G.R. No.

163782

March 24, 2006

LIGHT RAIL TRANSIT AUTHORITY, Petitioner,

was a qualified transportation corporation duly

organized in accordance with the provisions of the
Corporation Code, registered with the Securities and
Exchange Commission, and existing under Philippine
laws.

vs.
PERFECTO H. VENUS, JR., BIENVENIDO P. SANTOS, JR.,
RAFAEL C. ROY, NANCY C. RAMOS, SALVADOR A.
ALFON, NOEL R. SANTOS, MANUEL A. FERRER,
SALVADOR G. ALINAS, RAMON D. LOFRANCO,
AMADOR H.POLICARPIO, REYNALDO B. GENER, and
BIENVENIDO G. ARPILLEDA, Respondents.

x-----------------------------x

G.R. No. 163881

March 24, 2006

METRO TRANSIT ORGANIZATION, INC., Petitioner,

vs.
COURT OF APPEALS, PERFECTO H. VENUS, JR.,
BIENVENIDO P. SANTOS, JR., RAFAEL C. ROY, NANCY
C. RAMOS, SALVADOR A. ALFON, NOEL R. SANTOS,
MANUEL A. FERRER, SALVADOR G. ALINAS, RAMON D.
LOFRANCO, AMADOR H. POLICARPIO, and REYNALDO
B. GENER, Respondents.

DECISION

PUNO, J.:

Before us are the consolidated petitions of Light Rail

Transit Authority (LRTA) and Metro Transit
Organization, Inc. (METRO), seeking the reversal of
the Decision of the Court of Appeals directing them
to reinstate private respondent workers to their
former positions without loss of seniority and other
rights and privileges, and ordering them to jointly
and severally pay the latter their full back wages,
benefits, and moral damages. The LRTA and METRO
were also ordered to jointly and severally pay
attorneys fees equivalent to ten percent (10%) of
the total money judgment.

Petitioner LRTA is a government-owned and

controlled corporation created by Executive Order
No. 603, Series of 1980, as amended, to construct
and maintain a light rail transit system and provide
the commuting public with an efficient, economical,
dependable and safe transportation. Petitioner
METRO, formerly Meralco Transit Organization, Inc.,

It appears that petitioner LRTA constructed a light rail

transit system from Monumento in Kalookan City to
Baclaran in Paraaque, Metro Manila. To provide the
commuting public with an efficient and dependable
light rail transit system, petitioner LRTA, after a
bidding process, entered into a ten (10)-year
Agreement for the Management and Operation of the
Metro Manila Light Rail Transit System from June 8,
1984 until June 8, 1994 with petitioner METRO.1The
Agreement provided, among others, that

1. Effective on the COMMENCEMENT DATE, METRO

shall accept and take over from the AUTHORITY
[LRTA] the management, maintenance and operation
of the commissioned and tested portion of the [Light
Rail Transit] System x x x [par. 2.02];

2. The AUTHORITY [LRTA] shall pay METRO the

MANAGEMENT FEE as follows x x x [par. 5.01];

3. In rendering these services, METRO shall apply its

best skills and judgment, in attaining the objectives
of the [Light Rail Transit] System in accordance with
accepted professional standards. It shall exercise the
required care, diligence and efficiency in the
discharge of its duties and responsibilities and shall
work for the best interest of the [Light Rail Transit]
System and the AUTHORITY [LRTA] [par. 2.03];

4. METRO shall be free to employ such employees

and officers as it shall deem necessary in order to
carry out the requirements of [the] Agreement. Such
employees and officers shall be the employees of
METRO and not of the AUTHORITY [LRTA]. METRO
shall prepare a compensation schedule and the
corresponding salaries and fringe benefits of [its]
personnel in consultation with the AUTHORITY [LRTA]
[par. 3.05];

5. METRO shall likewise hold the AUTHORITY [LRTA]

free and harmless from any and all fines, penalties,
losses and liabilities and litigation expenses incurred
or suffered on account of and by reason of death,
injury, loss or damage to passengers and third
persons, including the employees and
representatives of the AUTHORITY [LRTA], except
where such death, injury, loss or damage is
attributable to a defect or deficiency in the design of
the system or its equipment [par. 3.06].

Pursuant to the above Agreement, petitioner METRO

hired its own employees, including herein private
respondents. Petitioner METRO thereafter entered
into a collective bargaining agreement with Pinagisang Lakas ng Manggagawa sa METRO, Inc.
National Federation of Labor, otherwise known as
PIGLAS-METRO, INC. NFL KMU (Union), the
certified exclusive collective bargaining
representative of the rank-and-file employees of
petitioner METRO.

Meanwhile, on June 9, 1989, petitioners LRTA and

METRO executed a Deed of Sale where petitioner
LRTA purchased the shares of stocks in petitioner
METRO.2However, petitioners LRTA and METRO
continued with their distinct and separate juridical
personalities. Hence, when the above ten (10)-year
Agreement expired on June 8, 1994, they renewed
the same, initially on a yearly basis, and
subsequently on a monthly basis.

On July 25, 2000, the Union filed a Notice of Strike

with the National Conciliation and Mediation Board
National Capital Region against petitioner METRO on
account of a deadlock in the collective bargaining
negotiation. On the same day, the Union struck. The
power supply switches in the different light rail
transit substations were turned off. The members of
the Union picketed the various substations. They
completely paralyzed the operations of the entire
light rail transit system. As the strike adversely
affected the mobility of the commuting public, then
Secretary of Labor Bienvenido E. Laguesma issued on
that same day an assumption of jurisdiction
order3directing all the striking employees "to return
to work immediately upon receipt of this Order and
for the Company to accept them back under the
same terms and conditions of employment prevailing
prior to the strike."4

In their memorandum,5Department of Labor and

Employment Sheriffs Feliciano R. Orihuela, Jr., and
Romeo P. Lemi reported to Sec. Laguesma that they
tried to personally serve the Order of assumption of
jurisdiction to the Union through its officials and
members on July 26, 2000, but the latter refused to
receive the same. The sheriffs thus posted the Order
in the different stations/terminals of the light rail
transit system. Further, the Order of assumption of
jurisdiction was published on the July 27, 2000 issues
of the Philippine Daily Inquirer6and the Philippine
Star.7

private respondent workers, failed to return to work.

Thus, effective July 27, 2000, private respondents,
Perfecto Venus, Jr., Bienvenido P. Santos, Jr., Rafael C.
Roy, Nancy C. Ramos, Salvador A. Alfon, Noel R.
Santos, Manuel A. Ferrer, Salvador G. Alinas, Ramon
D. Lofranco, Amador H. Policarpio, Reynaldo B.
Gener, and Bienvenido G. Arpilleda, were considered
dismissed from employment.

In the meantime, on July 31, 2000, the Agreement for

the Management and Operation of the Metro Manila
Light Rail Transit System between petitioners LRTA
and METRO expired. The Board of Directors of
petitioner LRTA decided not to renew the contract
with petitioner METRO and directed the LRTA
management instead to immediately take over the
management and operation of the light rail transit
system to avert the mass transportation crisis.

On October 10, 2000, private respondents Venus, Jr.,

Santos, Jr., and Roy filed a complaint for illegal
dismissal before the National Labor Relations
Commission (NLRC) and impleaded both petitioners
LRTA and METRO. Private respondents Ramos, Alfon,
Santos, Ferrer, Alinas, Lofranco, Policarpio, Gener,
and Arpilleda follwed suit on December 1, 2000.

On October 1, 2001, Labor Arbiter Luis D. Flores

rendered a consolidated judgment in favor of the
private respondent workers8

WHEREFORE, judgment is hereby rendered in favor of

the complainants and against the respondents, as
follows:

1. Declaring that the complainants were illegally

dismissed from employment and ordering their
reinstatement to their former positions without loss
of seniority and other rights and privileges.

