the Labor Arbiter's Decision and dismissed petitioner's
appeal for lack of merit.3
Without filing a motion for reconsideration with the NLRC,
petitioner went to the Court of Appeals (CA) via a petition
for certiorari under Rule 65 of the Rules of Court.
In a Resolution dated October 29, 2002, the CA4 dismissed the
petition due to petitioner's non-filing of a motion for
reconsideration with the NLRC.5
Petitioner filed a motion for reconsideration but it was
nonetheless denied by the CA per Resolution dated February
26, 2003.
Hence, the present recourse under Rule 45 of the Rules of
Court.
Petitioner alleges that:
I. The Court of Appeals departed from the accepted and usual
concepts of remedial law when it ruled that the petitioner
should have first filed a Motion for Reconsideration with the
National Labor Relations Commission.
II. The National Labor Relations Commission decided a
question of jurisdiction heretofore not yet determined by the
Court and decided the same in a manner not in accord with law
when it ruled that it had no jurisdiction over a labor dispute
between a Philippine corporation and its employee which it
assigned to work for a foreign land.6
The pivotal question that needs to be resolved is whether or
not a prior motion for reconsideration is indispensable for the
filing of a petition for certiorari under Rule 65 of the Rules of
Court with the CA.
Under Rule 65, the remedy of filing a special civil action
for certiorari is available only when there is no appeal; or any
plain, speedy, and adequate remedy in the ordinary course of
law.7 A "plain" and "adequate remedy" is a motion for

reconsideration of the assailed order or resolution, the filing of


which is an indispensable condition to the filing of a special
civil action for certiorari.8 This is to give the lower court the
opportunity to correct itself.9
There are, of course, exceptions to the foregoing rule, to wit:
(a) where the order is a patent nullity, as where the court a quo
has no jurisdiction;
(b) where the questions raised in the certiorari proceedings
have been duly raised and passed upon by the lower court, or
are the same as those raised and passed upon in the lower
court;
(c) where there is an urgent necessity for the resolution of the
question and any further delay would prejudice the interests of
the Government or of the petitioner or the subject matter of the
action is perishable;
(d) where, under the circumstances,
reconsideration would be useless;

motion

for

(e) where petitioner was deprived of due process and there is


extreme urgency for relief;
(f) where, in a criminal case, relief from an order of arrest is
urgent and the granting of such relief by the trial court is
improbable;
(g) where the proceedings in the lower court are a nullity for
lack of due process;
(h) where the proceeding was ex parte or in which the
petitioner had no opportunity to object; and
(i) where the issue raised is one purely of law or public interest
is involved.10
Petitioner, however, failed to qualify her case as among the few
exceptions. In fact, the Court notes that the petition filed before
the CA failed to allege any reason why a motion for
reconsideration was dispensed with by petitioner. It was only in
her motion for reconsideration of the CA's resolution of
dismissal and in the petition filed in this case that petitioner
justified her non-filing of a motion for reconsideration.
Petitioner argues that filing a motion for reconsideration with
the NLRC would be merely an exercise in futility and useless.
But it is not for petitioner to determine whether it is so. As
stressed in Cervantes v. Court of Appeals:
It must be emphasized that a writ of certiorari is a prerogative
writ, never demandable as a matter of right, never issued
except in the exercise of judicial discretion. Hence, he who
seeks a writ of certiorari must apply for it only in the manner
and strictly in accordance with the provisions of the law and the
Rules.Petitioner may not arrogate to himself the
determination of whether a motion for reconsideration is
necessary or not. To dispense with the requirement of
filing a motion for reconsideration, petitioner must show a
concrete, compelling, and valid reason for doing so, which
petitioner failed to do. Thus, the Court of Appeals correctly
dismissed the petition.11 (Emphasis supplied)
Petitioner also contends that the issue at bench is purely a
question of law, hence, an exception to the rule. A reading of
the petition filed with the CA shows otherwise. The issues
raised in this case are mixed questions of fact and law. There
is a question of fact when doubt or difference arises as to the
truth or falsehood of the alleged facts, and there is a question
of law where the doubt or difference arises as to what the law
is on a certain state of facts.12

Petitioner, aside from questioning the ruling of the NLRC


sustaining the Labor Arbiter's view that it does not have any
jurisdiction over the case, also questions the NLRC's ruling
affirming the Labor Arbiter's conclusion that she was validly
dismissed by respondent. The legality of petitioner's dismissal
hinges on the question of whether there was an employeremployee relationship, which was denied by respondent; and,
if in the affirmative, whether petitioner, indeed, committed a
breach of trust and confidence justifying her dismissal. These
are mixed questions of fact and law and, as such, do not fall
within the exception from the filing of a motion for
reconsideration.
Consequently, the CA was not in error when it dismissed the
petition. More so since petitioner failed to show any error on
the part of the Labor Arbiter and the NLRC in ruling that she
was dismissed for cause.
The rule is that the Court is bound by the findings of facts of
the Labor Arbiter or the NLRC, unless it is shown that grave
abuse of discretion or lack or excess of jurisdiction has been
committed by said quasi-judicial bodies.13 The Court will not
deviate from said doctrine without any clear showing that the
findings of the Labor Arbiter, as affirmed by the NLRC, are
bereft of sufficient substantiation.
Petitioner does not deny having withdrawn the amount
of P3,000,000.00 lire from the bank's account. What petitioner
submits is that she used said amount for the Radio Pilipinas sa
Roma radio program of the company. Respondent, however,
countered that at the time she withdrew said amount, the radio
program was already off the air. Respondent is a managerial
employee. Thus, loss of trust and confidence is a valid ground
for her dismissal.14 The mere existence of a basis for believing
that a managerial employee has breached the trust of the
employer would suffice for his/her dismissal.15
[w]hen an employee accepts a promotion to a managerial
position or to an office requiring full trust and confidence, she
gives up some of the rigid guaranties available to ordinary
workers. Infractions which if committed by others would be
overlooked or condoned or penalties mitigated may be visited
with more severe disciplinary action. A company's resort to acts
of self-defense would be more easily justified.16
The Court notes, however, a palpable error in the Labor
Arbiter's disposition of the case, which was affirmed by the
NLRC, with regard to the issue on jurisdiction. It was wrong for
the Labor Arbiter to rule that "labor relations system in the
Philippines has no extra-territorial jurisdiction."17
Article 217 of the Labor Code provides for the jurisdiction of the
Labor Arbiter
and
the
National
Labor
Relations
Commission, viz.:
ART. 217. Jurisdiction of Labor Arbiters and the Commission.
(a) Except as otherwise provided under this Code the Labor
Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wage, rates of pay, hours of
work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code,


including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount
of exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
(b) The commission shall have exclusive appellate jurisdiction
over all cases decided by Labor Arbiters.
Moreover, Section 10 of Republic Act (R.A.) No. 8042, or the
Migrant
Workers
and
Overseas
Filipinos Act
of
1995,18 provides:
SECTION 10. Money Claims. Notwithstanding any provision
of law to the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of
any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and
other forms of damages.
Also, Section 62 of the Omnibus Rules and Regulations
Implementing R.A. No. 804219 provides that the Labor Arbiters
of the NLRC shall have the original and exclusive jurisdiction to
hear and decide all claims arising out of employer-employee
relationship or by virtue of any law or contract involving Filipino
workers for overseas deployment including claims for actual,
moral, exemplary and other forms of damages, subject to the
rules and procedures of the NLRC.
Under these provisions, it is clear that labor arbiters have
original and exclusive jurisdiction over claims arising from
employer-employee relations, including termination disputes
involving all workers, among whom are overseas Filipino
workers.20 In Philippine National Bank v. Cabansag, the Court
pronounced:
x x x Whether employed locally or overseas, all Filipino
workers enjoy the protective mantle of Philippine labor
and social legislation, contract stipulations to the contrary
notwithstanding. This pronouncement is in keeping with the
basic public policy of the State to afford protection to labor,
promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations
between workers and employers. For the State assures the
basic rights of all workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions
of work [Article 3 of the Labor Code of the Philippines; See
also Section 18, Article II and Section 3, Article XIII, 1987
Constitution]. This ruling is likewise rendered imperative by
Article 17 of the Civil Code which states that laws "which have
for their object public order, public policy and good customs
shall not be rendered ineffective by laws or judgments
promulgated, or by determination or conventions agreed upon
in a foreign country."21 (Emphasis supplied)
In any event, since the CA did not commit any error in
dismissing the petition before it for failure to file a prior motion
for reconsideration with the NLRC, and considering that the
Labor Arbiter and the NLRC's factual findings as regards the
validity of petitioner's dismissal are accorded great weight and
respect and even finality when the same are supported by
substantial evidence, the Court finds no compelling reason to
relax the rule on the filing of a motion for reconsideration prior
to the filing of a petition for certiorari.
WHEREFORE, the petition is DENIED.

Costs against petitioner.


SO ORDERED.
[G.R. No. 128024. May 9, 2000]
BEBIANO M. BAEZ, petitioner, vs. HON. DOWNEY C.
VALDEVILLA and ORO MARKETING, INC., respondents.
The orders of respondent judge[1] dated June 20, 1996 and
October 16, 1996, taking jurisdiction over an action for
damages filed by an employer against its dismissed employee,
are assailed in this petition for certiorari under Rule 65 of the
Rules of Court for having been issued in grave abuse of
discretion.
Petitioner was the sales operations manager of private
respondent in its branch in Iligan City. In 1993, private
respondent "indefinitely suspended" petitioner and the latter
filed a complaint for illegal dismissal with the National Labor
Relations Commission ("NLRC") in Iligan City. In a decision
dated July 7, 1994, Labor Arbiter Nicodemus G. Palangan
found petitioner to have been illegally dismissed and ordered
the payment of separation pay in lieu of reinstatement, and of
backwages and attorney's fees. The decision was appealed to
the NLRC, which dismissed the same for having been filed out
of time.[2] Elevated by petition for certiorari before this Court,
the case was dismissed on technical grounds [3]; however, the
Court also pointed out that even if all the procedural
requirements for the filing of the petition were met, it would still
be dismissed for failure to show grave abuse of discretion on
the part of the NLRC. Slxmis
On November 13, 1995, private respondent filed a complaint
for damages before the Regional Trial Court ("RTC") of
Misamis Oriental, docketed as Civil Case No. 95-554, which
prayed for the payment of the following: Slxsc
a. P709,217.97 plus 12% interest as loss of profit and/or
unearned income of three years;
b. P119,700.00 plus 12% interest as estimated cost of
supplies, facilities, properties, space, etc. for three years;
c. P5,000.00 as initial expenses of litigation; and
d. P25,000.00 as attorney's fees.[4]
On January 30, 1996, petitioner filed a motion to dismiss the
above complaint. He interposed in the court below that the
action for damages, having arisen from an employer-employee
relationship, was squarely under the exclusive original
jurisdiction of the NLRC under Article 217(a), paragraph 4 of
the Labor Code and is barred by reason of the final judgment
in the labor case. He accused private respondent of splitting
causes of action, stating that the latter could very well have
included the instant claim for damages in its counterclaim
before the Labor Arbiter. He also pointed out that the civil
action of private respondent is an act of forum-shopping and
was merely resorted to after a failure to obtain a favorable
decision with the NLRC. Scslx
Ruling upon the motion to dismiss, respondent judge issued
the herein questioned Order, which summarized the basis for
private respondent's action for damages in this manner: Slx
Paragraph 5 of the complaint alleged that the defendant
violated the plaintiffs policy re: His business in his branch at
Iligan City wherein defendant was the Sales Operations
Manager, and paragraph 7 of the same complaint briefly
narrated the modus operandi of defendant, quoted herein:
Defendant canvassed customers personally or through
salesmen of plaintiff which were hired or recruited by him. If
said customer decided to buy items from plaintiff on installment

basis, defendant, without the knowledge of said customer and


plaintiff, would buy the items on cash basis at ex-factory price,
a privilege not given to customers, and thereafter required the
customer to sign promissory notes and other documents using
the name and property of plaintiff, purporting that said
customer purchased the items from plaintiff on installment
basis. Thereafter, defendant collected the installment
payments either personally or through Venus Lozano, a Group
Sales Manager of plaintiff but also utilized by him as secretary
in his own business for collecting and receiving of installments,
purportedly for the plaintiff but in reality on his own account or
business. The collection and receipt of payments were made
inside the Iligan City branch using plaintiffs facilities, property
and manpower. That accordingly plaintiffs sales decreased
and reduced to a considerable extent the profits which it would
have earned.[5]
In declaring itself as having jurisdiction over the subject matter
of the instant controversy, respondent court stated: Mesm
A perusal of the complaint which is for damages does not ask
for any relief under the Labor Code of the Philippines. It seeks
to recover damages as redress for defendant's breach of his
contractual obligation to plaintiff who was damaged and
prejudiced. The Court believes such cause of action is within
the realm of civil law, and jurisdiction over the controversy
belongs to the regular courts.
While seemingly the cause of action arose from employeremployee relations, the employer's claim for damages is
grounded on the nefarious activities of defendant causing
damage and prejudice to plaintiff as alleged in paragraph 7 of
the complaint. The Court believes that there was a breach of a
contractual obligation, which is intrinsically a civil dispute. The
averments in the complaint removed the controversy from the
coverage of the Labor Code of the Philippines and brought it
within the purview of civil law. (Singapore Airlines, Ltd. Vs.
Pao, 122 SCRA 671.) xxx[6]
Petitioner's motion for reconsideration of the above Order was
denied for lack of merit on October 16, 1996. Hence, this
petition. Calrky
Acting on petitioner's prayer, the Second Division of this Court
issued a Temporary Restraining Order ("TRO ") on March 5,
1997, enjoining respondents from further proceeding with Civil
Case No. 95-554 until further orders from the Court. Kycalr
By way of assignment of errors, the petition reiterates the
grounds raised in the Motion to Dismiss dated January 30,
1996, namely, lack of jurisdiction over the subject matter of the
action, res judicata, splitting of causes of action, and forumshopping. The determining issue, however, is the issue of
jurisdiction. Kyle
Article 217(a), paragraph 4 of the Labor Code, which was
already in effect at the time of the filing of this case,
reads: Exsm
ART. 217. Jurisdiction of Labor Arbiters and the
Commission. --- (a) Except as otherwise provided under this
Code the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision
without extension, even in the absence of stenographic notes,
the following cases involving all workers, whether agricultural
or non-agricultural:
xxx
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
xxx

The above provisions are a result of the amendment by


Section 9 of Republic Act ("R.A.") No. 6715, which took effect
on March 21, 1989, and which put to rest the earlier confusion
as to who between Labor Arbiters and regular courts had
jurisdiction over claims for damages as between employers
and employees. Sppedjo
It will be recalled that years prior to R.A. 6715, jurisdiction over
all money claims of workers, including claims for damages,
was originally lodged with the Labor Arbiters and the NLRC by
Article 217 of the Labor Code.[7] On May 1, 1979, however,
Presidential Decree ("P.D.") No. 1367 amended said Article
217 to the effect that "Regional Directors shall not indorse and
Labor Arbiters shall not entertain claims for moral or other
forms of damages."[8] This limitation in jurisdiction, however,
lasted only briefly since on May 1, 1980, P.D. No. 1691 nullified
P.D. No. 1367 and restored Article 217 of the Labor Code
almost to its original form. Presently, and as amended by R.A.
6715, the jurisdiction of Labor Arbiters and the NLRC in Article
217 is comprehensive enough to include claims for all forms of
damages "arising from the employer-employee relations". Miso
Whereas this Court in a number of occasions had applied the
jurisdictional provisions of Article 217 to claims for damages
filed by employees,[9] we hold that by the designating clause
"arising from the employer-employee relations" Article 217
should apply with equal force to the claim of
an employer for actual damages against its dismissed
employee, where the basis for the claim arises from or is
necessarily connected with the fact of termination, and should
be entered as a counterclaim in the illegal dismissal
case. Nexold
Even under Republic Act No. 875 (the "Industrial Peace Act",
now completely superseded by the Labor Code), jurisprudence
was settled that where the plaintiff's cause of action for
damages arose out of, or was necessarily intertwined with, an
alleged unfair labor practice committed by the union, the
jurisdiction is exclusively with the (now defunct) Court of
Industrial Relations, and the assumption of jurisdiction of
regular courts over the same is a nullity.[10] To allow otherwise
would be "to sanction split jurisdiction, which is prejudicial to
the orderly administration of justice." [11] Thus, even after the
enactment of the Labor Code, where the damages separately
claimed by the employer were allegedly incurred as a
consequence of strike or picketing of the union, such complaint
for damages is deeply rooted from the labor dispute between
the parties, and should be dismissed by ordinary courts for lack
of jurisdiction. As held by this Court in National Federation of
Labor vs. Eisma, 127 SCRA 419: Manikx
Certainly, the present Labor Code is even more committed to
the view that on policy grounds, and equally so in the interest
of greater promptness in the disposition of labor matters, a
court is spared the often onerous task of determining what
essentially is a factual matter, namely, the damages that may
be incurred by either labor or management as a result of
disputes or controversies arising from employer-employee
relations.
There is no mistaking the fact that in the case before us,
private respondent's claim against petitioner for actual
damages arose from a prior employer-employee relationship.
In the first place, private respondent would not have taken
issue with petitioner's "doing business of his own" had the
latter not been concurrently its employee. Thus, the damages
alleged in the complaint below are: first, those amounting to
lost profits and earnings due to petitioner's abandonment or
neglect of his duties as sales manager, having been otherwise
preoccupied by his unauthorized installment sale scheme; and
second, those equivalent to the value of private respondent's
property and supplies which petitioner used in conducting his
"business ". Maniks

Second, and more importantly, to allow respondent court to


proceed with the instant action for damages would be to open
anew the factual issue of whether petitioner's installment sale
scheme resulted in business losses and the dissipation of
private respondent's property. This issue has been duly raised
and ruled upon in the illegal dismissal case, where private
respondent brought up as a defense the same allegations now
embodied in his complaint, and presented evidence in support
thereof. The Labor Arbiter, however, found to the contrary
---that no business losses may be attributed to petitioner as in
fact, it was by reason of petitioner's installment plan that the
sales of the Iligan branch of private respondent (where
petitioner was employed) reached its highest record level to
the extent that petitioner was awarded the 1989 Field Sales
Achievement Award in recognition of his exceptional sales
performance, and that the installment scheme was in fact with
the knowledge of the management of the Iligan branch of
private respondent.[12] In other words, the issue of actual
damages has been settled in the labor case, which is now final
and executory. Manikan
Still on the prospect of re-opening factual issues already
resolved by the labor court, it may help to refer to that period
from 1979 to 1980 when jurisdiction over employmentpredicated actions for damages vacillated from labor tribunals
to regular courts, and back to labor tribunals. In Ebon vs. de
Guzman, 113 SCRA 52,[13] this Court discussed:
The lawmakers in divesting the Labor Arbiters and the NLRC of
jurisdiction to award moral and other forms of damages in labor
cases could have assumed that the Labor Arbiters' positionpaper procedure of ascertaining the facts in dispute might not
be an adequate tool for arriving at a just and accurate
assessment of damages, as distinguished from backwages
and separation pay, and that the trial procedure in the Court of
First Instance would be a more effective means of determining
such damages. xxx
Evidently, the lawmaking authority had second thoughts about
depriving the Labor Arbiters and the NLRC of the jurisdiction to
award damages in labor cases because that setup would
mean duplicity of suits, splitting the cause of action and
possible conflicting findings and conclusions by two tribunals
on one and the same claim.
So, on May 1, 1980, Presidential Decree No. 1691 (which
substantially reenacted Article 217 in its original form) nullified
Presidential Decree No. 1367 and restored to the Labor Arbiter
and the NLRC their jurisdiction to award all kinds of damages
in cases arising from employer-employee relations. xxx
(Underscoring supplied)
Clearly, respondent court's taking jurisdiction over the instant
case would bring about precisely the harm that the lawmakers
sought to avoid in amending the Labor Code to restore
jurisdiction over claims for damages of this nature to the
NLRC. Oldmiso
This is, of course, to distinguish from cases of actions for
damages where the employer-employee relationship is merely
incidental and the cause of action proceeds from a different
source of obligation. Thus, the jurisdiction of regular courts was
upheld where the damages, claimed for were based on tort [14],
malicious prosecution[15], or breach of contract, as when the
claimant seeks to recover a debt from a former employee [16] or
seeks liquidated damages in enforcement of a prior
employment contract. [17]
Neither can we uphold the reasoning of respondent court that
because the resolution of the issues presented by the
complaint does not entail application of the Labor Code or
other labor laws, the dispute is intrinsically civil. Article 217(a)
of the Labor Code, as amended, clearly bestows upon the

Labor Arbiter original and exclusive jurisdiction over claims for


damages arising from employer-employee relations ---in other
words, the Labor Arbiter has jurisdiction to award not only the
reliefs provided by labor laws, but also damages governed by
the Civil Code.[18]
Thus, it is obvious that private respondent's remedy is not in
the filing of this separate action for damages, but in properly
perfecting an appeal from the Labor Arbiter's decision. Having
lost the right to appeal on grounds of untimeliness, the decision
in the labor case stands as a final judgment on the merits, and
the instant action for damages cannot take the place of such
lost appeal.
Respondent court clearly having no jurisdiction over private
respondent's complaint for damages, we will no longer pass
upon petitioner's other assignments of error. Ncm
WHEREFORE, the Petition is GRANTED, and the complaint in
Civil Case No. 95-554 before Branch 39 of the Regional Trial
Court of Misamis Oriental is hereby DISMISSED. No
pronouncement as to costs. Ncmmis
SO ORDERED.
ROBERTO T. DOMONDON,
Petitioner,
- versus NATIONAL LABOR RELATIONS
COMMISSION, VAN MELLE PHILS.,
INC. and NIELS H.B. HAVE,
Respondents.
30, 2005

G.R. No. 154376


Promulgated:
September

This is a petition for review on certiorari seeking the


reversal of the February 28, 2002 Decision[1] of the Court of
Appeals in CA-G.R. SP No. 65130 and its July 17, 2002
Resolution, denying petitioners motion for reconsideration.
The assailed Decision affirmed the rulings of the National
Labor Relations Commission (NLRC) and the Labor Arbiter,
which held that petitioner was not illegally dismissed but
voluntarily resigned.
On November 20, 1998, petitioner Roberto T. Domondon filed
a complaint before the Regional Arbitration Branch of the
NLRC, Quezon City, against private respondent Van Melle
Phils., Inc. (VMPI) and its President and General Manager,
private respondent Niels H.B. Have. He claimed illegal
dismissal and prayed for reinstatement, payment of full
backwages inclusive of allowances, 14th month pay, sick and
vacation leaves, share in the profits, moral and exemplary
damages and attorneys fees.
Petitioner alleged that on January 8, 1997, private respondent
VMPI, a manufacturing company engaged in the production
and distribution of confectionaries and related products, hired
him as Materials Manager through its then President and
General Manager Victor M. Endaya. He was tasked to
supervise the Inventory Control, Purchasing, and Warehouse
and Distribution Sections of the company. He was given a
guaranteed monthly salary of ninety-eight thousand
(P98,000.00) pesos for fourteen (14) months with annual merit
adjustment, profit sharing bonus from 0-2 months based on
individual, company and corporate performance,[4] and a brand
new 1600cc Honda VTEC[5] with 300 liters monthly gas
allowance.[6]
Petitioner claimed that things worked out well for him in
the beginning until Endaya was transferred to China in August
1997 and was replaced by private respondent Have, a Dutch
national. According to petitioner, private respondent Have
immediately set a one-on-one meeting with him and requested
his courtesy resignation. Alleging that the decision came from
the Asia Regional Office, private respondent Have wanted to

reorganize and put his people in management. Petitioner


refused to resign and life got difficult for him. His decisions
were always questioned by private respondent Have. He was
subjected to verbal abuse. His competence was undermined
by baseless and derogatory memos, which lay the bases for
his removal from the company. He also did not receive his
14th month pay.
Petitioner further stated that the final straw came on
June 10, 1998, in another one-on-one meeting with private
respondent Have. Private respondent Have informed
petitioner that things would get more difficult for him if he does
not resign. Private respondent Have threw a veiled threat at
petitioner to the effect that a dignified resignation would be
infinitely better than being fired for a fabricated lawful cause.
Private respondent Have offered financial assistance if
petitioner would leave peacefully but the offer must be
accepted immediately or it would be withdrawn. Thus,
petitioner signed a ready-made resignation letter without
deliberation and evaluation of the consequences. His main
concern then was to prevent the end of his professional
career.
Petitioner stated that on the same day that he handed in
his resignation letter, private respondent VMPI posted a
memorandum with information of his replacement. He claimed
that to lend a semblance of credibility to his forced resignation,
private respondents released to him a portion of the offered
financial package.
On their part, private respondents admitted hiring
petitioner under the circumstances set forth by him but denied
illegally dismissing him. They maintained that with his
educational and professional background, petitioner could not
have been coerced and intimidated into resigning from the
company. Instead, they claimed that he voluntarily resigned to
embark on management consultancy in the field of strategic
planning and import/export.[10] They stated that petitioner
informed them about his intention to resign and requested a
soft landing financial support in the amount of three hundred
thousand (P300,000.00) pesos on top of accrued benefits due
him upon resignation. Private respondents granted the
request. Subsequently, however, petitioner proposed the
transfer of ownership of the car assigned to him in lieu of the
financial assistance from the company. Since company policy
prohibits disposition of assets without valuable consideration,
the parties agreed that petitioner shall pay for the car with
theP300,000.00 soft landing financial assistance from private
respondent VMPI.
Private respondents averred that petitioner, who was then in
charge of the disposition of the assets of the company, effected
the registration of the car in his name. [11] Joannes Cornelis
Kuiten, then Vice-President for Finance, signed for the
company.[12] On July 30, 1998, P300,000.00 was credited to
petitioners payroll account[13] but he did not use it to pay for
the car as agreed upon. Repeated demands for payment were
unheeded. In its letter of demand dated October 28, 1998,
private respondent VMPI gave petitioner an option to apply
the P169,368.32 total cash conversion of his sick and vacation
leave credits, 13th and 14th months pay less taxes as partial
payment for the car and pay the balance of P130,631.68,
or return the car to the company.[14] Petitioner did not exercise
either option. Instead, on November 20, 1998, he filed a
complaint for illegal dismissal against private respondents.
On June 14, 1999, the Labor Arbiter ruled for private
respondents, viz:
WHEREFORE, premises considered, the complaint for illegal
dismissal is hereby dismissed for lack of merit, and the claim
for damages and attorneys fees denied.

The complainant has the option to reconvey to respondents the


car sold to him and thus retain full credit of the P300,000.00
soft landing assistance, or retain ownership of the car by
paying respondents the purchase price of P300,000.00 minus
any amount due him corresponding to his accrued benefits that
has been applied by respondents as partial payment for the
car.
The NLRC affirmed the Decision of the Labor Arbiter on
January 26, 2001 and denied petitioners motion for
reconsideration on March 5, 2001. Petitioner went to the Court
of Appeals on a special civil action for certiorari but failed for
the third time. The appellate court dismissed the petition on
February 28, 2002 and denied petitioners motion for
reconsideration on July 17, 2002; hence, this petition for review
on certiorari.
Petitioner raises as error the failure of the appellate court to
apply the rule in termination of employment that the burden
rests upon the employer to prove by substantial evidence that
the employee was removed for lawful or authorized cause. He
also questions the jurisdiction of the Labor Arbiter to resolve
the issue of the transfer of car-ownership by private
respondents.
I.
The first issue raises factual matters which may not be
reviewed by the Court. Our jurisdiction is limited to reviewing
errors of law. Not being a trier of facts, the Court cannot reexamine and re-evaluate the probative value of evidence
presented to the Labor Arbiter, the NLRC and the Court of
Appeals, which formed the basis of the questioned decision
and resolution.[17] Indeed, their findings when in absolute
agreement are accorded not only respect but even finality as
long as they are supported by substantial evidence.[18]
In any event, we combed the records of the case at bar and
found no compelling reason to disturb the uniform findings and
conclusions of the Court of Appeals, the NLRC and the Labor
Arbiter. There was no arbitrary disregard or misapprehension
of evidence of such nature as to compel a contrary conclusion
if properly appreciated. Petitioners letter of resignation, his
educational attainment, and the circumstances antecedent
and contemporaneous to the filing of the complaint for
illegal dismissal are substantial proof of petitioners
voluntary resignation.
Petitioners letter of resignation was categorical that he was
resigning to embark on management consultancy in the field
of strategic planning and import/export.[19] Petitioner was
holding a managerial position at private respondent VMPI and
he was previously Vice-President for strategic planning at LG
Collins Electronics. Thus, management consultancy in the
field of strategic planning was a logical reason for the
resignation, which either petitioner or private respondents may
provide.
Import/export, whether inclusive or exclusive of the clause
managerial consultancy, on the other hand, could neither be
inferred from petitioners nature of work with private
respondent VMPI nor from his past work experiences. Thus,
even if petitioner was correct in arguing that he could not have
considered it given the state of the countrys economy, anyone
may provide it as reason for the resignation, including him and
private respondents.
But assuming that private respondents prepared the letter of
resignation for petitioner to sign as claimed, the Court is not
convinced that petitioner was coerced and intimidated into
signing it. Petitioner is no ordinary employee with limited
education. He has a Bachelor of Arts Degree in Economics
from the University of Santo Tomas, has completed academic
requirements for Masters of Business Economics from the

University of Asia and the Pacific, and studied law for two (2)
years at Adamson University. He also has a good professional
record, which highlights his marketability. Thus, his reliance on
the case of Molave Tours Corporation v. NLRC,[20] where the
employee found to have been forced to resign was a mere
garage custodian, is clearly misplaced.
In termination cases, the employer decides for the employee.
It is different in resignation cases for resignation is a formal
pronouncement of relinquishment of an office. It is made with
the intention of relinquishing the office accompanied by an act
of relinquishment.[21] In the instant case, petitioner relinquished
his position when he submitted his letter of resignation. His
subsequent act of receiving and keeping his requested soft
landing financial assistance of P300,000.00, and his retention
and use of the car subject of his arrangement with private
respondents showed his resolve to relinquish his post.
Thus, we affirm the findings of the Labor Arbiter, the NLRC and
the Court of Appeals that private respondents were able to
prove through substantial evidence that petitioner was not
illegally dismissed.
II.
The next issue involves the jurisdiction of the Labor Arbiter to
hear and decide the question on the transfer of ownership of
the car assigned to petitioner. He contends that it is the
regular courts that have jurisdiction over the question and not
the Labor Arbiter.
This is not an issue of first impression. The jurisdiction of
Labor Arbiters is provided under Article 217(a) of the Labor
Code, as amended, viz:
(a) Except as otherwise provided under this Code the Labor
Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or
non-agricultural:
1.

Unfair labor practice cases;

2.

Termination disputes;

3.
If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay,
hours of work and other terms and conditions of employment;
4.
Claims for actual, moral, exemplary and other forms of
damages arising from employer-employee relations;
5.
Cases arising from any violation of Article 264 of this
Code, including questions involving the legality of strikes and
lockouts;
6.
Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
In all these instances, the matrix is the existence of an
employer-employee relationship. In the case at bar, there is no
dispute that petitioner is an employee of the respondents.
In Baez v. Valdevilla,[23] we held:
x x x Presently, and as amended by R.A. 6715, the jurisdiction
of Labor Arbiters and the NLRC in Article 217 is
comprehensive enough to include claims for all forms of
damages arising from the employer-employee relations.

Whereas this Court in a number of occasions had applied the


jurisdictional provisions of Article 217 to claims of
damages filed by employees,[24] we hold that by the
designating clause arising from the employer-employee
relations Article 217 should apply with equal force to the claim
of an employer for actual damages against its dismissed
employee, where the basis for the claim arises from or is
necessarily connected with the fact of termination, and
should be entered as a counterclaim in the illegal dismissal
case.
Baez is in accord with paragraph 6 of Article 217(a), which
covers all other claims, arising from employer-employee
relations, viz:
6.
Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those
of persons in domestic or household service, involving an
amount exceeding five thousand pesos (P5,000.00) regardless
of whether accompanied with a claim for reinstatement.
In the case at bar, petitioner claims illegal dismissal and prays
for reinstatement, payment of full backwages inclusive of
allowances, 14th month pay, sick and vacation leaves, share in
the profits, moral and exemplary damages and attorneys fees.
[25]
These causes of action clearly fall within the jurisdiction of
the Labor Arbiter, specifically under paragraphs 2, 3 and 4 of
Article 217(a). On the other hand, private respondents made a
counterclaim involving the transfer of ownership of a company
car to petitioner. They maintain that he failed to pay for the car
in accordance with their agreement. The issue is whether this
claim of private respondents arose from the employeremployee relationship of the parties pursuant to paragraph 6 of
Article 217(a) under the general clause as quoted above.
The records show that the initial agreement of the parties was
that petitioner would be extended a soft-landing financial
assistance in the amount of P300,000.00 on top of his accrued
benefits at the time of the effectivity of his resignation.
However, petitioner later changed his mind. He requested that
he be allowed to keep the car assigned to him in lieu of the
financial assistance. However, company policy prohibits
transfer of ownership of property without valuable
consideration. Thus, the parties agreed that petitioner shall
still be extended the P300,000.00 financial support, which he
shall use to pay for the subject car. On July 30, 1998, private
respondent VMPI deposited the agreed amount in petitioners
account.[26] Despite having registered the car in his name and
repeated demands from private respondents, petitioner failed
to pay for it as agreed upon. Petitioner did not also return the
car. Without doubt, the transfer of the ownership of the
company car to petitioner is connected with his resignation and
arose out of the parties employer-employee relations.
Accordingly, private respondents claim for damages falls within
the jurisdiction of the Labor Arbiter.
III.
Petitioner was not illegally dismissed but voluntarily resigned.
His claims for reinstatement, payment of full backwages
inclusive of allowances, moral and exemplary damages and
attorneys fees must necessarily fail. However, he is entitled to
his 14th month pay, cash conversion of accrued sick and
vacation leaves and profit share in the aggregate amount
of P169,368.32, the total of which is not disputed. The amount
shall be applied to his obligation to pay P300,000.00 for the
company car, which ownership was transferred to him. The
return of the company car to private respondents, given the
period that has lapsed from the offer, ceased to be an option
open to petitioner.