2. Ordering respondents Metro Transit Organization,

Inc. and Light Rail Transit Authority to jointly and
severally pay the complainants their other benefits
and full backwages, which as of June 30, 2001 are as
follows:

1. Perfecto H. Venus, Jr.

P247,724.36

2. Bienvenido P. Santos, Jr. 247,724.36

Despite the issuance, posting, and publication of the
assumption of jurisdiction and return to work order,
the Union officers and members, including herein

3. Rafael C. Roy

247,724.36

4. Nancy [C.] Ramos

254,282.62

5. Salvador A. Alfon

257,764.62

6. Noel R. Santos 221,897.58

7. Manuel A. Ferrer

250,534.78

8. Salvador G. [Alinas]

253,454.88

9. Ramon D. Lofranco

253,642.18

10. Amador H. Policarpio

256,609.22

11. Reynaldo B. Gener

255,094.56

TOTAL

Decision rendered by the Labor Arbiter. Public

respondent appellate court declared the workers
dismissal as illegal, pierced the veil of separate
corporate personality and held the LRTA and METRO
as jointly liable for back wages.

Hence, these twin petitions for review on certiorari of

the decision of public respondent appellate court
filed by LRTA and METRO which this Court eventually
consolidated.

P2,746,453.52

3. Ordering respondents Metro Transit Organization,

Inc. and Light Rail Transit Authority to jointly and
severally pay each of the complainants the amount
of P50,000.00 as moral damages.

4. Ordering respondents Metro Transit Organization,

Inc. and Light Rail Transit Authority to jointly and
severally pay the complainants attorneys fees
equivalent to ten percent (10%) of the total money
judgment.

SO ORDERED.

The complaint filed by Bienvenido G. Arpilleda,

although initially consolidated with the main case,
was eventually dropped for his failure to appear and
submit any document and position paper.9

On May 29, 2002, on appeal, the NLRC found that the

striking workers failed to heed the return to work
order and reversed and set aside the decision of the
labor arbiter. The suit against LRTA was dismissed
since "LRTA is a government-owned and controlled
corporation created by virtue of Executive Order No.
603 with an original charter"10and "it ha[d] no
participation whatsoever with the termination of
complainants employment."11In fine, the cases
against the LRTA and METRO were dismissed,
respectively, for lack of jurisdiction and for lack of
merit.

On December 3, 2002, the NLRC denied the workers

Motion for Reconsideration "[t]here being no showing
that the Commission committed, (and that) the
Motion for Reconsideration was based on, palpable or
patent errors, and the fact that (the) said motion is
not under oath."

On a petition for certiorari however, the Court of

Appeals reversed the NLRC and reinstated the

In the main, petitioner LRTA argues that it has no

employer-employee relationship with private
respondent workers as they were hired by petitioner
METRO alone pursuant to its ten (10)-year
Agreement for the Management and Operation of the
Metro Manila Light Rail Transit System with petitioner
METRO. Private respondent workers recognized that
their employer was not petitioner LRTA when their
certified exclusive collective bargaining
representative, the Pinag-isang Lakas ng
Manggagawa sa METRO, Inc. National Federation of
Labor, otherwise known as PIGLAS-METRO, INC. NFL
KMU, entered into a collective bargaining
agreement with petitioner METRO. Piercing the
corporate veil of METRO was unwarranted, as there
was no competent and convincing evidence of any
wrongful, fraudulent or unlawful act on the part of
METRO, and, more so, on the part of LRTA.

Petitioner LRTA further contends that it is a

government-owned and controlled corporation with
an original charter, Executive Order No. 603, Series
of 1980, as amended, and thus under the exclusive
jurisdiction only of the Civil Service Commission, not
the NLRC.

Private respondent workers, however, submit that

petitioner METRO was not only fully-owned by
petitioner LRTA, but all aspects of its operations and
administration were also strictly controlled,
conducted and directed by petitioner LRTA. And since
petitioner METRO is a mere adjunct, business
conduit, and alter ego of petitioner LRTA, their
respective corporate veils must be pierced to satisfy
the money claims of the illegally dismissed private
respondent employees.

We agree with petitioner LRTA. Section 2 (1), Article

IX B, 1987 Constitution, expressly provides that
"[t]he civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the
Government, including government-owned or
controlled corporations with original charters."
Corporations with original charters are those which
have been created by special law and not through

the general corporation law. Thus, in Philippine

National Oil Company Energy Development
Corporation v. Hon. Leogrado, we held that "under
the present state of the law, the test in determining
whether a government-owned or controlled
corporation is subject to the Civil Service Law is the
manner of its creation such that government
corporations created by special charter are subject to
its provisions while those incorporated under the
general Corporation Law are not within its
coverage."12There should be no dispute then that
employment in petitioner LRTA should be governed
only by civil service rules, and not the Labor Code
and beyond the reach of the Department of Labor
and Employment, since petitioner LRTA is a
government-owned and controlled corporation with
an original charter, Executive Order No. 603, Series
of 1980, as amended.

In contrast, petitioner METRO is covered by the Labor

Code despite its later acquisition by petitioner LRTA.
In Lumanta v. National Labor Relations
Commission,13this Court ruled that labor law claims
against government-owned and controlled
corporations without original charter fall within the
jurisdiction of the Department of Labor and
Employment and not the Civil Service Commission.
Petitioner METRO was originally organized under the
Corporation Code, and only became a governmentowned and controlled corporation after it was
acquired by petitioner LRTA. Even then, petitioner
METRO has no original charter, hence, it is the
Department of Labor and Employment, and not the
Civil Service Commission, which has jurisdiction over
disputes arising from the employment of its workers.
Consequently, the terms and conditions of such
employment are governed by the Labor Code and not
by the Civil Service Rules and Regulations.

We therefore hold that the employees of petitioner

METRO cannot be considered as employees of
petitioner LRTA. The employees hired by METRO are
covered by the Labor Code and are under the
jurisdiction of the Department of Labor and
Employment, whereas the employees of petitioner
LRTA, a government-owned and controlled
corporation with original charter, are covered by civil
service rules. Herein private respondent workers
cannot have the best of two worlds, e.g., be
considered government employees of petitioner
LRTA, yet allowed to strike as private employees
under our labor laws. Department of Justice Opinion
No. 108, Series of 1999, issued by then Secretary of
Justice Serafin R. Cuevas on whether or not
employees of petitioner METRO could go on strike is
persuasive

We believe that METRO employees are not covered

by the prohibition against strikes applicable to
employees embraced in the Civil Service. It is not

disputed, but in fact conceded, that METRO

employees are not covered by the Civil Service. This
being so, METRO employees are not covered by the
Civil Service law, rules and regulations but are
covered by the Labor Code and, therefore, the rights
and prerogatives granted to private employees
thereunder, including the right to strike, are available
to them.

Moreover, as noted by Secretary Benjamin E. Diokno,

of the Department of Budget and Management, in his
letter dated February 22, 1999, the employees of
METRO are not entitled to the government
amelioration assistance authorized by the President
pursuant to Administrative Order No. 37 for
government employees, because the employees of
METRO are not government employees since Metro,
Inc. "could not be considered as GOCC as defined
under Section 3 (b) of E.O. 518 x x x x"14

Indeed, there was never an intention to consider the

employees of petitioner METRO as government
employees of petitioner LRTA as well neither from
the beginning, nor until the end. Otherwise, they
could have been easily converted from being
employees in the private sector and absorbed as
government employees covered by the civil service
when petitioner LRTA acquired petitioner METRO in
1989. The stubborn fact is that they remained private
employees with rights and prerogatives granted to
them under the Labor Code, including the right to
strike, which they exercised and from which the
instant dispute arose.

We likewise hold that it is inappropriate to pierce the

corporate veil of petitioner METRO. In Del Rosario v.
National Labor Relations Commission, we ruled that
"[u]nder the law a corporation is bestowed juridical
personality, separate and distinct from its
stockholders. But when the juridical personality of
the corporation is used to defeat public convenience,
justify wrong, protect fraud or defend crime, the
corporation shall be considered as a mere association
of persons, and its responsible officers and/or
stockholders shall be held individually liable. For the
same reasons, a corporation shall be liable for the
obligations of a stockholder, or a corporation and its
successor-in-interest shall be considered as one and
the liability of the former shall attach to the latter.
But for the separate juridical personality of a
corporation to be disregarded, the wrongdoing must
be clearly and convincingly established. It cannot be
presumed."15In Del Rosario, we also held that the
"substantial identity of the incorporators of the two
corporations does not necessarily imply fraud."16

In the instant case, petitioner METRO, formerly

Meralco Transit Organization, Inc., was originally

owned by the Manila Electric Company and

registered with the Securities and Exchange
Commission more than a decade before the labor
dispute. It then entered into a ten-year agreement
with petitioner LRTA in 1984. And, even if petitioner
LRTA eventually purchased METRO in 1989, both
parties maintained their separate and distinct
juridical personality and allowed the agreement to
proceed. In 1990, this Court, in Light Rail Transit
Authority v. Commission on Audit, even upheld the
validity of the said agreement.17Consequently, the
agreement was extended beyond its ten-year period.
In 1995, METROs separate juridical identity was
again recognized when it entered into a collective
bargaining agreement with the workers union. All
these years, METROs distinct corporate personality
continued quiescently, separate and apart from the
juridical personality of petitioner LRTA.