IN VIEW WHEREOF, the decision of the Court of Appeals is


AFFIRMED with MODIFICATION. Petitioner Roberto T.
Domondon is ORDERED to pay private respondent Van Melle
Phils., Inc. the amount of P130,631.68, representing the
balance of the purchase price of the car in his custody after
deducting his entitlement to 14thmonth pay, cash conversion of
accrued sick and vacation leaves and profit share in the total
amount of P169,368.32 from the P300,000.00 soft-landing
financial assistance he received from private respondent.
SO ORDERED.
PATRICIA HALAGUEA, MA. ANGELITA L. PULIDO, MA.
TERESITA
P.
SANTIAGO,
MARIANNE
V.
KATINDIG,
BERNADETTE A. CABALQUINTO,
LORNA B. TUGAS, MARY CHRISTINE A. VILLARETE,
CYNTHIA A. STEHMEIER, ROSE ANNA G. VICTA, NOEMI R.
CRESENCIO, and other flight attendants of PHILIPPINE
AIRLINES,
Petitioners,
- versus PHILIPPINE AIRLINES INCORPORATED,
Respondent.
G.R. No. 172013 October 2, 2009
Before this Court is a petition for review
on certiorari under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision[1] and the Resolution[2] of the
Court of Appeals (CA) in CA-G.R. SP. No. 86813.
Petitioners were employed as female flight attendants of
respondent Philippine Airlines (PAL) on different dates prior to
November 22, 1996. They are members of the Flight
Attendants and Stewards Association of the Philippines
(FASAP), a labor organization certified as the sole and
exclusive certified as the sole and exclusive bargaining
representative of the flight attendants, flight stewards and
pursers of respondent.
On July 11, 2001, respondent and FASAP entered into a
Collective Bargaining Agreement[3] incorporating the terms and
conditions of their agreement for the years 2000 to 2005,
hereinafter referred to as PAL-FASAP CBA.
Section 144, Part A of the PAL-FASAP CBA, provides
that:
A. For
November

the

Cabin Attendants
1996:

hired

before

22

xxxx
3.

Compulsory Retirement

Subject to the grooming standards provisions


of this Agreement,
compulsory retirement shall be
fifty-five (55) for females and sixty
(60) for males.
x x x.
In a letter dated July 22, 2003,[4] petitioners and several
female cabin crews manifested that the aforementioned CBA
provision on compulsory retirement is discriminatory, and
demanded for an equal treatment with their male counterparts.
This demand was reiterated in a letter [5] by petitioners' counsel
addressed to respondent demanding the removal of gender
discrimination provisions in the coming re-negotiations of the
PAL-FASAP CBA.
On July 12, 2004, Robert D. Anduiza, President of
FASAP submitted their 2004-2005 CBA proposals [6] and
manifested their willingness to commence the collective

bargaining negotiations between the management and the


association, at the soonest possible time.
On July 29, 2004, petitioners filed a Special Civil Action
for Declaratory Relief with Prayer for the Issuance of
Temporary Restraining Order and Writ of Preliminary
Injunction[7] with the Regional Trial Court (RTC) of Makati City,
Branch 147, docketed as Civil Case No. 04-886, against
respondent for the invalidity of Section 144, Part A of the PALFASAP CBA. The RTC set a hearing on petitioners'
application for a TRO and, thereafter, required the parties to
submit their respective memoranda.
On August 9, 2004, the RTC issued an
Order[8] upholding its jurisdiction over the present case. The
RTC reasoned that:
In the instant case, the thrust of the Petition is Sec.
144 of the subject CBA which is allegedly discriminatory as it
discriminates against female flight attendants, in violation of
the Constitution, the Labor Code, and the CEDAW. The
allegations in the Petition do not make out a labor dispute
arising from employer-employee relationship as none is shown
to exist. This case is not directed specifically against
respondent arising from any act of the latter, nor does it involve
a claim against the respondent. Rather, this case seeks a
declaration of the nullity of the questioned provision of the
CBA, which is within the Court's competence, with the
allegations in the Petition constituting the bases for such relief
sought.
The RTC issued a TRO on August 10, 2004, enjoining
the respondent for implementing Section 144, Part A of the
PAL-FASAP CBA.
The respondent filed an omnibus motion seeking
reconsideration of the order overruling its objection to the
jurisdiction of the RTC the lifting of the TRO. It further prayed
that the (1) petitioners' application for the issuance of a writ of
preliminary injunction be denied; and (2) the petition be
dismissed or the proceedings in this case be suspended.
On September 27, 2004, the RTC issued an
Order[11] directing the issuance of a writ of preliminary injunction
enjoining the respondent or any of its agents and
representatives from further implementing Sec. 144, Part A of
the PAL-FASAP CBA pending the resolution of the case.
Aggrieved, respondent, on October 8, 2004, filed a
Petition for Certiorari and Prohibition with Prayer for a
Temporary Restraining Order and Writ of Preliminary
Injunction[12] with the Court of Appeals (CA) praying that the
order of the RTC, which denied its objection to its jurisdiction,
be annuled and set aside for having been issued without
and/or with grave abuse of discretion amounting to lack of
jurisdiction.
The CA rendered a Decision, dated August 31, 2005,
granting the respondent's petition, and ruled that:
WHEREFORE, the respondent court is by us declared
to have NO JURISDICTION OVER THE CASE BELOW and,
consequently, all the proceedings, orders and processes it has
so far issued therein are ANNULED and SET ASIDE.
Respondent court is ordered to DISMISS its Civil Case No. 04886.

THE COURT OF APPEALS' CONCLUSION THAT THE


SUBJECT MATTER IS A LABOR DISPUTE OR GRIEVANCE
IS CONTRARY TO LAW AND JURISPRUDENCE.
The main issue in this case is whether the RTC has
jurisdiction over the petitioners' action challenging the legality
or constitutionality of the provisions on the compulsory
retirement age contained in the CBA between respondent PAL
and FASAP.
Petitioners submit that the RTC has jurisdiction in all civil
actions in which the subject of the litigation is incapable of
pecuniary estimation and in all cases not within the exclusive
jurisdiction of any court, tribunal, person or body exercising
judicial or quasi-judicial functions. The RTC has the power to
adjudicate all controversies except those expressly witheld
from the plenary powers of the court. Accordingly, it has the
power to decide issues of constitutionality or legality of the
provisions of Section 144, Part A of the PAL-FASAP CBA. As
the issue involved is constitutional in character, the labor
arbiter or the National Labor Relations Commission (NLRC)
has no jurisdiction over the case and, thus, the petitioners pray
that judgment be rendered on the merits declaring Section 144,
Part A of the PAL-FASAP CBA null and void.
Respondent, on the other hand, alleges that the labor
tribunals have jurisdiction over the present case, as the
controversy partakes of a labor dispute. The dispute concerns
the terms and conditions of petitioners' employment in PAL,
specifically their retirement age. The RTC has no jurisdiction
over the subject matter of petitioners' petition for declaratory
relief because the Voluntary Arbitrator or panel of Voluntary
Arbitrators have original and exclusive jurisdiction to hear and
decide all unresolved grievances arising from the interpretation
or implementation of the CBA. Regular courts have no power
to set and fix the terms and conditions of employment. Finally,
respondent alleged that petitioners' prayer before this Court to
resolve their petition for declaratory relief on the merits is
procedurally improper and baseless.
The petition is meritorious.
Jurisdiction of the court is determined on the basis of the
material allegations of the complaint and the character of the
relief prayed for irrespective of whether plaintiff is entitled to
such relief.[14]
In the case at bar, the allegations in the petition for
declaratory relief plainly show that petitioners' cause of action
is the annulment of Section 144, Part A of the PAL-FASAP
CBA. The pertinent portion of the petition recites:
CAUSE OF ACTION
24. Petitioners have the constitutional right to fundamental
equality with men under Section 14, Article II, 1987 of the
Constitution and, within the specific context of this case, with
the male cabin attendants of Philippine Airlines.

26. Petitioners have the statutory right to equal work and


employment opportunities with men under Article 3,
Presidential Decree No. 442, The Labor Code and, within the
specific context of this case, with the male cabin attendants of
Philippine Airlines.

SO ORDERED.
Petitioner filed a motion for reconsideration, [13] which
was denied by the CA in its Resolution dated March 7, 2006.
Hence, the instant petition assigning the following error:

27. It is unlawful, even criminal, for an employer to discriminate


against women employees with respect to terms and
conditions of employment solely on account of their sex under
Article 135 of the Labor Code as amended by Republic Act No.

6725 or the Act Strengthening Prohibition on Discrimination


Against Women.
28. This discrimination against Petitioners is likewise against
the Convention on the Elimination of All Forms of
Discrimination Against Women (hereafter, CEDAW), a
multilateral convention that the Philippines ratified in 1981. The
Government and its agents, including our courts, not only must
condemn all forms of discrimination against women, but must
also implement measures towards its elimination.
29. This case is a matter of public interest not only because of
Philippine Airlines' violation of the Constitution and existing
laws, but also because it highlights the fact that twenty-three
years after the Philippine Senate ratified the CEDAW,
discrimination against women continues.
31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on
compulsory retirement from service is invidiously discriminatory
against and manifestly prejudicial to Petitioners because, they
are compelled to retire at a lower age (fifty-five (55) relative to
their male counterparts (sixty (60).
33. There is no reasonable, much less lawful, basis for
Philippine Airlines to distinguish, differentiate or classify cabin
attendants on the basis of sex and thereby arbitrarily set a
lower compulsory retirement age of 55 for Petitioners for the
sole reason that they are women.
37. For being patently unconstitutional and unlawful, Section
114, Part A of the PAL-FASAP 2000-2005 CBA must be
declared invalid and stricken down to the extent that it
discriminates against petitioner.
38. Accordingly, consistent with the constitutional and statutory
guarantee of equality between men and women, Petitioners
should be adjudged and declared entitled, like their male
counterparts, to work until they are sixty (60) years old.
PRAYER
WHEREFORE, it is most respectfully prayed that the
Honorable Court:
c. after trial on the merits:
(I)
declare Section 114, Part A of the PAL-FASAP
2000-2005 CBA INVALID, NULL and VOID to the extent that it
discriminates against Petitioners; x x x x
From the petitioners' allegations and relief prayed for in
its petition, it is clear that the issue raised is whether Section
144, Part A of the PAL-FASAP CBA is unlawful and
unconstitutional. Here, the petitioners' primary relief in Civil
Case No. 04-886 is the annulment of Section 144, Part A of the
PAL-FASAP CBA, which allegedly discriminates against them
for being female flight attendants. The subject of litigation is
incapable of pecuniary estimation, exclusively cognizable by
the RTC, pursuant to Section 19 (1) of Batas Pambansa Blg.
129, as amended.[15] Being an ordinary civil action, the same is
beyond the jurisdiction of labor tribunals.
The said issue cannot be resolved solely by applying the
Labor Code. Rather, it requires the application of the
Constitution, labor statutes, law on contracts and the
Convention on the Elimination of All Forms of Discrimination
Against Women,[16] and the power to apply and interpret the
constitution and CEDAW is within the jurisdiction of trial courts,
a court of general jurisdiction. In Georg Grotjahn GMBH & Co.
v. Isnani,[17] this Court held that not every dispute between an
employer and employee involves matters that only labor
arbiters and the NLRC can resolve in the exercise of their
adjudicatory or quasi-judicial powers. The jurisdiction of labor
arbiters and the NLRC under Article 217 of the Labor Code is

limited to disputes arising from an employer-employee


relationship which can only be resolved by reference to the
Labor Code, other labor statutes, or their collective bargaining
agreement.
Not every controversy or money claim by an employee
against the employer or vice-versa is within the exclusive
jurisdiction of the labor arbiter. Actions between employees and
employer where the employer-employee relationship is merely
incidental and the cause of action precedes from a different
source of obligation is within the exclusive jurisdiction of the
regular court.[18] Here, the employer-employee relationship
between the parties is merely incidental and the cause of
action ultimately arose from different sources of obligation, i.e.,
the Constitution and CEDAW.
Thus, where the principal relief sought is to be resolved
not by reference to the Labor Code or other labor relations
statute or a collective bargaining agreement but by the general
civil law, the jurisdiction over the dispute belongs to the regular
courts of justice and not to the labor arbiter and the NLRC. In
such situations, resolution of the dispute requires expertise, not
in labor management relations nor in wage structures and
other terms and conditions of employment, but rather in the
application of the general civil law. Clearly, such claims fall
outside the area of competence or expertise ordinarily ascribed
to labor arbiters and the NLRC and the rationale for granting
jurisdiction over such claims to these agencies disappears.[19]
If We divest the regular courts of jurisdiction over the
case, then which tribunal or forum shall determine the
constitutionality or legality of the assailed CBA provision?
This Court holds that the grievance machinery and
voluntary arbitrators do not have the power to determine and
settle the issues at hand. They have no jurisdiction and
competence to decide constitutional issues relative to the
questioned compulsory retirement age. Their exercise of
jurisdiction is futile, as it is like vesting power to someone who
cannot wield it.
In Gonzales v. Climax Mining Ltd.,[20] this Court affirmed
the jurisdiction of courts over questions on constitutionality of
contracts, as the same involves the exercise of judicial power.
The Court said:
Whether the case involves void or voidable contracts is
still a judicial question. It may, in some instances, involve
questions of fact especially with regard to the determination of
the circumstances of the execution of the contracts. But the
resolution of the validity or voidness of the contracts remains a
legal or judicial question as it requires the exercise of judicial
function. It requires the ascertainment of what laws are
applicable to the dispute, the interpretation and application of
those laws, and the rendering of a judgment based thereon.
Clearly, the dispute is not a mining conflict. It is essentially
judicial. The complaint was not merely for the determination of
rights under the mining contracts since the very validity of
those contracts is put in issue.
In Saura v. Saura, Jr.,[21] this Court emphasized the
primacy of the regular court's judicial power enshrined in the
Constitution that is true that the trend is towards vesting
administrative bodies like the SEC with the power to adjudicate
matters coming under their particular specialization, to insure a
more knowledgeable solution of the problems submitted to
them. This would also relieve the regular courts of a
substantial number of cases that would otherwise swell their
already clogged dockets. But as expedient as this policy
may be, it should not deprive the courts of justice of their
power to decide ordinary cases in accordance with the
general laws that do not require any particular expertise or
training to interpret and apply. Otherwise, the creeping

take-over by the administrative agencies of the judicial


power vested in the courts would render the judiciary
virtually impotent in the discharge of the duties assigned
to it by the Constitution.
To be sure, in Rivera v. Espiritu,[22] after Philippine
Airlines (PAL) and PAL Employees Association (PALEA)
entered into an agreement, which includes the provision to
suspend the PAL-PALEA CBA for 10 years, several employees
questioned its validity via a petition for certiorari directly to the
Supreme Court. They said that the suspension was
unconstitutional and contrary to public policy. Petitioners
submit that the suspension was inordinately long, way beyond
the maximum statutory life of 5 years for a CBA provided for in
Article 253-A of the Labor Code. By agreeing to a 10-year
suspension, PALEA, in effect, abdicated the workers'
constitutional right to bargain for another CBA at the mandated
time.
In that case, this Court denied the petition for certiorari,
ruling that there is available to petitioners a plain, speedy, and
adequate remedy in the ordinary course of law. The Court said
that while the petition was denominated as one for certiorari
and prohibition, its object was actually the nullification of the
PAL-PALEA agreement. As such, petitioners' proper remedy is
an ordinary civil action for annulment of contract, an action
which properly falls under the jurisdiction of the regional trial
courts.
The change in the terms and conditions of employment,
should Section 144 of the CBA be held invalid, is but a
necessary and unavoidable consequence of the principal relief
sought, i.e., nullification of the alleged discriminatory provision
in the CBA. Thus, it does not necessarily follow that a
resolution of controversy that would bring about a change in
the terms and conditions of employment is a labor dispute,
cognizable by labor tribunals. It is unfair to preclude petitioners
from invoking the trial court's jurisdiction merely because it may
eventually result into a change of the terms and conditions of
employment. Along that line, the trial court is not asked to set
and fix the terms and conditions of employment, but is called
upon to determine whether CBA is consistent with the laws.
Although the CBA provides for a procedure for the
adjustment of grievances, such referral to the grievance
machinery and thereafter to voluntary arbitration would be
inappropriate to the petitioners, because the union and the
management have unanimously agreed to the terms of the
CBA and their interest is unified.
In Pantranco North Express, Inc., v. NLRC,[23] this Court
held that:
x x x Hence, only disputes involving the union and the
company shall be referred to the grievance machinery or
voluntary arbitrators.
In the instant case, both the union and the company are united
or have come to an agreement regarding the dismissal of
private respondents. No grievance between them exists which
could be brought to a grievance machinery. The problem or
dispute in the present case is between the union and the
company on the one hand and some union and non-union
members who were dismissed, on the other hand. The dispute
has to be settled before an impartial body. The grievance
machinery with members designated by the union and the
company cannot be expected to be impartial against the
dismissed employees. Due process demands that the
dismissed workers grievances be ventilated before an
impartial body. x x x .
Applying the same rationale to the case at bar, it cannot be
said that the "dispute" is between the union and petitioner
company because both have previously agreed upon the

provision on "compulsory retirement" as embodied in the CBA.