The labor dispute only arose in 2000, after a

deadlock occurred during the collective bargaining
between petitioner METRO and the workers union.
This alone is not a justification to pierce the
corporate veil of petitioner METRO and make
petitioner LRTA liable to private respondent workers.
There are no badges of fraud or any wrongdoing to
pierce the corporate veil of petitioner METRO.

On this point, the Department of Justice Opinion No.

108, Series of 1999, issued by then Secretary of
Justice Serafin R. Cuevas is once again apropos:

Anent the issue of piercing the corporate veil, it was

held in Concept Builders, Inc. v. NLRC (G.R. No.
108734, May 29, 1996, 257 SCRA 149, 159) that the
test in determining the applicability of the doctrine of
piercing the veil of corporate fiction is as follows:

"1. Control, not mere majority or complete stock

control, but complete domination, not only of
finances but of policy and business practice in
respect to the transaction attacked so that the
corporate entity as to this transaction had at the
time no separate mind, will or existence of its own;

2. Such control must have been used by the

defendant to commit fraud or wrong, to perpetuate
the violation of a statutory or other positive legal
duty, or dishonest and unjust act in contravention of
plaintiffs legal rights; and

3. The aforesaid control and breach of duty must

proximately cause the injury or unjust loss
complained of.

The absence of any one of these elements prevents

piercing the corporate veil. In applying the
instrumentality or alter ego doctrine, the courts
are concerned with reality and not form, with how the
corporation operated and the individual defendants
relationship to that operation."

Here, the records do not show that control was used

to commit a fraud or wrong. In fact, it appears that
piercing the corporate veil for the purpose of delivery
of public service, would lead to a confusing situation
since the outcome would be that Metro will be
treated as a mere alter ego of LRTA, not having a
separate corporate personality from LRTA, when
dealing with the issue of strike, and a separate
juridical entity not covered by the Civil Service when
it comes to other matters. Under the Constitution, a
government corporation is either one with original
charter or one without original charter, but never
both.18

In sum, petitioner LRTA cannot be held liable to the

employees of petitioner METRO.

With regard the issue of illegal dismissal, petitioner

METRO maintains that private respondent workers
were not illegally dismissed but should be deemed to
have abandoned their jobs after defying the
assumption of jurisdiction and return-to-work order
issued by the Labor Secretary. Private respondent
workers, on the other hand, submit that they could
not immediately return to work as the light rail
transit system had ceased its operations.

We find for the private respondent workers. In

Batangas Laguna Tayabas Bus Co. v. National Labor
Relations Commission,19 we said that the five-day
period for the strikers to obey the Order of the
Secretary of Justice and return to work was not
sufficient as "some of them may have left Metro
Manila and did not have enough time to return during
the period given by petitioner, which was only five
days."20 In Batangas Laguna Tayabas Bus Co.,21 we
further held

The contention of the petitioner that the private

respondents abandoned their position is also not
acceptable. An employee who forthwith takes steps
to protest his lay-off cannot by any logic be said to
have abandoned his work.

For abandonment to constitute a valid cause for

termination of employment, there must be a

deliberate, unjustified refusal of the employee to

resume his employment. This refusal must be clearly
established. As we stressed in a recent case, mere
absence is not sufficient; it must be accompanied by
overt acts unerringly pointing to the fact that the
employee simply does not want to work anymore.

In the instant case, private respondent workers could

not have defied the return-to-work order of the
Secretary of Labor simply because they were
dismissed immediately, even before they could obey
the said order. The records show that the assumption
of jurisdiction and return-to-work order was issued by
Secretary of Labor Bienvenido E. Laguesma on July
25, 2000. The said order was served and posted by
the sheriffs of the Department of Labor and
Employment the following day, on July 26, 2000.
Further, the said order of assumption of jurisdiction
was duly published on July 27, 2000, in the Philippine
Daily Inquirer and the Philippine Star. On the same
day also, on July 27, 2000, private respondent
workers were dismissed. Neither could they be
considered as having abandoned their work. If
petitioner METRO did not dismiss the strikers right
away, and instead accepted them back to work, the
management agreement between petitioners LRTA
and METRO could still have been extended and the
workers would still have had work to return to.

IN VIEW WHEREOF, the Decision of public respondent

Court of Appeals is AFFIRMED insofar as it holds
Metro Transit Organization, Inc. liable for the illegal
dismissal of private respondents and orders it to pay
them their benefits and full back wages and moral
damages. Further, Metro Transit Organization, Inc. is
ordered to pay attorneys fees equivalent to ten
percent (10%) of the total money judgment. The
petition of the Light Rail Transit Authority is
GRANTED, and the complaint filed against it for
illegal dismissal is DISMISSED for lack of merit.

SO ORDERED.

G.R. No. 85279

July 28, 1989

SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION

(SSSEA), DIONISION T. BAYLON, RAMON MODESTO,
JUANITO MADURA, REUBEN ZAMORA, VIRGILIO DE
ALDAY, SERGIO ARANETA, PLACIDO AGUSTIN,
VIRGILIO MAGPAYO, petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM
(SSS), HON. CEZAR C. PERALEJO, RTC, BRANCH 98,
QUEZON CITY, respondents.

Vicente T. Ocampo & Associates for petitioners.

CORTES, J:

Primarily, the issue raised in this petition is whether

or not the Regional Trial Court can enjoin the Social
Security System Employees Association (SSSEA) from
striking and order the striking employees to return to
work. Collaterally, it is whether or not employees of
the Social Security System (SSS) have the right to
strike.

The antecedents are as follows:

On June 11, 1987, the SSS filed with the Regional

Trial Court of Quezon City a complaint for damages
with a prayer for a writ of preliminary injunction
against petitioners, alleging that on June 9, 1987, the
officers and members of SSSEA staged an illegal
strike and baricaded the entrances to the SSS
Building, preventing non-striking employees from
reporting for work and SSS members from
transacting business with the SSS; that the strike was
reported to the Public Sector Labor - Management
Council, which ordered the strikers to return to work;
that the strikers refused to return to work; and that
the SSS suffered damages as a result of the strike.
The complaint prayed that a writ of preliminary
injunction be issued to enjoin the strike and that the
strikers be ordered to return to work; that the
defendants (petitioners herein) be ordered to pay
damages; and that the strike be declared illegal.

It appears that the SSSEA went on strike after the

SSS failed to act on the union's demands, which
included: implementation of the provisions of the old
SSS-SSSEA collective bargaining agreement (CBA) on
check-off of union dues; payment of accrued
overtime pay, night differential pay and holiday pay;

conversion of temporary or contractual employees

with six (6) months or more of service into regular
and permanent employees and their entitlement to
the same salaries, allowances and benefits given to
other regular employees of the SSS; and payment of
the children's allowance of P30.00, and after the SSS
deducted certain amounts from the salaries of the
employees and allegedly committed acts of
discrimination and unfair labor practices [Rollo, pp.
21-241].

The court a quo, on June 11, 1987, issued a

temporary restraining order pending resolution of the
application for a writ of preliminary injunction [Rollo,
p. 71.] In the meantime, petitioners filed a motion to
dismiss alleging the trial court's lack of jurisdiction
over the subject matter [Rollo, pp. 72-82.] To this
motion, the SSS filed an opposition, reiterating its
prayer for the issuance of a writ of injunction [Rollo,
pp. 209-222]. On July 22,1987, in a four-page order,
the court a quo denied the motion to dismiss and
converted the restraining order into an injunction
upon posting of a bond, after finding that the strike
was illegal [Rollo, pp. 83- 86]. As petitioners' motion
for the reconsideration of the aforesaid order was
also denied on August 14, 1988 [Rollo, p. 94],
petitioners filed a petition for certiorari and
prohibition with preliminary injunction before this
Court. Their petition was docketed as G.R. No. 79577.
In a resolution dated October 21, 1987, the Court,
through the Third Division, resolved to refer the case
to the Court of Appeals. Petitioners filed a motion for
reconsideration thereof, but during its pendency the
Court of Appeals on March 9,1988 promulgated its
decision on the referred case [Rollo, pp. 130-137].
Petitioners moved to recall the Court of Appeals'
decision. In the meantime, the Court on June 29,1988
denied the motion for reconsideration in G.R. No.
97577 for being moot and academic. Petitioners'
motion to recall the decision of the Court of Appeals
was also denied in view of this Court's denial of the
motion for reconsideration [Rollo, pp. 141- 143].
Hence, the instant petition to review the decision of
the Court of Appeals [Rollo, pp. 12-37].