Also, it was only private respondent on his own who
questioned the compulsory retirement. x x x.
In the same vein, the dispute in the case at bar is not
between FASAP and respondent PAL, who have both
previously agreed upon the provision on the compulsory
retirement of female flight attendants as embodied in the CBA.
The dispute is between respondent PAL and several female
flight attendants who questioned the provision on compulsory
retirement of female flight attendants. Thus, applying the
principle in the aforementioned case cited, referral to the
grievance machinery and voluntary arbitration would not serve
the interest of the petitioners.
Besides, a referral of the case to the grievance
machinery and to the voluntary arbitrator under the CBA would
be futile because respondent already implemented Section
114, Part A of PAL-FASAP CBA when several of its female
flight attendants reached the compulsory retirement age of 55.
Further, FASAP, in a letter dated July 12, 2004,
addressed to PAL, submitted its association's bargaining
proposal for the remaining period of 2004-2005 of the PALFASAP CBA, which includes the renegotiation of the subject
Section 144. However, FASAP's attempt to change the
questioned provision was shallow and superficial, to say the
least, because it exerted no further efforts to pursue its
proposal. When petitioners in their individual capacities
questioned the legality of the compulsory retirement in the CBA
before the trial court, there was no showing that FASAP, as
their representative, endeavored to adjust, settle or negotiate
with PAL for the removal of the difference in compulsory age
retirement between its female and male flight attendants,
particularly those employed before November 22, 1996.
Without FASAP's active participation on behalf of its female
flight attendants, the utilization of the grievance machinery or
voluntary arbitration would be pointless.
The trial court in this case is not asked to interpret
Section 144, Part A of the PAL-FASAP CBA. Interpretation, as
defined in Black's Law Dictionary, is the art of or process of
discovering and ascertaining the meaning of a statute, will,
contract, or other written document. [24] The provision regarding
the compulsory retirement of flight attendants is not ambiguous
and does not require interpretation. Neither is there any
question regarding the implementation of the subject CBA
provision, because the manner of implementing the same is
clear in itself. The only controversy lies in its intrinsic validity.
Although it is a rule that a contract freely entered
between the parties should be respected, since a contract is
the law between the parties, said rule is not absolute.

[25]

In Pakistan International Airlines Corporation v. Ople,


this Court held that:

The principle of party autonomy in contracts is not, however,


an absolute principle. The rule in Article 1306, of our Civil Code
is that the contracting parties may establish such stipulations
as they may deem convenient, provided they are not contrary
to law, morals, good customs, public order or public policy.
Thus, counter-balancing the principle of autonomy of
contracting parties is the equally general rule that provisions of
applicable law, especially provisions relating to matters
affected with public policy, are deemed written into the
contract. Put a little differently, the governing principle is that
parties may not contract away applicable provisions of law
especially peremptory provisions dealing with matters heavily
impressed with public interest. The law relating to labor and
employment is clearly such an area and parties are not at
liberty to insulate themselves and their relationships from the

impact of labor laws and regulations by simply contracting with


each other.
Moreover, the relations between capital and labor are
not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good.x x
x [26] The supremacy of the law over contracts is explained by
the fact that labor contracts are not ordinary contracts; these
are imbued with public interest and therefore are subject to the
police power of the state. [27] It should not be taken to mean that
retirement provisions agreed upon in the CBA are absolutely
beyond the ambit of judicial review and nullification. A CBA, as
a labor contract, is not merely contractual in nature but
impressed with public interest. If the retirement provisions in
the CBA run contrary to law, public morals, or public policy,
such provisions may very well be voided.[28]
Finally, the issue in the petition for certiorari brought
before the CA by the respondent was the alleged exercise of
grave abuse of discretion of the RTC in taking cognizance of
the case for declaratory relief. When the CA annuled and set
aside the RTC's order, petitioners sought relief before this
Court through the instant petition for review under Rule 45. A
perusal of the petition before Us, petitioners pray for the
declaration of the alleged discriminatory provision in the CBA
against its female flight attendants.
This Court is not persuaded. The rule is settled that pure
questions of fact may not be the proper subject of an appeal by
certiorari under Rule 45 of the Revised Rules of Court. This
mode of appeal is generally limited only to questions of law
which must be distinctly set forth in the petition. The Supreme
Court is not a trier of facts.[29]
The question as to whether said Section 114, Part A of
the PAL-FASAP CBA is discriminatory or not is a question of
fact. This would require the presentation and reception of
evidence by the parties in order for the trial court to ascertain
the facts of the case and whether said provision violates the
Constitution, statutes and treaties. A full-blown trial is
necessary, which jurisdiction to hear the same is properly
lodged with the the RTC. Therefore, a remand of this case to
the RTC for the proper determination of the merits of the
petition for declaratory relief is just and proper.
WHEREFORE, the petition is PARTLY GRANTED. The
Decision and Resolution of the Court of Appeals, dated August
31, 2005 and March 7, 2006, respectively, in CA-G.R. SP. No.
86813 are REVERSED and SET ASIDE. The Regional Trial
Court of Makati City, Branch 147 is DIRECTED to continue the
proceedings in Civil Case No. 04-886 with deliberate dispatch.
SO ORDERED.
MA. ISABEL T. SANTOS, represented by ANTONIO P.
SANTOS,
Petitioner,
- versus SERVIER PHILIPPINES, INC. and NATIONAL LABOR
RELATIONS COMMISSION,
Respondents.
G.R. No. 166377
Promulgated:
November 28, 2008
Before this Court is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court, seeking to set aside the Court of
Appeals (CA) Decision,[1] dated August 12, 2004 and its
Resolution[2] dated December 17, 2004, in CA-G.R. SP No.
75706.
The facts, as culled from the records, are as follows:

Petitioner Ma. Isabel T. Santos was the Human Resource


Manager of respondent Servier Philippines, Inc. since 1991
until her termination from service in 1999. On March 26 and
27, 1998, petitioner attended a meeting[3] of all human
resource managers of respondent, held in Paris, France.
Since the last day of the meeting coincided with the graduation
of petitioners only child, she arranged for a European vacation
with her family right after the meeting. She, thus, filed a
vacation leave effective March 30, 1998.
On March 29, 1998, petitioner, together with her husband
Antonio P. Santos, her son, and some friends, had dinner at
Leon des Bruxelles, a Paris restaurant known for mussels[5] as
their specialty. While having dinner, petitioner complained of
stomach pain, then vomited. Eventually, she was brought to
the hospital known as Centre Chirurgical de LQuest where she
fell into coma for 21 days; and later stayed at the Intensive
Care Unit (ICU) for 52 days. The hospital found that the
probable cause of her sudden attack was alimentary allergy,
as she had recently ingested a meal of mussels which resulted
in a concomitant uticarial eruption.
During the time that petitioner was confined at the hospital, her
husband and son stayed with her in Paris. Petitioners
hospitalization expenses, as well as those of her husband and
son, were paid by respondent.[7]
In June 1998, petitioners attending physicians gave a
prognosis of the formers condition; and, with the consent of
her family, allowed her to go back to the Philippines for the
continuation of her medical treatment. She was then confined
at the St. Lukes Medical Center for rehabilitation.[8] During
the period of petitioners rehabilitation, respondent continued to
pay the formers salaries; and to assist her in paying her
hospital bills.
In a letter dated May 14, 1999, respondent informed the
petitioner that the former had requested the latters physician
to conduct a thorough physical and psychological evaluation of
her condition, to determine her fitness to resume her work at
the company. Petitioners physician concluded that the former
had not fully recovered mentally and physically. Hence,
respondent was constrained to terminate petitioners services
effective August 31, 1999.
As a consequence of petitioners termination from employment,
respondent offered a retirement package which consists of:

Retirement Plan Benefits:


1,063,841.76

Insurance Pension at P20,000.00/month


for 60 months from company-sponsored
group life policy:
1,200,000.00

Educational assistance:
465,000.00

Medical and Health Care:


200,000.00[10]

Of the promised retirement benefits amounting to


P1,063,841.76, only P701,454.89 was released to petitioners
husband, the balance[11] thereof was withheld allegedly for
taxation purposes. Respondent also failed to give the other
benefits listed above.[12]

Petitioner, represented by her husband, instituted the instant


case for unpaid salaries; unpaid separation pay; unpaid
balance of retirement package plus interest; insurance pension
for permanent disability; educational assistance for her son;
medical assistance; reimbursement of medical and
rehabilitation expenses; moral, exemplary, and actual
damages, plus attorneys fees. The case was docketed as
NLRC-NCR (SOUTH) Case No. 30-06-02520-01.
On September 28, 2001, Labor Arbiter Aliman D. Mangandog
rendered a Decision[13] dismissing petitioners complaint. The
Labor Arbiter stressed that respondent had been generous in
giving financial assistance to the petitioner.[14] He likewise
noted that there was a retirement plan for the benefit of the
employees. In denying petitioners claim for separation pay,
the Labor Arbiter ratiocinated that the same had already been
integrated in the retirement plan established by respondent.
Thus, petitioner could no longer collect separation pay over
and above her retirement benefits.[15] The arbiter refused to
rule on the legality of the deductions made by respondent from
petitioners total retirement benefits for taxation purposes, as
the issue was beyond the jurisdiction of the NLRC.[16] On the
matter of educational assistance, the Labor Arbiter found that
the same may be granted only upon the submission of a
certificate of enrollment.[17] Lastly, as to petitioners claim for
damages and attorneys fees, the Labor Arbiter denied the
same as the formers dismissal was not tainted with bad faith.
[18]
On appeal to the National Labor Relations Commission
(NLRC), the tribunal set aside the Labor Arbiters decision,
ruling that:
WHEREFORE, premises considered, Complainants appeal is
partly GRANTED. The Labor Arbiters decision in the aboveentitled case is hereby SET ASIDE. Respondent is ordered to
pay Complainants portion of her separation pay covering the
following: 1) P200,000.00 for medical and health care from
September 1999 to April 2001; and 2) P35,000.00 per year for
her sons high school (second year to fourth year) education
and P45,000.00 per semester for the latters four-year college
education, upon presentation of any applicable certificate of
enrollment.
SO ORDERED.[19]
The NLRC emphasized that petitioner was not retired from the
service pursuant to law, collective bargaining agreement (CBA)
or other employment contract; rather, she was dismissed from
employment due to a disease/disability under Article 284[20] of
the Labor Code.[21]
In view of her non-entitlement to
retirement benefits, the amounts received by petitioner should
then be treated as her separation pay.[22] Though not legally
obliged to give the other benefits, i.e., educational assistance,
respondent volunteered to grant them, for humanitarian
consideration. The NLRC therefore ordered the payment of the
other benefits promised by the respondent.[23] Lastly, it
sustained the denial of petitioners claim for damages for the
latters failure to substantiate the same.[24]
Unsatisfied, petitioner elevated the matter to the Court of
Appeals which affirmed the NLRC decision.[25]
Hence, the instant petition.
At the outset, the Court notes that initially, petitioner
raised the issue of whether she was entitled to separation pay,
retirement benefits, and damages. In support of her claim for
separation pay, she cited Article 284 of the Labor Code, as
amended. However, in coming to this Court via a petition for
review on certiorari, she abandoned her original position and
alleged that she was, in fact, not dismissed from employment
based on the above provision. She argued that her situation
could not be characterized as a disease; rather, she became

disabled. In short, in her petition before us, she now changes


her theory by saying that she is not entitled to separation pay
but to retirement pay pursuant to Section 4,[26] Article V of the
Retirement Plan, on disability retirement. She, thus, prayed for
the full payment of her retirement benefits by giving back to her
the amount deducted for taxation purposes.
In our Resolution[27] dated November 23, 2005
requiring the parties to submit their respective memoranda, we
specifically stated:
No new issues may be raised by a party in the
Memorandum and the issues raised in the pleadings but not
included in the Memorandum shall be deemed waived or
abandoned.
Being summations of the parties previous pleadings,
the Court may consider the Memoranda alone in deciding or
resolving this petition.
Pursuant to the above resolution, any argument raised
in her petition, but not raised in her Memorandum,[28] is
deemed abandoned.[29] Hence, the only issue proper for
determination is the propriety of deducting P362,386.87 from
her total benefits, for taxation purposes. Nevertheless, in order
to resolve the legality of the deduction, it is imperative that we
settle, once and for all, the ground relied upon by respondent
in terminating the services of the petitioner, as well as the
nature of the benefits given to her after such termination. Only
then can we decide whether the amount deducted by the
respondent should be paid to the petitioner.
Respondent dismissed the petitioner from her employment
based on Article 284 of the Labor Code, as amended, which
reads:
Art. 284. DISEASE AS GROUND FOR TERMINATION
An employer may terminate the services of an
employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law
or is prejudicial to his health as well as to the health of his coemployees: Provided, That he is paid separation pay
equivalent to at least one (1) month salary or to one-half (1/2)
month salary for every year of service, whichever is greater, a
fraction of at least six (6) months being considered as one (1)
whole year.
As she was dismissed on the abovementioned ground, the law
gives the petitioner the right to demand separation pay.
However, respondent established a retirement plan in favor of
all its employees which specifically provides for disability
retirement, to wit:
Sec. 4. DISABILITY RETIREMENT
In the event that a Member is retired by the Company
due to permanent total incapacity or disability, as determined
by a competent physician appointed by the Company, his
disability retirement benefit shall be the Full Members Account
Balance determined as of the last valuation date. x x x.[30]
On the basis of the above-mentioned retirement plan,
respondent offered the petitioner a retirement package which
consists of retirement plan benefits, insurance pension, and
educational assistance.[31] The amount of P1,063,841.76
represented the disability retirement benefit provided for in the
plan; while the insurance pension was to be paid by their
insurer; and the educational assistance was voluntarily
undertaken by the respondent as a gesture of compassion to
the petitioner.
We have declared in Aquino v. National Labor Relations
Commission[33] that the receipt of retirement benefits does not

bar the retiree from receiving separation pay. Separation pay


is a statutory right designed to provide the employee with the
wherewithal during the period that he/she is looking for another
employment. On the other hand, retirement benefits are
intended to help the employee enjoy the remaining years of his
life, lessening the burden of worrying about his financial
support, and are a form of reward for his loyalty and service to
the employer.[34] Hence, they are not mutually exclusive.
However, this is only true if there is no specific prohibition
against the payment of both benefits in the retirement plan
and/or in the Collective Bargaining Agreement (CBA).[35]

their retirement benefits. The retirees thus lodged a complaint


with the NLRC questioning said withholding. They averred that
their retirement benefits were exempt from income tax; and
IBC had no authority to withhold their salary differentials. The
Labor Arbiter took cognizance of the case, and this Court made
a definitive ruling that retirement benefits are exempt from
income tax, provided that certain requirements are met.
Nothing, therefore, prevents us from deciding this main issue
of whether the retirement benefits are taxable.
We answer in the affirmative.

In the instant case, the Retirement Plan bars the


petitioner from claiming additional benefits on top of that
provided for in the Plan. Section 2, Article XII of the
Retirement Plan provides:

Section 32 (B) (6) (a) of the New National Internal Revenue


Code (NIRC) provides for the exclusion of retirement benefits
from gross income, thus:

Section 2. NO DUPLICATION OF BENEFITS

(6) Retirement Benefits, Pensions, Gratuities, etc.

No other benefits other than those provided under this


Plan shall be payable from the Fund. Further, in the event the
Member receives benefits under the Plan, he shall be
precluded from receiving any other benefits under the Labor
Code or under any present or future legislation under any other
contract or Collective Bargaining Agreement with the
Company.

a) Retirement benefits received under Republic Act 7641 and


those received by officials and employees of private firms,
whether individual or corporate, in accordance with a
reasonable private benefit plan maintained by the employer:
Provided, That the retiring official or employee has been in the
service of the same employer for at least ten (10) years and is
not less than fifty (50) years of age at the time of his
retirement: Provided further, That the benefits granted under
this subparagraph shall be availed of by an official or employee
only once. x x x.

There being such a provision, as held in Cruz v. Philippine


Global Communications, Inc.,[37] petitioner is entitled only to
either the separation pay under the law or retirement benefits
under the Plan, and not both.
Clearly, the benefits received by petitioner from the
respondent represent her retirement benefits under the Plan.
The question that now confronts us is whether these benefits
are taxable. If so, respondent correctly made the deduction for
tax purposes. Otherwise, the deduction was illegal and
respondent is still liable for the completion of petitioners
retirement benefits.
Respondent argues that the legality of the deduction
from petitioners total benefits cannot be taken cognizance of
by this Court since the issue was not raised during the early
stage of the proceedings.[38]
We do not agree.
Records reveal that as early as in petitioners position
paper filed with the Labor Arbiter, she already raised the
legality of said deduction, albeit designated as unpaid balance
of the retirement package. Petitioner specifically averred that
P362,386.87 was not given to her by respondent as it was
allegedly a part of the formers taxable income.[39] This is
likewise evident in the Labor Arbiter and the NLRCs decisions
although they ruled that the issue was beyond the tribunals
jurisdiction. They even suggested that petitioners claim for
illegal deduction could be addressed by filing a tax refund with
the Bureau of Internal Revenue.[40]
Contrary to the Labor Arbiter and NLRCs conclusions,
petitioners claim for illegal deduction falls within the tribunals
jurisdiction. It is noteworthy that petitioner demanded the
completion of her retirement benefits, including the amount
withheld by respondent for taxation purposes. The issue of
deduction for tax purposes is intertwined with the main issue of
whether or not petitioners benefits have been fully given her.
It is, therefore, a money claim arising from the employeremployee relationship, which clearly falls within the
jurisdiction[41] of the Labor Arbiter and the NLRC.
This is not the first time that the labor tribunal is faced with the
issue of illegal deduction. In Intercontinental Broadcasting
Corporation (IBC) v. Amarilla,[42] IBC withheld the salary
differentials due its retired employees to offset the tax due on

Thus, for the retirement benefits to be exempt from the


withholding tax, the taxpayer is burdened to prove the
concurrence of the following elements: (1) a reasonable private
benefit plan is maintained by the employer; (2) the retiring
official or employee has been in the service of the same
employer for at least ten (10) years; (3) the retiring official or
employee is not less than fifty (50) years of age at the time of
his retirement; and (4) the benefit had been availed of only
once.[43]
As discussed above, petitioner was qualified for disability
retirement. At the time of such retirement, petitioner was only
41 years of age; and had been in the service for more or less
eight (8) years. As such, the above provision is not applicable
for failure to comply with the age and length of service
requirements. Therefore, respondent cannot be faulted for
deducting from petitioners total retirement benefits the amount
of P362,386.87, for taxation purposes.
WHEREFORE, the petition is DENIED for lack of merit. The
Court of Appeals Decision dated August 12, 2004 and its
Resolution dated December 17, 2004, in CA-G.R. SP No.
75706 are AFFIRMED.
SO ORDERED.
G.R. No. 71695-703 May 20, 1986
ASIAN FOOTWEAR & RUBBER CORPORATION, petitioner,
vs.
ANTONIO P. SORIANO, in his capacity as Deputy Sheriff of
the Arbitration Branch, National Capital Region, National
Labor Relations Commission, HON. BENIGNO L. VIVAR,
JR., in his capacity as Executive Labor Arbiter, Arbitration
Branch, National Capital Region, National Labor Relations
Commission, and JACINTO RUBBER FREE WORKERS
ASSOCIATION, respondents.
This is a petition to review the actuations of respondent
Benigno L. Vivar, Jr., in his capacity as Executive Labor Arbiter
of the National Capital Region. It is alleged that he "acted
without jurisdiction or with grave abuse of discretion amounting
to lack or excess of jurisdiction in imprudently and
indiscriminately enforcing the aforesaid Alias Writ of Execution

against the petitioner who has no obligation whatsoever to the


private respondent." (Rollo, p. 13.) We issued a temporary
restraining order on September 25, 1985, which must now be
made permanent because the petition is impressed with merit.
Asian Footwear and Rubber Corporation (ASIAN), the
petitioner, is engaged in the manufacture of footwear. Its work
force consists of about 500 persons.
On November 10, 1980, ASIAN bought from Jacinto Rubber
and Plastics Co., Inc. (JACINTO) eight (8) parcels of land
together with the permanent improvements thereon. The
purchase price was P450.00 per square meter plus
assumption by ASIAN of JACINTO's obligation to the Philippine
Banking Corporation in the amount of P2,284,932.11. (Annex
A.) By November 28, 1980, ASIAN had obtained transfer
certificates of title to the lands which it had bought.
The petition recites that it had "been operating business
operations peacefully until May 16, 1985, when surprisingly,
respondent Deputy Sheriff Antonio P. Soriano, together with
some policemen and other persons went to the premises of
petitioner Asian Footwear & Rubber Corporation to enforce an
Alias Writ of Execution issued by the respondent Hon. Benigno
L. Vivar, Jr., Executive Labor Arbiter, in NLRC-NCR case No.
AB-9-8414-80; 8415-80; AB-12-9286-80; 928780, 9288-80;
9289-80;
9290-80;
9291-80;
and
AB-9-10596-80,
entitled 'Jacinto Rubber Free Workers Association-vs.-Jacinto
Rubber & Plastics Co., Inc.,' carbon copy of said Alias Writ of
Execution is hereto attached as Annex F." (Rollo, p. 5.) Annex
F is a writ of execution issued by respondent Vivar on May 8,
1985, commanding the Acting Sheriff of the National Labor
Relations Commission, National Capital Region, "to proceed to
the premises of respondent Jacinto Rubber and Plastics
Company, Inc., located at 5th Avenue, Grace Park, Caloocan
City or c/o Hermogenes Jacinto, Jr. of No. 34 Valle Verde Gate
2, Pasig, Metro Manila, and collect the amount of seven
hundred sixty five thousand nine hundred ninety eight pesos
and ninety nine centavos (P 765,998.99) representing
complainants' gratuity pay. If you fail to collect the said amount
in cash, you may cause the full satisfaction of this writ out of
the movable goods and chattel, or in the absence thereof, the
immovable properties of the respondent not exempt from
execution." (Rollo, p. 54.)
ASIAN resisted the execution on the ground that the properties
sought to be levied were its own and not JACINTO'S. The
sheriff reported ASIAN's posture to Vivar and in a conference
with ASIAN he verbally intimated that ASIAN was a purchaser
in bad faith so that the writ of execution could be enforced
against it. Hence, the instant petition.
The record shows that when ASIAN bought the JACINTO
properties, the latter had already stopped its business
operations. In fact, it had applied with the Ministry of Labor for
clearance for a total shotdown. Moreover, at the time of the
sale the only lien annotated on the certificates of title was the
mortgage in favor of the Philippine Banking Corporation
executed by JACINTO. Finally, there is nothing to show that
ASIAN is JACINTO by another name.
In the light of the foregoing, if there is nonetheless suspicion
that the sale of the JACINTO properties to ASIAN was not in
good faith, i.e. was made in fraud of creditors, a government
functionary like the respondent labor arbiter is incompetent to
make a determination. The task is judicial and the proceedings
must be adversary.
WHEREFORE, the petition is granted and the respondents are
directed to desist from enforcing the alias writ of execution
against the properties of the petitioner. Costs against the
private respondents.
SO ORDERED.

[G.R.

No.

L-75837.

December

11,

1987.]

DOMINADOR BASAYA, JR., FLORENCIO ABELLA,


DOMINADOR ORDINEZA, FLORO ROSALEJOS, PABLO
PADILLA, ELVIN ELISORIO, PATRICIO GUTIB, JOSE
LEOPOLDO, HONORATO SININA, EFREMIO CATUBAY,
RAUL DE REAL, VIRGINIO ALEGRIA, EDUARDO BULAK,
BALTAZAR DACARA, DIOSDADO REAL, MICHAEL
DUMALAGAN, RAMON FLORES, WILFREDO BACATAN,
PEDRO
CANAZARES,
LUCIFERO
PESQUERA,
FLORENTINO DURAN, CATALINO TIENGCO, EDUARDO
CABRERA, and RENATO ANTONINO, Petitioners, v. HON.
FRANCIS MILITANTE, President Judge, Regional Trial
Court, 7th Judicial Region, Branch XII, Cebu City, and
PHILIPPINE TUNA VENTURES, INC., Respondents.
In this Petition for Review on Certiorari, petitioners challenge
the assumption of jurisdiction by Respondent Judge of the
Regional Trial Court of Cebu City, Branch XII, over a complaint
for Replevin filed by private respondent, Philippine Tuna
Ventures, Inc. against petitioners, upon the allegation that it is
intertwined with a labor dispute so that exclusive jurisdiction
belongs to the National Labor Relations Commission (NLRC).
Respondent Philippine Tuna Ventures, Inc. (TUNA, Inc., for
short), is the charterer of the fishing vessel, the F/B Caribbean
(hereinafter referred to simply as the Vessel). TUNA, Inc. has
been operating this Vessel in its deep-sea fishing business
since 1977 together with eight (8) other fishing boats.
Sometime in 1985, TUNA, Inc. transferred the operation of the
Vessel to a sister corporation, the Eastship Fishing Corporation
(Eastship, for brevity). Petitioners, twenty-four (24) in all,
constitute the crew of the Vessel, with petitioner Dominador
Basaya,
Jr.,
as
its
Captain.
On 9 July 1986, TUNA, Inc. sought the remedy of Replevin
(the Replevin Case) against petitioners before the Regional
Trial Court presided over by Respondent Judge, praying that
petitioners (defendants in that case) be ordered to deliver to it
the possession of its Vessel, which petitioners were allegedly
possessing in violation of its rights.chanrobles.com.ph : virtual
law
library
In their defense below petitioners maintained that they were in
possession of the Vessel as its crew; that their possession is
"an extension of the possession of the plaintiff over the Vessel"
and that to deprive them of its possession by a Writ of Replevin
would amount to an illegal termination of their employment.
On 10 July 1986, the Writ of Replevin was ordered issued
upon TUNA, Inc.s filing of a bond in the amount of P2M. The
Sheriff served the Writ on petitioners on 12 July 1986 and they
disembarked from the Vessel in the evening of that day.
However, after about an hour, they re-embarked and re-took
possession.
On 29 August 1986 judgment was rendered in the Replevin
Case declaring TUNA, Inc. to have a better right to the
possession of the Vessel and ordering petitioners to
immediately
deliver
possession
thereof.
On 15 September 1986 petitioners resorted to this appeal
by certiorari on a question of law with a prayer for a restraining
order.
On 17 September 1986 we issued a Temporary Restraining
Order enjoining respondents from enforcing the judgment in
the Replevin Case or any Writ of Execution issued therein.
The only issue for resolution is whether or not the Trial Court
had jurisdiction to hear and decide the Replevin Case.

Said Court upheld its jurisdiction and ruled, as heretofore


stated, that the charterer, TUNA, Inc., has a better right to the
possession of the Vessel and ordered petitioners to
immediately
deliver
possession.
In this Petition, petitioners argue that the Trial Court erred
in:jgc:chanrobles.com.ph
"I. . . . assuming a split jurisdiction over the civil rights of the
respondent corporation to possess the vessel F/B Caribbean
and oust the petitioners-appellants separately from the labor
rights of the petitioners-appellants to be protected from their
sudden arbitrary ouster from their positions in the said vessel
as
crew
members
and
officers
thereof.
"II. . . . holding that the legal responsibility of the respondent,
Philippine Tuna Ventures, Inc. as the employer of the
petitioners-appellants has been transferred to Eastship Fishing
Corporation.
"III. . . . assuming jurisdiction over this case which involves the
labor violation of unfair labor practice committed by the
respondent Phil. Tuna Ventures, Inc. and which, therefore,
appertains to the exclusive jurisdiction of the National Labor
Relations
Commission.
It appears that on 26 June 1986, petitioners had presented to
the management of TUNA, Inc., a set of labor demands; that
on 28 June 1986 they had informed Eastship that they would
not move the Vessel to any destination until their demands
were met; that on 2 July 1986 TUNA, Inc., had applied for a
"shut-down" or closure allegedly due to business losses; that
on 8 July 1986 Eastship filed with the National Labor Relations
Commission, Regional Office No. 7, Cebu City, a Petition to
declare petitioners strike illegal; and that on 8 August 1986,
petitioners instituted a Complaint for Unfair Labor Practice
against TUNA, Inc. and Eastship. Incidentally, petitioners
allege
that
they
are
not
on
strike.
Developments subsequent to the judgment in the Replevin
Case also disclose that on 18 November 1986, in NLRC
Injunction Case No. 1270 entitled Eastship Fishing Corporation
v. Concerned Seamen of the Philippines, the NLRC issued an
Injunction Writ enjoining petitioners from blocking the free
ingress and egress to the Vessel and seven (7) other fishing
boats and to disembark from and vacate the Vessel without
prejudice to the exercise of their right to lawful and peaceful
picketing; that on 28 November 1986, the NLRC Sheriffs
attempted to enforce the Injunction but petitioners refused to
comply thereby compelling the NLRC on the same date to
seek the assistance of the Philippine Constabulary and the
Philippine Coast Guard; that it was only on 11 December 1986,
after a series of refusals, that petitioners left the Vessel
peacefully only to retake possession on 16 December 1986.
An ocular inspection on 10 January 1987 by Eastship
disclosed that petitioners were still in possession.cralawnad
Upon the facts and issue involved, we uphold the jurisdiction of
the
Civil
Court.
Replevin is a possessory action, the gist of which is the right of
possession in the plaintiff. The primary relief sought therein is
the return of the property in specie wrongfully detained by
another person. It is an ordinary statutory proceeding to
adjudicate rights to the title or possession of personal property
(Francisco, The Revised Rules of Court, Provisional
Remedies, 1985, p. 386, citing 46 Am. Jur. 7). The question of
whether or not a party has the right of possession over the
property involved and if so, whether or not the adverse party
has wrongfully taken and detained said property as to require
its return to plaintiff, is outside the pale of competence of a

labor tribunal; it is beyond the field of specialization of Labor


Arbiters.
The Trial Court, therefore, rightfully assumed jurisdiction over
the Replevin Case and aptly held that, as charterer of the
Vessel, TUNA, Inc. has the better right of possession and that
petitioners alleged right to possess the Vessel as the crew
thereof is not in any way superior to the right of TUNA, Inc. as
such
charterer
or
lessee.
The labor dispute involved is not intertwined with the issue in
the Replevin Case. The respective issues raised in each forum
can be resolved independently of the other. In fact, on 18
November 1986, the NLRC in the case before it had issued an
Injunctive Writ enjoining petitioners from blocking the free
ingress and egress to the Vessel and ordering petitioners to
disembark and vacate. That aspect of the controversy is
properly settled under the Labor Code. So also with petitioners
right to picket. But the determination of the question of who has
the better right to take possession of the Vessel and whether
petitioners can deprive the Charterer, as the legal possessor of
the Vessel, of that right to possess is addressed to the
competence
of
Civil
Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but
defining avenues of jurisdiction as laid down by pertinent laws.
The Court takes note that petitioners have defied not only the
Writ of Replevin issued by the Civil Court but also the
Injunction ordered by the NLRC. Petitioners must be reminded
that rights are not their exclusive prerogative but are enjoyed
by others as well. They must yield to the rule of law and not
rely on the law of force, specially where adjudicative bodies
and Courts have ruled upon the merits of their claims although
adversely
to
them.
WHEREFORE, the judgment under review is hereby
AFFIRMED and petitioners are hereby ORDERED to
disembark from the F/B Caribbean and to turn over possession
of said vessel to private respondent Philippine Tuna Ventures,
Inc., without prejudice to the continued prosecution of their
demands for labor benefits before the labor tribunal, which will
surely be protective of their just deserts. The Temporary
Restraining Order issued by this Court on 17 September 1986
is hereby LIFTED. Treble costs against petitioners.chanrobles
virtual
lawlibrary
This

judgment

SO ORDERED.

is

immediately

executory.