Upon motion of the SSS on February 6,1989, the

Court issued a temporary restraining order enjoining
the petitioners from staging another strike or from
pursuing the notice of strike they filed with the
Department of Labor and Employment on January 25,
1989 and to maintain the status quo [Rollo, pp. 151152].

The Court, taking the comment as answer, and

noting the reply and supplemental reply filed by
petitioners, considered the issues joined and the
case submitted for decision.

The position of the petitioners is that the Regional

Trial Court had no jurisdiction to hear the case
initiated by the SSS and to issue the restraining order
and the writ of preliminary injunction, as jurisdiction
lay with the Department of Labor and Employment or
the National Labor Relations Commission, since the
case involves a labor dispute.

On the other hand, the SSS advances the contrary

view, on the ground that the employees of the SSS
are covered by civil service laws and rules and
regulations, not the Labor Code, therefore they do
not have the right to strike. Since neither the DOLE
nor the NLRC has jurisdiction over the dispute, the
Regional Trial Court may enjoin the employees from
striking.

In dismissing the petition for certiorari and

prohibition with preliminary injunction filed by
petitioners, the Court of Appeals held that since the
employees of the SSS, are government employees,
they are not allowed to strike, and may be enjoined
by the Regional Trial Court, which had jurisdiction
over the SSS' complaint for damages, from
continuing with their strike.

Thus, the sequential questions to be resolved by the

Court in deciding whether or not the Court of Appeals
erred in finding that the Regional Trial Court did not
act without or in excess of jurisdiction when it took
cognizance of the case and enjoined the strike are as
follows:

1.
Do the employees of the SSS have the right
to strike?

2.
Does the Regional Trial Court have
jurisdiction to hear the case initiated by the SSS and
to enjoin the strikers from continuing with the strike
and to order them to return to work?

These shall be discussed and resolved seriatim

The 1987 Constitution, in the Article on Social Justice

and Human Rights, provides that the State "shall
guarantee the rights of all workers to selforganization, collective bargaining and negotiations,
and peaceful concerted activities, including the right
to strike in accordance with law" [Art. XIII, Sec. 31].

By itself, this provision would seem to recognize the

right of all workers and employees, including those in
the public sector, to strike. But the Constitution itself
fails to expressly confirm this impression, for in the
Sub-Article on the Civil Service Commission, it
provides, after defining the scope of the civil service
as "all branches, subdivisions, instrumentalities, and
agencies of the Government, including governmentowned or controlled corporations with original
charters," that "[t]he right to self-organization shall
not be denied to government employees" [Art. IX(B),
Sec. 2(l) and (50)]. Parenthetically, the Bill of Rights
also provides that "[tlhe right of the people, including
those employed in the public and private sectors, to
form unions, associations, or societies for purposes
not contrary to law shall not abridged" [Art. III, Sec.
8]. Thus, while there is no question that the
Constitution recognizes the right of government
employees to organize, it is silent as to whether such
recognition also includes the right to strike.

Resort to the intent of the framers of the organic law

becomes helpful in understanding the meaning of
these provisions. A reading of the proceedings of the
Constitutional Commission that drafted the 1987
Constitution would show that in recognizing the right
of government employees to organize, the
commissioners intended to limit the right to the
formation of unions or associations only, without
including the right to strike.

Thus, Commissioner Eulogio R. Lerum, one of the

sponsors of the provision that "[tlhe right to selforganization shall not be denied to government
employees" [Art. IX(B), Sec. 2(5)], in answer to the
apprehensions expressed by Commissioner Ambrosio
B. Padilla, Vice-President of the Commission,
explained:

MR. LERUM.
I think what I will try to say will not
take that long. When we proposed this amendment
providing for self-organization of government
employees, it does not mean that because they have
the right to organize, they also have the right to
strike. That is a different matter. We are only talking
about organizing, uniting as a union. With regard to
the right to strike, everyone will remember that in
the Bill of Rights, there is a provision that the right to
form associations or societies whose purpose is not
contrary to law shall not be abridged. Now then, if
the purpose of the state is to prohibit the strikes
coming from employees exercising government
functions, that could be done because the moment
that is prohibited, then the union which will go on
strike will be an illegal union. And that provision is
carried in Republic Act 875. In Republic Act 875,
workers, including those from the government-owned
and controlled, are allowed to organize but they are

prohibited from striking. So, the fear of our honorable

Vice- President is unfounded. It does not mean that
because we approve this resolution, it carries with it
the right to strike. That is a different matter. As a
matter of fact, that subject is now being discussed in
the Committee on Social Justice because we are
trying to find a solution to this problem. We know
that this problem exist; that the moment we allow
anybody in the government to strike, then what will
happen if the members of the Armed Forces will go
on strike? What will happen to those people trying to
protect us? So that is a matter of discussion in the
Committee on Social Justice. But, I repeat, the right
to form an organization does not carry with it the
right to strike. [Record of the Constitutional
Commission, vol. 1, p. 569].

It will be recalled that the Industrial Peace Act (R.A.

No. 875), which was repealed by the Labor Code (P.D.
442) in 1974, expressly banned strikes by employees
in the Government, including instrumentalities
exercising governmental functions, but excluding
entities entrusted with proprietary functions:

.Sec. 11. Prohibition Against Strikes in the

Government. The terms and conditions of
employment in the Government, including any
political subdivision or instrumentality thereof, are
governed by law and it is declared to be the policy of
this Act that employees therein shall not strike for
the purpose of securing changes or modification in
their terms and conditions of employment. Such
employees may belong to any labor organization
which does not impose the obligation to strike or to
join in strike: Provided, however, That this section
shall apply only to employees employed in
governmental functions and not those employed in
proprietary functions of the Government including
but not limited to governmental corporations.

No similar provision is found in the Labor Code,

although at one time it recognized the right of
employees of government corporations established
under the Corporation Code to organize and bargain
collectively and those in the civil service to "form
organizations for purposes not contrary to law" [Art.
244, before its amendment by B.P. Blg. 70 in 1980],
in the same breath it provided that "[t]he 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" [now
Art. 276]. Understandably, the Labor Code is silent as
to whether or not government employees may strike,
for such are excluded from its coverage [Ibid]. But
then the Civil Service Decree [P.D. No. 807], is
equally silent on the matter.

On June 1, 1987, to implement the constitutional

guarantee of the right of government employees to
organize, the President issued E.O. No. 180 which
provides guidelines for the exercise of the right to
organize of government employees. In Section 14
thereof, it is provided that "[t]he Civil Service law and
rules governing concerted activities and strikes in the
government service shall be observed, subject to any
legislation that may be enacted by Congress." The
President was apparently referring to Memorandum
Circular No. 6, s. 1987 of the Civil Service
Commission under date April 21, 1987 which, "prior
to the enactment by Congress of applicable laws
concerning strike by government employees ...
enjoins under pain of administrative sanctions, all
government officers and employees from staging
strikes, demonstrations, mass leaves, walk-outs and
other forms of mass action which will result in
temporary stoppage or disruption of public service."
The air was thus cleared of the confusion. At present,
in the absence of any legislation allowing
government employees to strike, recognizing their
right to do so, or regulating the exercise of the right,
they are prohibited from striking, by express
provision of Memorandum Circular No. 6 and as
implied in E.O. No. 180. [At this juncture, it must be
stated that the validity of Memorandum Circular No.
6 is not at issue].

The general rule in the past and up to the present is

that 'the terms and conditions of employment in the
Government, including any political subdivision or
instrumentality thereof are governed by law" (Section
11, the Industrial Peace Act, R.A. No. 875, as
amended and Article 277, the Labor Code, P.D. No.
442, as amended). Since the terms and conditions of
government employment are fixed by law,
government workers cannot use the same weapons
employed by workers in the private sector to secure
concessions from their employers. The principle
behind labor unionism in private industry is that
industrial peace cannot be secured through
compulsion by law. Relations between private
employers and their employees rest on an essentially
voluntary basis. Subject to the minimum
requirements of wage laws and other labor and
welfare legislation, the terms and conditions of
employment in the unionized private sector are
settled through the process of collective bargaining.
In government employment, however, it is the
legislature and, where properly given delegated
power, the administrative heads of government
which fix the terms and conditions of employment.
And this is effected through statutes or
administrative circulars, rules, and regulations, not
through collective bargaining agreements. [At p. 13;
Emphasis supplied].

But are employees of the SSS covered by the

prohibition against strikes?

Apropos is the observation of the Acting

Commissioner of Civil Service, in his position paper
submitted to the 1971 Constitutional Convention,
and quoted with approval by the Court in Alliance, to
wit:

The Court is of the considered view that they are.

Considering that under the 1987 Constitution "[t]he
civil service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
including government-owned or controlled
corporations with original charters" [Art. IX(B), Sec. .
2(l) see also Sec. 1 of E.O. No. 180 where the
employees in the civil service are denominated as
"government employees"] and that the SSS is one
such government-controlled corporation with an
original charter, having been created under R.A. No.
1161, its employees are part of the civil service
[NASECO v. NLRC, G.R. Nos. 69870 & 70295,
November 24,1988] and are covered by the Civil
Service Commission's memorandum prohibiting
strikes. This being the case, the strike staged by the
employees of the SSS was illegal.

The statement of the Court in Alliance of Government

Workers v. Minister of Labor and Employment [G.R.
No. 60403, August 3, 1:983, 124 SCRA 11 is relevant
as it furnishes the rationale for distinguishing
between workers in the private sector and
government employees with regard to the right to
strike:

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
necessarily 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 interest 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. [At pp.
16-17; also quoted in National Housing Corporation v.
Juco, G.R. No. 64313, January 17,1985,134 SCRA
172,178-179].

E.O. No. 180, which provides guidelines for the

exercise of the right to organize of government
employees, while clinging to the same philosophy,
has, however, relaxed the rule to allow negotiation
where the terms and conditions of employment
involved are not among those fixed by law. Thus:

.SECTION 13.
Terms and conditions of
employment or improvements thereof, except those
that are fixed by law, may be the subject of
negotiations between duly recognized employees'
organizations and appropriate government
authorities.

The same executive order has also provided for the

general mechanism for the settlement of labor
disputes in the public sector to wit:

.SECTION 16.
The Civil Service and labor laws
and procedures, whenever applicable, shall be
followed in the resolution of complaints, grievances
and cases involving government employees. In case
any dispute remains unresolved after exhausting all
the available remedies under existing laws and
procedures, the parties may jointly refer the dispute
to the [Public Sector Labor- Management] Council for
appropriate action.

Government employees may, therefore, through their

unions or associations, either petition the Congress
for the betterment of the terms and conditions of
employment which are within the ambit of legislation
or negotiate with the appropriate government
agencies for the improvement of those which are not
fixed by law. If there be any unresolved grievances,
the dispute may be referred to the Public Sector
Labor - Management Council for appropriate action.
But employees in the civil service may not resort to
strikes, walk-outs and other temporary work
stoppages, like workers in the private sector, to
pressure the Govemment to accede to their
demands. As now provided under Sec. 4, Rule III of
the Rules and Regulations to Govern the Exercise of
the Right of Government- Employees to SelfOrganization, which took effect after the instant
dispute arose, "[t]he terms and conditions of
employment in the government, including any
political subdivision or instrumentality thereof and
government- owned and controlled corporations with
original charters are governed by law and employees
therein shall not strike for the purpose of securing
changes thereof."

II

The strike staged by the employees of the SSS

belonging to petitioner union being prohibited by law,
an injunction may be issued to restrain it.

It is futile for the petitioners to assert that the subject

labor dispute falls within the exclusive jurisdiction of
the NLRC and, hence, the Regional Trial Court had no

jurisdiction to issue a writ of injunction enjoining the

continuance of the strike. The Labor Code itself
provides that terms and conditions of employment of
government employees shall be governed by the
Civil Service Law, rules and regulations [Art. 276].
More importantly, E.O. No. 180 vests the Public
Sector Labor - Management Council with jurisdiction
over unresolved labor disputes involving government
employees [Sec. 16]. Clearly, the NLRC has no
jurisdiction over the dispute.

This being the case, the Regional Trial Court was not
precluded, in the exercise of its general jurisdiction
under B.P. Blg. 129, as amended, from assuming
jurisdiction over the SSS's complaint for damages
and issuing the injunctive writ prayed for therein.
Unlike the NLRC, the Public Sector Labor Management Council has not been granted by law
authority to issue writs of injunction in labor disputes
within its jurisdiction. Thus, since it is the Council,
and not the NLRC, that has jurisdiction over the
instant labor dispute, resort to the general courts of
law for the issuance of a writ of injunction to enjoin
the strike is appropriate.

Neither could the court a quo be accused of

imprudence or overzealousness, for in fact it had
proceeded with caution. Thus, after issuing a writ of
injunction enjoining the continuance of the strike to
prevent any further disruption of public service, the
respondent judge, in the same order, admonished
the parties to refer the unresolved controversies
emanating from their employer- employee
relationship to the Public Sector Labor - Management
Council for appropriate action [Rollo, p. 86].

III

In their "Petition/Application for Preliminary and

Mandatory Injunction," and reiterated in their reply
and supplemental reply, petitioners allege that the
SSS unlawfully withheld bonuses and benefits due
the individual petitioners and they pray that the
Court issue a writ of preliminary prohibitive and
mandatory injunction to restrain the SSS and its
agents from withholding payment thereof and to
compel the SSS to pay them. In their supplemental
reply, petitioners annexed an order of the Civil
Service Commission, dated May 5, 1989, which ruled
that the officers of the SSSEA who are not
preventively suspended and who are reporting for
work pending the resolution of the administrative
cases against them are entitled to their salaries,
year-end bonuses and other fringe benefits and
affirmed the previous order of the Merit Systems
Promotion Board.

10

The matter being extraneous to the issues elevated

to this Court, it is Our view that petitioners' remedy is
not to petition this Court to issue an injunction, but to
cause the execution of the aforesaid order, if it has
already become final.

WHEREFORE, no reversible error having been

committed by the Court of Appeals, the instant
petition for review is hereby DENIED and the decision
of the appellate court dated March 9, 1988 in CA-G.R.
SP No. 13192 is AFFIRMED. Petitioners'
"Petition/Application for Preliminary and Mandatory
Injunction" dated December 13,1988 is DENIED.

SO ORDERED.

G.R. No. 80767

April 22, 1991

11

BOY SCOUTS OF THE PHILIPPINES, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION,
FORTUNATO ESGUERRA, ROBERTO MALABORBOR,
ESTANISLAO MISA, VICENTE EVANGELISTA, and
MARCELINO GARCIA, respondents.

Julio O. Lopez for petitioner.

would receive a relocation allowance equivalent to

one (1) month's basic pay. This assurance, however,
failed to persuade private respondents to abandon
their opposition to the transfer orders issued by the
BSP Secretary-General.

On 13 November 1984, a complaint 3 (docketed as

NLRC Case No. 16-84J) for illegal transfer was filed
with the then Ministry of Labor and Employment,
Sub-Regional Arbitration Branch IV, San Pablo City,
Laguna. Private respondents there sought to enjoin
implementation of Special Orders Nos. 80, 81, 83, 84
and 85, alleging, among other things, that said
orders were "indubitable and irrefutable action[s]
prejudicial not only to [them] but to [their] families
and [would] seriously affect [their] economic stability
and solvency considering the present cost of living."

FELICIANO, J.:p

This Petition for Certiorari is directed at (1) the

Decision, 1 dated 27 February 1987, and (2) the
Resolution 2 dated 16 October 1987, both issued by
the National Labor Relations Commission ("NLRC") in
Case No. 1637-84.

Private respondents Fortunato C. Esquerra, Roberto

O. Malaborbor, Estanislao M. Misa, Vicente N.
Evangelista and Marcelino P. Garcia, had all been
rank-and-file employees of petitioner Boy Scouts of
the Philippines ("BSP"). At the time of termination of
their services in February 1985, private respondents
were stationed at the BSP Camp in Makiling, Los
Baos, Laguna.