G.R. No. 162775

October 27, 2006

INTERCONTINENTAL BROADCASTING CORPORATION (IBC), represented by ATTY. RENATOQ. BELLO, in his capacity as CEO
and
President, petitioner,
vs.
NOEMI B. AMARILLA, CORSINI R. LAGAHIT, ANATOLIO G. OTADOY, and CANDIDO C. QUIONES, JR.,respondents.
Before us is a Petition for Review on Certiorari filed by petitioner Intercontinental Broadcasting Corporation (IBC) assailing the
Decision1 of the Court of Appeals in CA-G.R. SP No. 72414, which in turn affirmed the Decision 2 of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-000660-2000.
On various dates, petitioner employed the following persons at its Cebu station: Candido C. Quiones, Jr.; on February 1,
1975;3 Corsini R. Lagahit, as Studio Technician, also on February 1, 1975; 4 Anatolio G. Otadoy, as Collector, on April 1, 1975; 5 and
Noemi Amarilla, as Traffic Clerk, on July 1, 1975.6 On March 1, 1986, the government sequestered the station, including its properties,
funds and other assets, and took over its management and operations from its owner, Roberto Benedicto. 7 However, in December
1986, the government and Benedicto entered into a temporary agreement under which the latter would retain its management and
operation. On November 3, 1990, the Presidential Commission on Good Government (PCGG) and Benedicto executed a Compromise
Agreement,8 where Benedicto transferred and assigned all his rights, shares and interests in petitioner station to the government. The
PCGG submitted the Agreement to the Sandiganbayan in Civil Case No. 0034 entitled "Republic of the Philippines v. Roberto S.
Benedicto, et al."9
In the meantime, the four (4) employees retired from the company and received, on staggered basis, their retirement benefits under the
1993 Collective Bargaining Agreement (CBA) between petitioner and the bargaining unit of its employees.

Name of Employee

Date of Retirement

Retirement Benefit

Candido C. Quiones, Jr.

October 16, 1995

P 766,532.97

Noemi B. Amarilla

April 16, 1998

P 1,134,239.47

Corsini R. Lagahit

April 16, 1998

P 1,298,879.50

Anatolio G. Otadoy

February 29, 1996

P 751,914.30

In the meantime, a P1,500.00 salary increase was given to all employees of the company, current and retired, effective July 1994.
However, when the four retirees demanded theirs, petitioner refused and instead informed them via a letter that their differentials would
be used to offset the tax due on their retirement benefits in accordance with the National Internal Revenue Code (NIRC). Amarilla was
informed that the P71,480.00 of the amount due to her would be used to offset her tax liability of P340,641.42.10 Otadoy was also
informed in a letter dated July 5, 1999, that his salary differential of P170,250.61 would be used to pay his tax liability which amounted
to P127,987.57. Since no tax liability was withheld from his retirement benefits, he even owed the company P17,727.26 after the
offsetting. Quiones was informed that he should have retired compulsorily in 1992 at age 55 as provided in the CBA, and that since he
was already 58 when he retired, he was no longer entitled to receive salary increases from 1992 to 1995. Consequently, he was
overpaid by P137,932.22 for the "extension" of his employment from 1992 to 1995, which amount he was obliged to return to the
company. In any event, his claim for salary differentials had expired pursuant to Article 291 of the Labor Code of the
Philippines.11 Lagahits claim for salary differential of P73,165.23 was rejected by petitioner in a letter dated July 6, 1999, on the ground
that he had a tax liability of P396,619.03; since the amount would be used as partial payment for his tax liability, he still owed the
company P323,453.80.12
The four (4) retirees filed separate complaints13 against IBC TV-13 Cebu and Station Manager Louella F. Cabaero for unfair labor
practice and non-payment of backwages before the NLRC, Regional Arbitration Branch VII. As all of the complainants had the same
causes of action, their complaints were docketed as NLRC RAB-VII Case No. 10-1625-99.
The complainants averred that their retirement benefits are exempt from income tax under Article 32 of the NIRC. Sections 28 and 72 of
the NIRC, which petitioner relied upon in withholding their differentials, do not apply to them since these provisions deal with the
applicable income tax rates on foreign corporations and suits to recover taxes based on false or fraudulent returns. They pointed out
that, under Article VIII of the CBA, only those employees who reached the age of 60 were considered retired, and those under 60 had
the option to retire, like Quiones and Otadoy who retired at ages 58 and 51, respectively. They prayed that they be paid their salary
differentials, as follows:

Otadoy

P 170,250.61

Quiones

P 170,250.61

Lagahit

P 73,165.23

Amarilla

P 71,480.0014

For its part, petitioner averred that under Section 21 of the NIRC, the retirement benefits received by employees from their employers
constitute taxable income. While retirement benefits are exempt from taxes under Section 28(b) of said Code, the law requires that
such benefits received should be in accord with a reasonable retirement plan duly registered with the Bureau of Internal Revenue (BIR)
after compliance with the requirements therein enumerated. Since its retirement plan in the 1993 CBA was not approved by the BIR,
complainants were liable for income tax on their retirement benefits. Petitioner claimed that it was mandated to withhold the income tax
due from the retirement benefits of said complainants. It was not estopped from correcting the mistakes of its former officers. Under the
law, complainants are obliged to return what had been mistakenly delivered to them.15
In reply, complainants averred that the claims for the retirement salary differentials of Quiones and Otadoy had not prescribed
because the said CBA was implemented only in 1997. They pointed out that they filed their claims with petitioner on April 3, 1999. They
maintained that they availed of the optional retirement because of petitioners inducement that there would be no tax deductions.
Petitioner IBC did not commit any mistake in not withholding the taxes due on their retirement benefits as shown by the fact that the
PCCG, the Commission on Audit (COA) and the Bureau of Internal Revenue (BIR) did not even require them to explain such mistake.
They pointed out that petitioner paid their retirement benefits on a staggered basis, and nonetheless failed to deduct any amount as
taxes.16
Petitioner countered that the retirement benefits received by the complainants were based on the CBA between it and its bargaining
units. Under Sections 72 and 73 of the NIRC, it is obliged to deduct and withhold taxes determined in accordance with the rules and
regulations to be prepared by the Secretary of Finance. It was its duty to withhold the taxes on complainants retirement benefits,
otherwise, it would be held civilly and criminally liable under Sections 251, 254 and 255 of the NIRC.
On February 14, 2000, the Labor Arbiter rendered judgment in favor of the retirees. The fallo of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Intercontinental Broadcasting
Corporation (IBC TV-13 Cebu) to pay the complainants Noemi Amarilla and Corsini Lagahit as follows:

1. Noemi E. Amarilla

P26,423.00

2. Corsino R. Lagahit

P26,423.00

Total

P52,846.00

The claim of complainants Anatolio Otadoy and Candido Quiones and the case against respondent Louella F. Cabaero are
dismissed for lack of merit.
SO ORDERED.17
The Labor Arbiter ruled that the claims of Quiones and Otadoy had prescribed. The retirement benefits of complainants Lagahit and
Amarilla, on the other hand, were exempt from income tax under Section 28(b) of the NIRC. However, the differentials due to the two
complainants were computed three years backwards due to the law on prescription.
Petitioner appealed the decision of the Labor Arbiter to the NLRC, arguing that the retirement benefits of Amarilla and Lagahit are not
tax exempt. It insisted that the Labor Arbiter erred in declaring as unlawful the act of withholding the employees salary differentials as
payment for the latters tax liabilities.
Otadoy and Quiones no longer appealed the decision.
On May 21, 2002, the NLRC rendered its decision dismissing the appeal and affirming that of the Labor Arbiter. The fallo of the decision
reads:
WHEREFORE, the Decision of the Labor Arbiter dated February 14, 2000 is hereby AFFIRMED. Respondents appeal is
dismissed for lack of merit.
SO ORDERED.18
The NLRC held that the benefits of the retirement plan under the CBAs between petitioner and its union members were subject to tax
as the scheme was not approved by the BIR. However, it had also been the practice of petitioner to give retiring employees their
retirement pay without tax deductions and there was no justifiable reason for the respondent to deviate from such practice. The NLRC
concluded that petitioner was deemed to have assumed the tax liabilities of the complainants on their retirement benefits, hence, had
no right to deduct taxes from their salary differentials. The NLRC thus ratiocinated:
The sole concern of the law is that tax shall be imposed on retirement benefits. The employer assuming the payment of tax on
behalf of the retiring employee to make the retirement attractive, does not contravene the tax law, because it is not contrary to
the law or public policy, morals and good customs. It is significant to note that respondent did not refute the complainants
allegations in their Position Papers, to wit:
"Complainants Amarilla and Lagahit availed themselves of the offer of the respondent company when they were
induced and were made to believe that respondent companys employees who avail of such early retirement can
avail of that exemption on their retirement benefits. Were it not for the offer of no tax liability, complainants would not
have availed of such optional or early retirement."

It is worthy to note that the retirement benefits of the complainants did not suffer any tax deductions when they were given at
the first instance. It is only after they claimed the salary differentials when the respondent withheld the backwages for the
payment of tax liabilities.
"From the facts it can be shown that the disbursement of retirement benefits of the complainants were made on
staggered basis, three (3) and four (4) times. So, if the company, as it claimed, is really vent on deducting the alleged
taxes due the complainants, they have three or four opportunities to do so."
The respondents history reveals that it was paying retirement pays to its retiring employees without tax deductions as a matter
of practice. There is no justifiable reason for the respondent to deviate from that practice now. It is deemed to have assumed
the tax liabilities of the complainants.19
Aggrieved, petitioner elevated the decision before the CA on the following grounds:
1. THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION TANTAMOUNT TO LACK OF JURISDICTION WHEN IT
RULED THAT WHILE PETITIONER MAY NOT HAVE A RETIREMENT PLAN WHOSE BENEFITS THEREFROM ARE
EXEMPTED FROM TAXES UNDER SECTION 28 OF THE NIRC, BY VIRTUE OF ITS PREVIOUS PRACTICE THAT IT
ASSUMED THE PAYMENT OF TAX LIABILITES, IT IS DEEMED TO HAVE ANSWERED FOR THE TAX LIABILITES OF THE
COMPLAINANTS, WHICH ULTIMATE CONSEQUENCE, IF NOT RECTIFIED, SHALL CAUSE IRREPARABLE DAMAGE AND
INJURY TO THE PETITIONER CORPORATION.
2. THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION TANTAMOUNT TO LACK OR EXCESS OF
JURISDICTION IN AFFIRMING THE DECISION RENDERED BY THE LABOR ARBITER ON FEBRUARY 14, 2000 WHICH
GRANTED RETIREMENT DIFFERENTIAL TO RESPONDENTS AMARILLA AND LAGAHIT AS THESE ARE CONTRARY TO
THE FACTS AND RETIREMENT LAWS PARTICULARLY THE PROVISIONS EMBODIED IN SECTIONS 21, 27, 28 OF THE
NATIONAL INTERNAL REVENUE CODE AND R.A. 7641 IMPLEMENTING ARTICLE 287 OF THE LABOR CODE AS WELL
AS SECTION 6 OF THE IMPLEMENTING RULES OF RA 7641.
3. CONSEQUENT TO NLRCS RULING GRANTING RETIREMENT DIFFERENTIAL TO RESPONDENTS AMARILLA AND
LAGAHIT, THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION TANTAMOUNT TO LACK OR EXCESS OF
JURISDICTION IN HOLDING THAT PETITIONERS ACT OF WITHHOLDING COMPLAINANTS BACKWAGES AS PAYMENT
OF THEIR TAX LIABILITIES IS ILLEGAL.20
On December 3, 2003, the CA rendered judgment dismissing the petition for lack of merit.
The appellate court declared that the salary differentials of the respondents are part of their taxable gross income, considering
that the CBA was not approved, much less submitted to the BIR. However, petitioner could not withhold the corresponding tax
liabilities of respondents due to the then existing CBA, providing that such retirement benefits would not be subjected to any
tax deduction, and that any such taxes would be for its account. The appellate court relied on the allegations of respondents in
their Position Paper before the Labor Arbiter which petitioner failed to refute.
Petitioner filed a motion for reconsideration, which the appellate court denied. Hence, the present petition, where petitioner
avers that:
WITH ALL DUE RESPECT, THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT RULED THAT SINCE
IT HAS BEEN THE PURPORTED PRACTICE OF PETITIONER IBC-13 NOT TO WITHHOLD TAXES DUE ON THE SALARY
DIFFERENTIAL AND THE RETIREMENT BENEFITS, PETITIONER IBC-13 NECESSARILY ASSUMED PAYMENT OF THE
TAXES AND COULD NOT THEREFORE WITHHOLD THE SAME NOTWITHSTANDING THE SUBSEQUENT DISCOVERY
THAT THE FAILURE TO WITHHOLD THE TAXES WAS DONE DUE TO THE OMISSION, MISTAKE, FRAUD OR
IRREGULARITY COMMITTED BY PREVIOUS MANAGEMENT.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS GLOSSED OVER THE FACT AND COMMITTED
REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION
DATED MAY 21, 2002 WHICH ORDERED PETITIONER IBC-13 TO PAY RETIREMENT DIFFERENTIAL TO RESPONDENTS
AMARILLA AND LAGAHIT AS THESE ARE CONTRARY TO THE FACTS AND RETIREMENT LAWS PARTICULARLY THE
PROVISIONS EMBODIED IN SECTIONS 21, 27, 28 OF THE NATIONAL INTERNAL REVENUE CODE (AS AMENDED BY
PRESIDENTIAL DECREE NO. 1994)21
Petitioner insists that respondents are liable for taxes on their retirement benefits because the retirement plan under the CBA was not
approved by the BIR. It insisted that it failed to comply with the requisites of Section 32 of the NIRC and Rule II, Section 6 of the Rules
Implementing the New Retirement Law which provides that retirement pay shall be tax exempt upon compliance with the requirements
under Section 2(b) of Revenue Regulation No. 12-86 dated August 1, 1986.
Petitioner maintains that respondents failed to present any document as proof that petitioner bound and obliged itself to pay the
withholding taxes on their retirement benefits. In fact, the Labor Arbiter did not make any finding that petitioner had obliged itself to pay
the withholding taxes on respondents retirement benefits. The NLRCs reliance on the statements in its Position Paper that it undertook
to pay for respondents withholding taxes is misplaced.
While petitioner admits that its "previous directors" had paid the withholding taxes on the retirement benefits of respondents, it explains
that this practice was stopped when the new management took over. The new management could not be expected to enforce and
follow through the illegal policy of the old management which is adverse to the interests of the petitioner; hence, the decisions of the
NLRC and the CA affirming such undertaking should be reversed. It points out that it is a government corporation, and as such, its
officials and employees may be held liable for violation of Section 3(a) of Republic Act Nos. 3019, and 6713.22 Moreover, its officers and
employees are mandated to preserve the companys assets, and may, likewise be held liable for failure to do so under Section 31 of the
Corporation Code.
The issues are (1) whether the retirement benefits of respondents are part of their gross income; and (2) whether petitioner is estopped
from reneging on its agreement with respondent to pay for the taxes on said retirement benefits.

We agree with petitioners contention that, under the CBA, it is not obliged to pay for the taxes on the respondents retirement benefits.
We have carefully reviewed the CBA and find no provision where petitioner obliged itself to pay the taxes on the retirement benefits of
its employees.
We also agree with petitioners contention that, under the NIRC, the retirement benefits of respondents are part of their gross income
subject to taxes. Section 28 (b) (7) (A) of the NIRC of 198623 provides:
Sec. 28. Gross Income.
xxxx
(b) Exclusions from gross income. - The following items shall not be included in gross income and shall be exempt from
taxation under this Title:
xxxx
(7) Retirement benefits, pensions, gratuities, etc. - (A) Retirement benefits received by officials and employees of private firms
whether individuals or corporate, in accordance with a reasonable private benefit plan maintained by the employer: Provided,
That the retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less
than fifty years of age at the time of his retirement: Provided, further, That the benefits granted under this subparagraph shall
be availed of by an official or employee only once. For purposes of this subsection, the term "reasonable private benefit plan"
means a pension, gratuity, stock bonus or profit-sharing plan maintained by an employer for the benefit of some or all of his
officials or employees, where contributions are made by such employer for officials or employees, or both, for the purpose of
distributing to such officials and employees the earnings and principal of the fund thus accumulated, and wherein it is provided
in said plan that at no time shall any part of the corpus or income of the fund be used for, or be diverted to, any purpose other
than for the exclusive benefit of the said official and employees.
Revenue Regulation No. 12-86, the implementing rules of the foregoing provisions, provides:
(b) Pensions, retirements and separation pay. Pensions, retirement and separation pay constitute compensation subject to
withholding tax, except the following:
(1) Retirement benefit received by official and employees of private firms under a reasonable private benefit plan maintained
by the employer, if the following requirements are met:
(i) The retirement plan must be approved by the Bureau of Internal Revenue;
(ii) The retiring official or employees must have been in the service of the same employer for at least ten (10) years
and is not less than fifty (50) years of age at the time of retirement; and
(iii) The retiring official or employee shall not have previously availed of the privilege under the retirement benefit plan
of the same or another employer.
Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened to prove the concurrence of the
following elements: (1) a reasonable private benefit plan is maintained by the employer; (2) the retiring official or employee has been in
the service of the same employer for at least 10 years; (3) the retiring official or employee is not less than 50 years of age at the time of
his retirement; and (4) the benefit had been availed of only once.
Article VIII of the 1993 CBA provides for two kinds of retirement plans - compulsory and optional. Thus:
ARTICLE
RETIREMENT

VIII

Section 1: Compulsory Retirement Any employee who has reached the age of Fifty Five (55) years shall be retired from the
COMPANY and shall be paid a retirement pay in accordance with the following schedule:

LENGTH OF SERVICE

RETIREMENT BENEFITS

1 year below 5 yrs.