The events which led to such termination of services

are as follows:

On 19 October 1984, the Secretary-General of

petitioner BSP issued Special Orders Nos. 80, 81, 83,
84 and 85 addressed separately to the five (5)
private respondents, informing them that on 20
November 1984, they were to be transferred from
the BSP Camp in Makiling to the BSP Land Grant in
Asuncion, Davao del Norte. These Orders were
opposed by private respondents who, on 4 November
1984, appealed the matter to the BSP National
President.

On 6 November 1984, petitioner BSP conducted a

pre-transfer briefing at its National Headquarters in
Manila. Private respondents were in attendance
during the briefing and they were there assured that
their transfer to Davao del Norte would not involve
any diminution in salary, and that each of them

On 21 November 1984 (or the day immediately

following the date of scheduled transfer), the BSP
Camp Manager in Makiling issued a Memorandum
requiring the five (5) private respondents to explain
why they should not be charged administratively for
insubordination. The Memorandum was a direct
result of the refusal by private respondents, two (2)
days earlier, to accept from petitioner BSP their
respective boat tickets to Davao del Norte and their
relocation allowances.

Meanwhile, in a letter of the same date, the BSP

National President informed private respondents that
their refusal to comply with the Special Orders was
not sufficiently justified and constituted rank
disobedience. Memoranda subsequently issued by
the BSP Secretary-General stressed that such refusal
as well as the explanations proffered therefor, were
unacceptable and could altogether result in
termination of employment with petitioner BSP.
These warnings notwithstanding, private respondents
continued pertinaciously to disobey the disputed
transfer orders.

Petitioner BSP consequently imposed a five-day

suspension on the five (5) private respondents, in the
latter part of January 1985. Subsequently, by Special
Order dated 12 February 1985 issued by the BSP
Secretary-General, private respondents' services
were ordered terminated effective 15 February 1985.

On 22 February 1985, private respondents amended

their original complaint to include charges of illegal
dismissal and unfair labor practice against petitioner
BSP. 4 The Labor Arbiter thereafter proceeded to hear
the complaint.

12

In a decision 5 dated 31 July 1985, the Labor Arbiter

ordered the dismissal of private respondents'
complaint for lack of merit.

On 27 February 1987, however, the ruling of the

Labor Arbiter was reversed by public respondent,
NLRC, which held that private respondents had been
illegally dismissed by petitioner BSP. The dispositive
portion of the NLRC decision read:

WHEREFORE, premises considered the Decision

appealed from is hereby SET ASIDE and a new one
entered ordering the respondent-appellee [petitioner
BSP] to reinstate the complainants-appellants
[private respondents] to their former positions
without loss of seniority rights and other benefits
appurtenant thereto and with full backwages from
the time they were illegally dismissed from the
service up to the date of their actual reinstatement.

SO ORDERED.

The Court notes at the outset that in the Position

Paper 6 filed by petitioner BSP with the Labor Arbiter,
it was alleged in the second paragraph thereof, that
petitioner is a "civic service, non-stock and non-profit
organization, relying mostly [on] government and
public support, existing under and by virtue of
Commonwealth Act No. 111, as amended, by
Presidential Decree No. 460 . . . " A similar allegation
was contained in the Brief for Appellee 7 and in the
Petition 8 and Memorandum 9 filed by petitioner BSP
with public respondent NLRC and this Court,
respectively. The same allegation, moreover,
appeared in the Comment 10 (also treated as the
Memorandum) submitted to this Court by the
Solicitor General on behalf of public respondent
NLRC; for their part, private respondents stated in
their Appeal Memorandum 11 with the NLRC that
petitioner BSP is "by mandate of law a Public
Corporation," a statement reiterated by them in their
Memorandum 12 before this Court.

In a Resolution dated 9 August 1989, this Court

required the parties and the Office of the
Government Corporate Counsel to file a comment on
the question of whether or not petitioner BSP is in
fact a government-owned or controlled corporation.

Petitioner, private respondents, the Office of the

Solicitor General and the Office of the Government
Corporate Counsel filed their respective comments.

The central issue is whether or not the BSP is

embraced within the Civil Service as that term is
defined in Article IX (B) (2) (1) of the 1987
Constitution which reads as follows:

The Civil Service embraces all branches,

subdivisions, instrumentality mentalities and
agencies of the Government, including governmentowned or controlled corporations with original
charters.

xxx

xxx

xxx

The answer to the central issue will determine

whether or not private respondent NLRC had
jurisdiction to render the Decision and Resolution
which are here sought to be nullified.

The responses of the parties, on the one hand, and of

the Office of the Solicitor General and the Office of
the Government Corporate Counsel, upon the other
hand, in compliance with the Resolution of this Court
of 9 August 1989, present a noteworthy uniformity.
Petitioner BSP and private respondents submit
substantially the same view "that the BSP is a purely
private organization". In contrast, the Solicitor
General and the Government Corporate Counsel take
much the same position, that is, that the BSP is a
"public corporation' or a "quasi-public corporation"
and, as well, a "government controlled corporation."
Petitioner BSP's compliance with our Resolution
invokes the following provisions of its Constitution
and By-laws:

The Boy Scouts of the Philippines declares that it is

an independent, voluntary, non-political, nonsectarian and non-governmental organization, with
obligations towards nation building and with
international orientation.

The BSP, petitioner stresses, does not receive any

monetary or financial subsidy from the Government
whether on the national or local level. 13 Petitioner
declares that it is a "purely private organization"
directed and controlled by its National Executive
Board the members of which are, it is said, all
"voluntary scouters," including seven (7) Cabinet
Secretaries. 14

Private respondents submitted a supplementary

memorandum arguing that while petitioner BSP was
created as a public corporation, it had lost that status
when Section 2 of Commonwealth Act No. 111 as

13

amended by P.D. No. 460 conferred upon it the

powers which ordinary private corporations
organized under the Corporation Code have:

Sec. 2. The said corporation shall have perpetual

succession with power to sue and be sued; to hold
such real and personal estate as shall be necessary
for corporate purposes, and to receive real and
personal property by gift, devise, or bequest; to
adopt a seal, and to alter or destroy the same at
pleasure; to have offices and conduct its business
and affairs in the City of Manila and in the several
provinces; to make and adopt by-laws, rules and
regulations not inconsistent with the laws of the
Philippines, and generally to do all such acts and
things (including the establishment of regulations for
the election of associates and successors: as may be
necessary to carry into effect the provisions of the
Act and promote the purposes of said corporation.

Private respondents also point out that the BSP is

registered as a private employer with the Social
Security System and that all its staff members and
employees are covered by the Social Security Act,
indicating that the BSP had lost its personality or
standing as a public corporation. It is further alleged
that the BSP's assets and liabilities, official
transactions and financial statements have never
been subjected to audit by the government auditing
office, i.e., the Commission on Audit, being audited
rather by the private auditing firm of Sycip Gorres
Velayo and Co. Private respondents finally state that
the appointments of BSP officers and staff were not
approved or confirmed by the Civil Service
Commission.