15 days for every year of service

5 years 9 years

30 days for every year of service

10 years 14 years

50 days for every year of service

15 years 19 years

65 days for every year of service

20 years or more

80 days for every year of service

A supervisor who reached the age of Fifty (50) may at his/her option retire with the same retirement benefits provided above.
Section 2: Optional Retirement Any covered employee, regardless of age, who has rendered at least five (5) years of service to the
COMPANY may voluntarily retire and the COMPANY agrees to pay Long Service Pay to said covered employee in accordance with the
following schedule:

LENGTH OF SERVICE

RETIREMENT BENEFITS

5 9 years

15 days for every year of service

10 14 years

30 days for every year of service

15 19 years

50 days for every year of service

20 years and above

60 days for every year of service

Section 3: Fraction of a Year In computing the retirement under Section 1 and 2 of this Article, a fraction of at least six (6) months
shall be considered as one whole year. Moreover, the COMPANY may exercise the option of extending the employment of an
employee.
Section 4: Severance of Employment Due to Illness When a supervisor suffers from disease and/or permanent disability and her/his
continued employment is prohibited by law or prejudicial to her/his health of the health of his co-employees, the COMPANY shall not
terminate the employment of the subject supervisor unless there is a certification by a competent public health authority that the
disease is of such a nature or at such stage that it can not be cured within a period of six (6) months even with proper medical
treatment. The supervisor may be separated upon payment by the COMPANY of separation pay pursuant to law, unless the supervisor
falls within the purview of either Sections 1 or 2 hereof. In which case, the retirement benefits indicated therein shall apply, whichever is
higher.
Section 5: Loyalty Recognition The COMPANY shall recognize the services of the supervisor/director who have reached the following
number of years upon retirement by granting him/her a plaque of appreciation and any lasting gift:

10 years but below 15 years

(P 3,000.00) worth

15 years but below 20 years

(P 7,000.00) worth

20 years and more

(P10,000.00) worth

Respondents were qualified to retire optionally from their employment with petitioner. However, there is no evidence on record that the
1993 CBA had been approved or was ever presented to the BIR; hence, the retirement benefits of respondents are taxable.
Under Section 80 of the NIRC, petitioner, as employer, was obliged to withhold the taxes on said benefits and remit the same to the
BIR.
Section 80. Liability for Tax.
(A) Employer. The employer shall be liable for the withholding and remittance of the correct amount of tax required to be
deducted and withheld under this Chapter. If the employer fails to withhold and remit the correct amount of tax as required to
be withheld under the provision of this Chapter, such tax shall be collected from the employer together with the penalties or
additions to the tax otherwise applicable in respect to such failure to withhold and remit.
However, we agree with respondents contention that petitioner did not withhold the taxes due on their retirement benefits because it
had obliged itself to pay the taxes due thereon. This was done to induce respondents to agree to avail of the optional retirement
scheme. Thus, in its petition in this case, petitioner averred that:
While it may indeed be conceded that the previous dispensation of petitioner IBC-13 footed the bill for the withholding taxes ,
upon discovery by the new management, this was stopped altogether as this was grossly prejudicial to the interest of the
petitioner IBC-13. The policy of withholding the taxes due on the differentials as a remedial measure was a matter of sound
business judgment and dictates of good governance aimed at protecting the interests of the government. Necessarily, the
newly-appointed board and officers of the petitioner, who learned about this grossly disadvantageous mistake committed by
the former management of petitioner IBC-13 cannot be expected to just follow suit blindly. An illegal act simply cannot give rise
to an obligation. Accordingly, the new officers were correct in not honoring this highly suspect practice and it is now their duty
to rectify this anomalous occurrence, otherwise, they become remiss in the performance of their sworn responsibilities.

It need not be stressed that as board members and officers of the acquired asset of the government, they are committed to
preserve the assets thereof. Their concomitant obligations spring not only from their fiduciary responsibility as corporate
officers but as well as public officers.24
Respondents received their retirement benefits from the petitioner in three staggered installments without any tax deduction for the
simple reason that petitioner had remitted the same to the BIR with the use of its own funds conformably with its agreement with the
retirees. It was only when respondents demanded the payment of their salary differentials that petitioner alleged, for the first time, that it
had failed to present the 1993 CBA to the BIR for approval, rendering such retirement benefits not exempt from taxes; consequently,
they were obliged to refund to it the amounts it had remitted to the BIR in payment of their taxes. Petitioner used this "failure" as an
afterthought, as an excuse for its refusal to remit to the respondents their salary differentials. Patently, petitioner is estopped from doing
so. It cannot renege on its commitment to pay the taxes on respondents retirement benefits on the pretext that the "new management"
had found the policy disadvantageous.
It must be stressed that the parties are free to enter into any contract stipulation provided it is not illegal or contrary to public morals.
When such agreement freely and voluntarily entered into turns out to be advantageous to a party, the courts cannot "rescue" the other
party without violating the constitutional right to contract. Courts are not authorized to extricate the parties from the consequences of
their acts. Thus, the fact that the contract stipulations of the parties may turn out to be financially disadvantageous to them will not
relieve them of their obligation under the agreement.25
An agreement to pay the taxes on the retirement benefits as an incentive to prospective retirees and for them to avail of the optional
retirement scheme is not contrary to law or to public morals. Petitioner had agreed to shoulder such taxes to entice them to voluntarily
retire early, on its belief that this would prove advantageous to it. Respondents agreed and relied on the commitment of petitioner. For
petitioner to renege on its contract with respondents simply because its new management had found the same disadvantageous would
amount to a breach of contract. There is even no evidence that any "new management" was ever installed by petitioner after
respondents retirement; nor is there evidence that the Board of Directors of petitioner resolved to renege on its contract with
respondents and demand the reimbursement for the amounts remitted by it to the BIR.
The well-entrenched rule is that estoppel may arise from a making of a promise if it was intended that the promise should be relied
upon and, in fact, was relied upon, and if a refusal to sanction the perpetration of fraud would result to injustice. The mere omission by
the promisor to do whatever he promises to do is sufficient forbearance to give rise to a promissory estoppel.26
Petitioner cannot hide behind the fact that, under the compromise agreement between the PCGG and Benedicto, the latter had
assigned and conveyed to the Republic of the Philippines his shares, interests and rights in petitioner. Respondents retired only after
the Court affirmed the validity of the Compromise Agreement 27 and the execution by petitioner and the union of their 1993 CBA while
Civil Case No. 0034 was still pending in theSandiganbayan. There is no showing that before respondents demanded the payment of
their salary differentials, petitioner had rejected its commitment to shoulder the taxes on respondents retirement benefits and sought its
nullification before the court; nor is there any showing that petitioners "new management" filed any criminal or administrative charges
against the former officers/board of directors comprising the "old management" relative to the payment of the taxes on respondents
retirement benefits.
IN VIEW OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The Decision of the Court of Appeals in CA-G.R. SP No.
72414 is AFFIRMED. Costs against the petitioner.
SO ORDERED.
G.R. No. 71818 August 19, 1986
METROPOLITAN
WATERWORKS
AND
SEWERAGE
SYSTEM
(MWSS), petitioner,
vs.
HON. BIENVENIDO S. HERNANDEZ, Labor Arbiter, NATIONAL LABOR RELATIONS COMMISSION, LEMUEL B. ALEGADO,
DANILO S. LOPEZ, FORTUNATO L. MADRONA, ETC., ET AL., respondents.
Petitioner Metropolitan Waterworks and Sewerage System (MWSS) was haled before the Arbitration Branch, National Capital Region of
the National Labor Relations Commission on charges of willfull failure to pay wage differentials, allowances and other monetary benefits
to its contractual employees numbering 2,500 or so. 1 In answer, MWSS assessed that:
(1) it "is a government-owned and controlled corporation and therefore ... (the NLRC) has no jurisdiction over the ...
case", and (2) assuming the contrary arguendo, "the terms and conditions of the complainants who are all contractual
employees are governed by their respective contracts. 2
On June 5, 1985, judgment was rendered by the labor Arbiter to whom the case was assigned, adverse to MWSS. As regards the claim
of MWSS of lack of jurisdiction in the NLRC over the case, the Arbiter made the following observations:
... This Commission agree (sic) with the respondent that if the complainants are regular employees of MWSS, it being
a government owned and controlled corporation, said employees are within the mantle of the civil service rules and
regulations, their salaries are standardized by the National Assembly, then this Commission has no jurisdiction in the
case. 3 ... (But an examination of the records shows) ... that complainants are not a regular employee of the
respondent MWSS, but one of a hired workers or employees for limited period, that is upon completion of the project
for which they were hired, they can be removed by the respondent, because there is no more work or the contract
has already been terminated (Sic).4
The proferred deduction: while controversies respecting terms and conditions of employment between MWSS and its regular
employees are not within the jurisdiction of the NLRC, said controversies do fall within the competence of the NLRC if they involve nonregular or contractual employees of the MWSS.
Anent the second argument of MWSS which the Arbiter understands to be "that the contract of employment by the complainants ... is
governed by their contract, (and) it is therefore incumbent for the respondent 5 to be governed and to comply with their contract, 6 he
has this to say:

Respondent (MWSS) is citing Article 277 of the Labor Code to vouchsafe (sic) its contention about the lack of
jurisdiction of the NLRC. The provision, however, refers to the governance of the Civil Service Law vis-a-vis the terms
and conditions of government employees, those of government corporations included. The complaint is not such a
case as it is for monetary claims about which the Civil Service Decree, PD 807 does not provide. In fact, the last
provision of Article 277 shows the ever protection (sic) by the State through the Code of the workers' right to due
wages and other benefits by enjoining not to reduce the privileges being enjoyed by workers at the time of the
adoption of the Code. 7
The propounded deduction: The Civil Service Decree applies to employees in government corporations in all matters except "monetary
claims"; as regards the latter, it is the Labor Code that governs.
It is to invalidate the decision of the Labor Arbiter as well as a subsequent order directing execution thereof 8 and all other proceedings
in the case 9 that MWSS has come to this Court on certiorari and prohibition.
Evidently, the case turns upon the question: Are employees of the MWSS covered by the Labor Code or by laws and regulations
governing the civil service?
That question, framed in Identical terms save only that it had reference to another entity, the National Housing Corporation, has already
been answered by this Court. In National Housing Corporation vs. Juco, 10 this Court ruled that
1) "The NHC is a one hundred percent (100%) government-owned corporation ...; 11
2) "There should no longer be any question at this time that employees of goverment-owned or controlled
corporations are governed by the civil service law and civil service rules and regulation "; 12 and
3) "The decision of the Labor Arbiter dismissing the case (filed against the NHC by an employee) for lack of
jurisdiction" was correct. 13
Now, the character of the MWSS as a government-owned or controlled corporation is not contested; it is, in any case, a proposition that
cannot be gainsaid. Republic Act No. 6234 created it as a "government corporation to be known as the Metropolitan Waterworks and
Sewerage System." As in the case of the National Housing Authority, therefore, employment in the MWSS is governed not by the Labor
Code but by the civil service law, rules and regulations; and controversies arising from or connected with that employment are not
cognizable by the National Labor Relations Commission.
The argument of the Labor Arbiter that it is only disputes between the MWSS and its regular employees that are beyond the jurisdiction
of the NLRC, not those between it and its "non-regular or contractual" employees, is sophistical. There is no legal or logical justification
for such a distinction. Indeed, it is ruled out by the fact that positions in the civil service are classified into career and non-career
service, 14 and that the non-career service includes inter alia... Contractual personnel or those whose employment in the government is in accordance with a special contract to
undertake a specific work or job, requiring special or technical skin not available in the employing agency, to be
accomplished within a specific period, which in no case shall exceed one year, and performs or accomplishes the
specific work or job, under his own responsibility with a minimum of direction and supervision from the hiring
agency. 15
The Labor Arbiter's other postulation, that the Civil Service Law governs employment in the MWSS in all aspect except "monetary
claims," and that as to the latter, it is the Labor Code that applies, is even more patently illogical and deserves no confutation.
But even more fallacious, almost unintelligible, is private respondents' contention that they "are not employees of Metropolitan
Waterworks and Sewerage System (MWSS)"; 16 and "not being employees of the petitioner ... (MWSS) ... this case therefore lies within
the National Labor Relations Commission (NLRC) through Arbiter Bienvenido Hernandez." 17 Such a contention also does not merit
refutation As absurd and as undeserving of response, too, is the claim that "Existence of employer-employee relationship (between the
MWSS and an individual) is not per se equivalent to being a government employee." 18
Arguments such as these, and the fractured syntax by which they are tendered, should really have no place in a judicial record. They
cannot persuade; they do but irritate. What is worse, they produce much waste of valuable time. They are symptomatic of defects in the
training and appointing processes which must be remedied.
WHEREFORE, the Decision of the Labor Arbiter dated June 5, 1985 and his Order of July 8, 1985, having been rendered without
jurisdiction, are hereby declared void and set aside. Said Labor Arbiter is enjoined to take no further action on Case No. NCR-9-316484 save to dismiss the same. Costs against private respondents.
SO ORDERED.
G.R. No. L-65377 May 28, 1984
MOLAVE
MOTOR
SALES,
INC., petitioner,
vs.
HON. CRISPIN C. LARON, Presiding Judge of the Regional Trial Court of Pangasinan, Branch XLIV and PEDRO
GEMENIANO, respondents.
Respondent Judge, presiding Branch XLIV of the Regional Trial Court in Dagupan City, had dismissed the case below for lack of
jurisdiction and had denied reconsideration for lack of merit.
Petitioner, PLAINTIFF in the case below, is a corporation engaged in the sale and repair of motor vehicles in Dagupan City. Private
respondent, the DEFENDANT in the case below, was, or is, the sales manager of PLAINTIFF. Whether or not there was still a

relationship of employer and employee between the parties when the complaint was filed is an unsettled question which need not be
resolved in this instance.
Alleging that DEFENDANT was a former employee, PLAINTIFF had sued him, on March 22, 1983, for payment of accounts pleaded as
follows:
That during his incumbency as such the defendant caused and without authority from the plaintiff incurred accounts
with the remaining balances in the total sum of P33,890.38 excluding interests, arising from
the purchases of vehicles and parts,
repair jobs of his personal cars and
cash advances,
faithful reproductions of the Vehicle Invoice, Debit Memos, Deed of Absolute Sale, Repair Orders, Charge Invoices,
Vouchers, Promissory Notes, Acknowledgement Letter and Statement of Account, hereto attached and marked as
Annexes "A", "B", "C", "D", "E", "F", "G", "H", "I", "J", "K", "L", "M", and "N" respectively and the contents of which
being herein additionally pleaded and made integral parts hereof; (Emphasis supplied)
In his Answer, DEFENDANT denied
... that he incurred any unpaid unauthorized accounts with the plaintiff in the total sum of P33,890.38 excluding
interests therefor, and,
specifically denies under oath that the annexed Vehicle Invoice, Debits Memos Deed of Absolute Sale, Repair
Orders, Charge Invoices, Vouchers, Promissory Notes, Acknowledgement Letter and Statement of Account
have remained unpaid as in fact the truth of the matter is as follows, to wit: (Emphasis supplied)
DEFENDANT further alleged in a counterclaim that he should still be considered an employee of PLAINTIFF inasmuch as there has
been no application for clearance in regards to his separation.
At the pre-trial conference, the DEFENDANT raised the question of jurisdiction of the Court stating that PLAINTIFF's complaint arose
out of employer-employee relationship, and he subsequently moved for dismissal. It was then when respondent Judge dismissed the
case finding that the sum of money and damages sued upon arose from employer-employee relationship and that jurisdiction belonged
to the Labor Arbiter and the NLRC.
Before the enactment of BP Blg. 227 on June 1, 1982, Labor Arbiters, under paragraph 5 of Article 217 of the Labor Code had
jurisdiction over "all other cases arising from employer-employee relation, unless expressly excluded by this Code." Even then, the
principle followed by this Court was that, although a controversy is between an employer and an employee, the Labor Arbiters have no
jurisdiction if the Labor Code is not involved. In Medina vs. Castro-Bartolome, 116 SCRA 597, 604, in negating jurisdiction of the Labor
Arbiter, although the parties were an employer and two employees, Mr. Justice Abad Santos stated:
The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by the
plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or
not they have retroactive effect is unnecessary.
It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a simple action
for damages for tortious acts allegedly committed by the defendants. Such being the case, the governing statute is
the Civil Code and not the Labor Code. It results that the orders under review are based on a wrong premise.
And in Singapore Airlines Limited vs. Pao, 122 SCRA 671, 677, the following was said:
Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor Code. The
primary relief sought is for liquidated damages for breach of a contractual obligation. The other items demanded are
not labor benefits demanded by workers generally taken cognizance of in labor disputes, such as payment of wages,
overtime compensation or separation pay. The items claimed are the natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.
In the case below, PLAINTIFF had sued for monies loaned to DEFENDANT, the cost of repair jobs made on his personal cars, and for
the purchase price of vehicles and parts sold to him. Those accounts have no relevance to the Labor Code. The cause of action was
one under the civil laws, and it does not breach any provision of the Labor Code or the contract of employment of DEFENDANT. Hence,
the civil courts, not the Labor Arbiters and the NLRC, should have jurisdiction.
BP Blg. 227 has amended Article 217 of the Labor Code to read as follows:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor Arbiters shall have the original and
exclusive jurisdiction to hear and decide within thirty (30) working days after submission of the case by the parties for
decision, the following cases involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that ( involve) WORKERS MAY FILE INVOLVING wages, hours of work and other terms and conditions of
employment;