The views of the Office of the Solicitor General and

the Office of the Government Corporate Counsel on
the above issue appeared to be generally similar. The
Solicitor General's Office, although it had appeared
for the NLRC and filed a Comment on the latter's
behalf on the merits of the Petition for Certiorari,
submitted that the BSP is a government-owned or
controlled corporation, having been created by virtue
of Commonwealth Act No. 111 entitled "An Act to
Create a Public Corporation to be known as the Boy
Scouts of the Philippines and to Define its Powers and
Purposes." The Solicitor General stressed that the
BSP was created in order to "promote, through
organization, and cooperation with other agencies
the ability of boys to do things for themselves and
others, to train them in scoutcraft, and to teach them
patriotism, courage, self-reliance, and kindred
virtues, using the methods which are now in common
use by boy scouts." 5 He further noted that the BSP's
objectives and purposes are "solely of a benevolent
character and not for pecuniary profit by its
members. 16 The Solicitor General also underscored
the extent of government participation in the BSP

under its charter as reflected in the composition of its

governing body:

The governing body of the said corporation shall

consist of a National Executive Board composed of
(a) the President of the Philippines or his
representative; (b) the charter and life members of
the Boy Scouts of the Philippines; (c) the Chairman of
the Board of Trustees of the Philippine Scouting
Foundation; (d) the Regional Chairman of the Scout
Regions of the Philippines; (e) the Secretary of
Education and Culture, the Secretary of Social
Welfare, the Secretary of National Defense, the
Secretary of Labor, the Secretary of Finance, the
Secretary of Youth and Sports, and the Secretary of
local Government and Community Development; (f)
an equal number of individuals from the private
sector; (g) the National President of the Girl Scouts of
the Philippines; (h) one Scout of Senior age from
each Scout Region to represent the boy membership;
and (i) three representatives of the cultural
minorities. Except for the Regional Chairman who
shall be elected by the Regional Scout Councils
during their annual meetings, and the Scouts of their
respective regions, all members of the National
Executive Board shall be either by appointment or
cooption, subject to ratification and confirmation by
the Chief Scout, who shall be the Head of State. . . .
17 (Emphasis supplied)

The Government Corporate Counsel, like the Solicitor

General, describes the BSP as a "public corporation"
but, unlike the Solicitor General, suggests that the
BSP is more of a "quasi corporation" than a "public
corporation." The BSP, unlike most public
corporations which are created for a political
purpose, is not vested with political or governmental
powers to be exercised for the public good or public
welfare in connection with the administration of civil
government. The Government Corporate Counsel
submits, more specifically, that the BSP falls within
the ambit of the term "government-owned or
controlled corporation" as defined in Section 2 of P.D.
No. 2029 (approved on 4 February 1986) which reads
as follows:

A government-owned or controlled corporation is a

stock or a non-stock corporation, whether performing
governmental or proprietary functions, which is
directly chartered by special law or if organized
under the general corporation law is owned or
controlled by the government directly, or indirectly
through a parent corporation or subsidiary
corporation, to the extent of at least a majority of its
outstanding capital stock or its outstanding voting
capital stock.

xxx

xxx

xxx

14

(Emphasis supplied)

Examining the relevant statutory provisions and the

arguments outlined above, the Court considers that
the following need to be considered in arriving at the
appropriate legal characterization of the BSP for
purposes of determining whether its officials and
staff members are embraced in the Civil Service.
Firstly, BSP's functions as set out in its statutory
charter do have a public aspect. BSP's functions do
relate to the fostering of the public virtues of
citizenship and patriotism and the general
improvement of the moral spirit and fiber of our
youth. The social value of activities like those to
which the BSP dedicates itself by statutory mandate
have in fact, been accorded constitutional
recognition. Article II of the 1987 Constitution
includes in the "Declaration of Principles and State
Policies," the following:

Sec. 13. The State recognizes the vital role of the

youth in nation-building and shall promote and
protect their physical, moral, spiritual, intellectual,
and social well-being. It shall inculcate in the youth
patriotism and nationalism, and encourage their
involvement in public and civic affairs.

At the same time, BSP's sanctions do not relate to

the governance of any part of territory of the
Philippines; BSP is not a public corporation in the
same sense that municipal corporations or local
governments are public corporations. BSP's functions
can not also be described as proprietary functions in
the same sense that the functions or activities of
government-owned or controlled corporations like
the National Development Company or the National
Steel Corporation can be described as proprietary or
"business-like" in character. Nevertheless, the public
character of BSP's functions and activities must be
conceded, for they pertain to the educational, civic
and social development of the youth which
constitutes a very substantial and important part of
the nation.

The second aspect that the Court must take into

account relates to the governance of the BSP. The
composition of the National Executive Board of the
BSP includes, as noted from Section 5 of its charter
quoted earlier, includes seven (7) Secretaries of
Executive Departments. The seven (7) Secretaries
(now six [6] in view of the abolition of the
Department of Youth and Sports and merger thereof
into the Department of Education, Culture and
Sports) by themselves do not constitute a majority of
the members of the National Executive Board. We
must note at the same time that the appointments of

members of the National Executive Board, except

only the appointments of the Regional Chairman and
Scouts of Senior age from the various Scout Regions,
are subject to ratification and confirmation by the
Chief Scout, who is the President of the Philippines.
Vacancies to the Board are filled by a majority vote of
the remaining members thereof, but again subject to
ratification and confirmation by the Chief Scout. 18
We must assume that such confirmation or
ratification involves the exercise of choice or
discretion on the part of ratifying or confirming
power. It does appears therefore that there is
substantial governmental (i.e., Presidential)
participation or intervention in the choice of the
majority of the members of the National Executive
Board of the BSP.

The third aspect relates to the character of the

assets and funds of the BSP. The original assets of
the BSP were acquired by purchase or gift or other
equitable arrangement with the Boy Scouts of
America, of which the BSP was part before the
establishment of the Commonwealth of the
Philippines. The BSP charter, however, does not
indicate that such assets were public or statal in
character or had originated from the Government or
the State. According to petitioner BSP, its operating
funds used for carrying out its purposes and
programs, are derived principally from membership
dues paid by the Boy Scouts themselves and from
property rentals. In this respect, the BSP appears
similar to private non-stock, non-profit corporations,
although its charter expressly envisages donations
and contributions to it from the Government and any
of its agencies and instrumentalities. 19 We note only
that BSP funds have not apparently heretofore been
regarded as public funds by the Commission on
Audit, considering that such funds have not been
audited by the Commission.

While the BSP may be seen to be a mixed type of

entity, combining aspects of both public and private
entities, we believe that considering the character of
its purposes and its functions, the statutory
designation of the BSP as "a public corporation" and
the substantial participation of the Government in
the selection of members of the National Executive
Board of the BSP, the BSP, as presently constituted
under its charter, is a government-controlled
corporation within the meaning of Article IX. (B) (2)
(1) of the Constitution.

We are fortified in this conclusion when we note that

the Administrative Code of 1987 designates the BSP
as one of the attached agencies of the Department of
Education, Culture and Sports ("DECS"). 20 An
"agency of the Government" is defined as referring to
any of the various units of the Government including
a department, bureau, office, instrumentality,
government-owned or-controlled corporation, or local

15

government or distinct unit therein. 21 "Government

instrumentality" is in turn defined in the 1987
Administrative Code in the following manner:

Instrumentality refers to any agency of the

National Government, not integrated within the
department framework, vested with special functions
or jurisdiction by law, endowed with some if not all
corporate powers, administering special funds, and
enjoying operational autonomy usually through a
charter. This term includes regulatory agencies,
chartered institutions and government-owned or
controlled corporations. 22 (Emphasis supplied)

The same Code describes a "chartered institution" in

the following terms:

Chartered institution refers to any agency

organized or operating under a special charter, and
vested by law with functions relating to specific
constitutional policies or objectives. This term
includes the state universities and colleges, and the
monetary authority of the State. 23 (Emphasis
supplied)

We believe that the BSP is appropriately regarded as

"a government instrumentality" under the 1987
Administrative Code.

It thus appears that the BSP may be regarded as

both a "government controlled corporation with an
original charter" and as an "instrumentality" of the
Government within the meaning of Article IX (B) (2)
(1) of the Constitution. It follows that the employees
of petitioner BSP are embraced within the Civil
Service and are accordingly governed by the Civil
Service Law and Regulations.

It remains only to note that even before the

effectivity of the 1987 Constitution employees of the
BSP already fell within the scope of the Civil Service.
In National Housing Corporation v. Juco, 24 decided in
1985, the Court, speaking through Mr. Justice
Gutierrez, held:

There should no longer be any question at this time

that employees of government-owned or controlled
corporations are governed by the civil service law
and civil service rules and regulations.

Section 1, Article XII-B of the [19731 Constitution

specifically provides:

The Civil Service embraces every branch, agency,

subdivision and instrumentality of the Government,
including every government-owned or controlled
corporation. . . .

The 1935 Constitution had a similar provision in its

Section 1, Article XII which stated:

A Civil Service embracing all branches and

subdivisions of the Government shall be provided by
law.