3. All money claims of workers, including those based on non-payment or underpayment of wages, overtime
compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for
employees compensation, social security, and maternity benefits;
4. Cases involving household services; and
5. CASES ARISING FROM ANY VIOLATION OF ARTICLE 265 OF THIS CODE, INCLUDING QUESTIONS
INVOLVING THE LEGALITY OF STRIKES AND LOCKOUTS.
6. All other claims arising from employer-employee relations, unless expressly excluded by this Code]. (Italics and
bracketed portions indicate the deletions, while the amendments introduced are capitalized).
The dismissal of the case below on the ground that the sum of money and damages sued upon arose from employer-employee
relationship was erroneous. Claims arising from employer-employee relations are now limited to those mentioned in paragraphs 2 and
3 of Article 217. There is no difficulty on our part in stating that those in the case below should not be faulted for not being aware of the
last amendment to the frequently changing Labor Code.
The claim of DEFENDANT that he should still be considered an employee of PLAINTIFF, because the latter has not sought clearance
for his separation from the service, will not affect the jurisdiction of respondent Judge to resolve the complaint of PLAINTIFF.
DEFENDANT could still be liable to PLAINTIFF for payment of the accounts sued for even if he remains an employee of PLAINTIFF.
WHEREFORE, the Petition is granted, and respondent Judge is hereby ordered to take cognizance of the case below and to render
judgment therein accordingly.
No costs.
SO ORDERED.
G.R. No. L-64313 January 17, 1985
NATIONAL
HOUSING
vs.
BENJAMIN JUCO AND THE NATIONAL LABOR RELATIONS COMMISSION, respondents.

CORPORATION, petitioner,

Government Corporate Counsel for petitioner.


Amante A. Pimentel for respondents.

GUTIERREZ, JR., J.:


Are employees of the National Housing Corporation (NHC) covered by the Labor Code or by laws and regulations governing the civil
service?
The background facts of this case are stated in the respondent-appellee's brief as follows:
The records reveal that private respondent (Benjamin C. Juco) was a project engineer of the National Housing
Corporation (NHC) from November 16, 1970 to May 14, 1975. For having been implicated in a crime of theft and/or
malversation of public funds involving 214 pieces of scrap G.I. pipes owned by the corporation which was allegedly
committed on March 5, 1975. Juco's services were terminated by (NHC) effective as of the close of working hours on
May 14, 1975. On March 25, 1977 he filed a complaint for illegal dismissal against petitioner (NHC) with Regional
Office No. 4, Department of Labor (now Ministry of Labor and Employment) docketed as R04-3-3309-77 (Annex A,
Petition). The said complaint was certified by Regional Branch No. IV of the NLRC for compulsory arbitration where it
was docketed as Case No. RB-IV-12038-77 and assigned to Labor Arbiter Ernilo V. Pealosa. The latter conducted
the hearing. By agreement of the parties, the case was submitted for resolution upon submission of their respective
position papers. Private respondent (Juco) submitted his position paper on July 15, 1977. He professed innocence of
the criminal acts imputed against him contending "that he was dismissed based on purely fabricated charges
purposely to harass him because he stood as a witness in the theft case filed against certain high officials of the
respondent's establishment" (NHC) and prayed for 'his immediate reinstatement to his former position in the (NHC)
without loss of seniority rights and the consequent payment of his will back wages plus all the benefits appertaining
thereto. On July 28, 1977, the NHC also filed its position paper alleging that the Regional Office Branch IV, Manila,
NLRC, "is without authority to entertain the case for lack of jurisdiction, considering that the NHC is a government
owned and controlled corporation; that even assuming that this case falls within the jurisdiction of this Office,
respondent firm (now petitioner) maintains that respondent (Juco), now private respondent, was separated from the
service for valid and justified reasons, i.e., for having sold company properties consisting of 214 pieces of scrap G.I.
pipes at a junk shop in Alabang, Muntinlupa, Metro Manila, and thereafter appropriating the proceeds thereof to his
own benefit."
The pertinent portion of the decision of respondent National Labor Relations Commission (NLRC) reads:
The fact that in the early case of Fernandez v. Cedro (NLRC Case No. 201165-74, May 19, 1975) the Commission,
(Second Division) ruled that the respondent National Housing Corporation is a government-owned or controlled
corporation does not preclude us from later taking a contrary stand if by doing so the ends of justice could better be
served.

For although adherence to precedents (stare decisis) is a sum formula for achieving uniformity of action and
conducive to the smooth operation of an office, Idolatrous reverence for precedents which have outlived their validity
and usefulness retards progress and should therefore be avoided. In fact, even courts do reverse themselves for
reasons of justice and equity. This Commission as an Administrative body performing quasi judicial function is no
exception.
WHEREFORE, in the light of the foregoing, the decision appealed from is hereby, set aside. In view, however, of the
fact that the Labor Arbiter did not resolve the issue of illegal dismissal we have opted to remand this case to the
Labor Arbiter a quo for resolution of the aforementioned issue.
The NHC is a one hundred percent (100%) government-owned corporation organized in accordance with Executive Order No. 399, the
Uniform Charter of Government Corporations, dated January 5, 1951. Its shares of stock are owned by the Government Service
Insurance System the Social Security System, the Development Bank of the Philippines, the National Investment and Development
Corporation, and the People's Homesite and Housing Corporation. Pursuant to Letter of Instruction No. 118, the capital stock of NHC
was increased from P100 million to P250 million with the five government institutions above mentioned subscribing in equal proportion
to the increased capital stock. The NHC has never had any private stockholders. The government has been the only stockholder from
its creation to the present.
There should no longer be any question at this time that employees of government-owned or controlled corporations are governed by
the civil service law and civil service rules and regulations.
Section 1, Article XII-B of the Constitution specifically provides:
The Civil Service embraces every branch, agency, subdivision, and instrumentality of the Government, including
every government-owned or controlled corporation. ...
The 1935 Constitution had a similar provision in its Section 1, Article XI I which stated:
A Civil Service embracing all branches and subdivisions of the Government shall be provided by law.
The inclusion of "government-owned or controlled corporations" within the embrace of the civil service shows a deliberate effort of the
framers to plug an earlier loophole which allowed government-owned or controlled corporations to avoid the full consequences of the
an encompassing coverage of the civil service system. The same explicit intent is shown by the addition of "agency" and
"instrumentality" to branches and subdivisions of the Government. All offices and firms of the government are covered.
The amendments introduced in 1973 are not Idle exercises or a meaningless gestures. They carry the strong message that t civil
service coverage is broad and an- embracing insofar as employment in the government in any of its governmental or corporate arms is
concerned.
The constitutional provision has been implemented by statute. Presidential Decree No. 807 is unequivocal that personnel of
government-owned or controlled corporations belong to the civil service and are subject to civil service requirements.
It provides:
SEC. 56. Government-owned or Controlled Corporations Personnel. All permanent personnel of governmentowned or controlled corporations whose positions are now embraced in the civil service shall continue in the service
until they have been given a chance to qualify in an appropriate examination, but in the meantime, those who do not
possess the appropriate civil service eligibility shag not be promoted until they qualify in an appropriate civil service
examination. Services of temporary personnel may be terminated any time.
The very Labor Code, P. D. No. 442 as amended, which the respondent NLRC wants to apply in its entirety to the private respondent
provides:
ART. 277. Government employees. The terms and conditions of employment of all government employees,
including employees of government-owned and controlled corporations shall be governed by the Civil Service Law,
rules and regulations. Their salaries shall be standardized by the National Assembly as provided for in the New
Constitution. However, there shall be reduction of existing wages, benefits and other terms and conditions of
employment being enjoyed by them at the time of the adoption of the Code.
Our decision in Alliance of Government Workers, et al v. Honorable Minister of Labor and Employment et all. (124 SCRA 1) gives the
background of the amendment which includes government-owned or controlled corporations in the embrace of the civil service.
We stated:
Records of the 1971 Constitutional Convention show that in the deliberation held relative to what is now Section 1(1), Article XIIB, supra, the issue of the inclusion of government-owned or controlled corporations figured prominently.
The late delegate Roberto S. Oca, a recognized labor leader, vehemently objected to the inclusion of government-owned or controlled
corporations in the Civil Service. He argued that such inclusion would put asunder the right of workers in government corporations,
recognized in jurisprudence under the 1935 Constitution, to form and join labor unions for purposes of collective bargaining with their
employers in the same manner as in the private section (see: records of 1971 Constitutional Convention).
In contrast, other labor experts and delegates to the 1971 Constitutional Convention enlightened the members of the Committee on
Labor on the divergent situation of government workers under the 1935 Constitution, and called for its rectification. Thus, in a Position
Paper dated November 22, 197 1, submitted to the Committee on Labor, 1971 Constitutional Convention, then Acting Commissioner of
Civil Service Epi Rey Pangramuyen declared:

It is the stand, therefore, of this Commission that by reason of the nature of the public employer and the peculiar character of the public
service, it must necessary regard the right to strike given to unions in private industry as not applying to public employees and civil
service employees. It has been stated that the Government, in contrast to the private employer, protects the interests of all people in
the public service, and that accordingly, such conflicting interests as are present in private labor relations could not exist in the relations
between government and those whom they employ.
Moreover, determination of employment conditions as well as supervision of the management of the public service is in the hands of
legislative bodies. It is further emphasized that government agencies in the performance of their duties have a right to demand
undivided allegiance from their workers and must always maintain a pronounced esprit de corps or firm discipline among their staff
members. It would be highly incompatible with these requirements of the public service, if personnel took orders from union leaders or
put solidarity with members of the working class above solidarity with the Government. This would be inimical to the public interest.
Moreover, it is asserted that public employees by joining labor unions may be compelled to support objectives which are political in
nature and thus jeopardize the fundamental principle that the governmental machinery must be impartial and non-political in the sense
of party politics. (See: Records of 1971 Constitutional Convention).
Similar, Delegate Leandro P. Garcia, expressing for the inclusion of government-owned or controlled corporations in the Civil Service,
argued:
It is meretricious to contend that because Government-owned or controlled corporations yield profits, their employees are entitled to
better wages and fringe benefits than employees of Government other than Government-owned and controlled corporations which are
not making profits. There is no gainsaying the fact that the capital they use is the people's money. (see: Records of the 1971
Constitutional Convention).
Summarizing the deliberations of the 1971 Constitutional Convention on the inclusion of Government-owned or controlled corporation
Dean Joaquin G. Bernas, SJ., of the Ateneo de Manila University Professional School of Law, stated that government-owned
corporations came under attack as g cows of a privileged few enjoying salaries far higher than their counterparts in the various
branches of government, while the capital of these corporations belongs to the Government and government money is pumped into
them whenever on the brink of disaster, and they should therefore come under the strict surveillance of the Civil Service System.
(Bernas, The 1973 Philippine Constitution, Notes and Cases, 1974 ed., p. 524).
Applying the pertinent provisions of the Constitution, the Labor Code as amended, and the Civil Service Decree as amended and the
precedent in the Alliance of Government Workers decision, it is clear that the petitioner National Housing Corporation comes under the
jurisdiction of the Civil Service Commission, not the Ministry of Labor and Employment.
This becomes more apparent if we consider the fact that the NHC performs governmental functions and not proprietary ones.
The NHC was organized for the governmental objectives stated in its amended articles of incorporation as follows:
SECOND: That the purpose for which the corporation is organized is to assist and carry out the coordinated massive housing program
of the government, principally but not limited to low-cost housing with the integration cooperation and assistance of all governmental
agencies concerned, through the carrying on of any or all the following activities:
l) The acquisition, development or reclamation of lands for the purpose of construction and building therein preferably low-cost housing
so as to provide decent and durable dwelling for the greatest number of inhabitants in the country;
2) The promotion and development of physical social and economic community growth through the establishment of general physical
plans for urban, suburban and metropolitan areas to be characterized by efficient land use patterns;
3) The coordination and implementation of all projects of the government for the establishment of nationwide and massive low cost
housing;
4) The undertaking and conducting of research and technical studies of the development and promotion of construction of houses and
buildings of sound standards of design liability, durability, safety, comfort and size for improvement of the architectural and engineering
designs and utility of houses and buildings with the utilization of new and/or native materials economics in material and construction,
distribution, assembly and construction and of applying advanced housing and building technology.
5) Construction and installation in these projects of low-cost housing privately or cooperatively owned water and sewerage system or
waste disposal facilities, and the formulations of a unified or officially coordinated urban transportation system as a part of a
comprehensive development plan in these areas.
The petitioner points out that it was established as an instrumentality of the government to accomplish governmental policies and
objectives and extend essential services to the people. It would be incongruous if employees discharging essentially governmental
functions are not covered by the same law and rules which govern those performing other governmental functions. If government
corporations discharging proprietary functions now belong to the civil service with more reason should those performing governmental
functions be governed by civil service law.
The respondent NLRC cites a 1976 opinion of the Secretary of Justice which holds that the phrase "government-owned or controlled
corporations" in Section 1, Article XII-B of the Constitution contemplates only those government-owned or controlled
corporations created by special law. The opinion states that since the Constitution provides for the organization or regulation of private
corporations only by "general law", expressly excluding government-owned or controlled corporations, it follows that whenever the
Constitution mentions government-owned or controlled corporations, it must refer to those created by special law. P.D. No. 868 which
repeals all charters, laws, decrees, rules, and provisions exempting any branch, agency, subdivision, or instrumentality of the
government, including government- owned or controlled corporations from the civil service law and rules is also cited to show that
corporations not governed by special charters or laws are not to be brought within civil service coverage. The discussions in the
Constitutional Convention are also mentioned. It appears that at the time the Convention discussed government-owned or controlled
corporations, all such corporations were organized only under special laws or charters.

The fact that "private" corporations owned or controlled by the government may be created by special charter does not mean that such
corporations not created by special law are not covered by the civil service. Nor does the decree repealing all charters and special laws
granting exemption from the civil service law imply that government corporations not created by special law are exempt from civil
service coverage. These charters and statutes are the only laws granting such exemption and, therefore, they are the only ones which
could be repealed. There was no similar exempting provision in the general law which called for repeal. And finally, the fact that the
Constitutional Convention discussed only corporations created by special law or charter cannot be an argument to exclude petitioner
NHC from civil service coverage. As stated in the cited speech delivered during the convention sessions of March 9, 1972, all
government corporations then in existence were organized under special laws or charters. The convention delegates could not possibly
discuss government-owned or controlled corporations which were still non-existent or about whose existence they were unaware.
Section I of Article XII-B, Constitution uses the word "every" to modify the phrase "government-owned or controlled corporation."
"Every" means each one of a group, without exception It means all possible and all taken one by one. Of course, our decision in this
case refers to a corporation created as a government-owned or controlled entity. It does not cover cases involving private firms taken
over by the government in foreclosure or similar proceedings. We reserve judgment on these latter cases when the appropriate
controversy is brought to this Court.
The infirmity of the respondents' position lies in its permitting a circumvention or emasculation of Section 1, Article XII-B of the
Constitution It would be possible for a regular ministry of government to create a host of subsidiary corporations under the Corporation
Code funded by a willing legislature. A government-owned corporation could create several subsidiary corporations. These subsidiary
corporations would enjoy the best of two worlds. Their officials and employees would be privileged individuals, free from the strict
accountability required by the Civil Service Decree and the regulations of the Commission on Audit. Their incomes would not be subject
to the competitive restraints of the open market nor to the terms and conditions of civil service employment.
Conceivably, all government-owned or controlled corporations could be created, no longer by special charters, but through
incorporation under the general law. The constitutional amendment including such corporations in the embrace of the civil service would
cease to have application. Certainly, such a situation cannot be allowed to exist.
WHEREFORE, the petition is hereby GRANTED. The questioned decision of the respondent National Labor Relations Commission is
SET ASIDE. The decision of the Labor Arbiter dismissing the case before it for lack of jurisdiction is REINSTATED.
SO ORDERED.