The inclusion of "government-owned or controlled

corporations" within the embrace of the civil service
shows a deliberate effort of the framers to plug an
earlier loophole which allowed government-owned or
controlled corporations to avoid the full
consequences of the all encompassing coverage of
the civil service system. The same explicit intent is
shown by the addition of "agency" and
"instrumentality" to branches and subdivisions of the
Government. All offices and firms of the government
are covered. The amendments introduced in 1973
are not idle exercises or meaningless gestures. They
carry the strong message that civil service coverage
is broad and all-embracing insofar as employment in
the government in any of its governmental or
corporate arms is concerned. 25

The complaint in NLRC Case No. 1637-84 having

been filed on 13 November 1984, when the 1973
Constitution was still in force, our ruling in Juco
applies in the case at bar. 26

In view of the foregoing, we hold that both the Labor

Arbiter and public respondent NLRC had no
jurisdiction over the complaint filed by private
respondents in NLRC Case No. 1637-84; neither labor
agency had before it any matter which could validly
have been passed upon by it in the exercise of
original or appellate jurisdiction. The appealed
Decision and Resolution in this case, having been
rendered without jurisdiction, vested no rights and
imposed no liabilities upon any of the parties here
involved. That neither party had expressly raised the
issue of jurisdiction in the pleadings poses no
obstacle to this ruling of the Court, which may motu
proprio take cognizance of the issue of existence or
absence of jurisdiction and pass upon the same. 27

ACCORDINGLY, the Decision of the Labor Arbiter

dated 31 July 1985, and the Decision dated 27
February 1987 and Resolution dated 16 October

16

1987, issued by public respondent NLRC, in NLRC

Case No. 1637-84, are hereby SET ASIDE. All other
orders and resolutions rendered in this case by the
Labor Arbiter and the NLRC are likewise SET ASIDE.
No pronouncement as to costs.

G.R. No. 86773

February 14, 1992

SOUTHEAST ASIAN FISHERIES DEVELOPMENT

CENTER-AQUACULTURE DEPARTMENT (SEAFDECAQD), DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS
(HEAD, ADMINISTRATIVE DIV.), BEN DELOS REYES
(FINANCE OFFICER), petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
JUVENAL LAZAGA, respondents.

Ramon Encarnacion for petitioners.

Caesar T. Corpus for private respondent.

NOCON, J.:

This is a petition for certiorari to annul and set aside

the July 26, 1988 decision of the National Labor
Relations Commission sustaining the labor arbiter, in
holding herein petitioners Southeast Asian Fisheries
Development Center-Aquaculture Department
(SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil Cuevas and
Ben de los Reyes liable to pay private respondent
Juvenal Lazaga the amount of P126,458.89 plus
interest thereon computed from May 16, 1986 until
full payment thereof is made, as separation pay and
other post-employment benefits, and the resolution
denying the petitioners' motion for reconsideration of
said decision dated January 9, 1989.

The antecedent facts of the case are as follows:

SEAFDEC-AQD is a department of an international

organization, the Southeast Asian Fisheries
Development Center, organized through an
agreement entered into in Bangkok, Thailand on
December 28, 1967 by the governments of Malaysia,
Singapore, Thailand, Vietnam, Indonesia and the
Philippines with Japan as the sponsoring country
(Article 1, Agreement Establishing the SEAFDEC).

On April 20, 1975, private respondent Juvenal Lazaga

was employed as a Research Associate an a
probationary basis by the SEAFDEC-AQD and was
appointed Senior External Affairs Officer on January

17

5, 1983 with a monthly basic salary of P8,000.00 and

a monthly allowance of P4,000.00. Thereafter, he
was appointed to the position of Professional III and
designated as Head of External Affairs Office with the
same pay and benefits.

On May 8, 1986, petitioner Lacanilao in his capacity

as Chief of SEAFDEC-AQD sent a notice of
termination to private respondent informing him that
due to the financial constraints being experienced by
the department, his services shall be terminated at
the close of office hours on May 15, 1986 and that he
is entitled to separation benefits equivalent to one
(1) month of his basic salary for every year of service
plus other benefits (Rollo, p. 153).

Upon petitioner SEAFDEC-AQD's failure to pay private

respondent his separation pay, the latter filed on
March 18, 1987 a complaint against petitioners for
non-payment of separation benefits plus moral
damages and attorney's fees with the Arbitration
Branch of the NLRC (Annex "C" of Petition for
Certiorari).

Petitioners in their answer with counterclaim alleged

that the NLRC has no jurisdiction over the case
inasmuch as the SEAFDEC-AQD is an international
organization and that private respondent must first
secure clearances from the proper departments for
property or money accountability before any claim
for separation pay will be paid, and which clearances
had not yet been obtained by the private respondent.

A formal hearing was conducted whereby private

respondent alleged that the non-issuance of the
clearances by the petitioners was politically
motivated and in bad faith. On the other hand,
petitioners alleged that private respondent has
property accountability and an outstanding obligation
to SEAFDEC-AQD in the amount of P27,532.11.
Furthermore, private respondent is not entitled to
accrued sick leave benefits amounting to P44,000.00
due to his failure to avail of the same during his
employment with the SEAFDEC-AQD (Annex "D", Id.).

On January 12, 1988, the labor arbiter rendered a

decision, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is

hereby rendered ordering respondents:

1.
To pay complainant P126,458.89, plus legal
interest thereon computed from May 16, 1986 until

full payment thereof is made, as separation pay and

other post-employment benefits;

2.
To pay complainant actual damages in the
amount of P50,000, plus 10% attorney's fees.

All other claims are hereby dismissed.

SO ORDERED. (Rollo, p. 51, Annex "E")

On July 26, 1988, said decision was affirmed by the

Fifth Division of the NLRC except as to the award of
P50,000.00 as actual damages and attorney's fees
for being baseless. (Annex "A", p. 28, id.)

On September 3, 1988, petitioners filed a Motion for

Reconsideration (Annex "G", id.) which was denied on
January 9, 1989. Thereafter, petitioners instituted
this petition for certiorari alleging that the NLRC has
no jurisdiction to hear and decide respondent
Lazaga's complaint since SEAFDEC-AQD is immune
from suit owing to its international character and the
complaint is in effect a suit against the State which
cannot be maintained without its consent.

The petition is impressed with merit.

Petitioner Southeast Asian Fisheries Development

Center-Aquaculture Department (SEAFDEC-AQD) is
an international agency beyond the jurisdiction of
public respondent NLRC.

It was established by the Governments of Burma,

Kingdom of Cambodia, Republic of Indonesia, Japan,
Kingdom of Laos, Malaysia. Republic of the
Philippines, Republic of Singapore, Kingdom of
Thailand and Republic of Vietnam (Annex "H",
Petition).

The Republic of the Philippines became a signatory to

the Agreement establishing SEAFDEC on January
16,1968. Its purpose is as follows:

The purpose of the Center is to contribute to the

promotion of the fisheries development in Southeast
Asia by mutual co-operation among the member
governments of the Center, hereinafter called the
"Members", and through collaboration with

18

international organizations and governments external

to the Center. (Agreement Establishing the SEAFDEC,
Art. 1; Annex "H" Petition) (p.310, Rollo)

SEAFDEC-AQD was organized during the Sixth

Council Meeting of SEAFDEC on July 3-7, 1973 in
Kuala Lumpur, Malaysia as one of the principal
departments of SEAFDEC (Annex "I", id.) to be
established in Iloilo for the promotion of research in
aquaculture. Paragraph 1, Article 6 of the Agreement
establishing SEAFDEC mandates:

1.
The Council shall be the supreme organ of
the Center and all powers of the Center shall be
vested in the Council.

Being an intergovernmental organization, SEAFDEC

including its Departments (AQD), enjoys functional
independence and freedom from control of the state
in whose territory its office is located.

As Senator Jovito R. Salonga and Former Chief Justice

Pedro L. Yap stated in their book, Public International
Law (p. 83, 1956 ed.):

Permanent international commissions and

administrative bodies have been created by the
agreement of a considerable number of States for a
variety of international purposes, economic or social
and mainly non-political. Among the notable
instances are the International Labor Organization,
the International Institute of Agriculture, the
International Danube Commission. In so far as they
are autonomous and beyond the control of any one
State, they have a distinct juridical personality
independent of the municipal law of the State where
they are situated. As such, according to one leading
authority "they must be deemed to possess a species
of international personality of their own." (Salonga
and Yap, Public International Law, 83 [1956 ed.])

Pursuant to its being a signatory to the Agreement,

the Republic of the Philippines agreed to be
represented by one Director in the governing
SEAFDEC Council (Agreement Establishing SEAFDEC,
Art. 5, Par. 1, Annex "H", ibid.) and that its national
laws and regulations shall apply only insofar as its
contribution to SEAFDEC of "an agreed amount of
money, movable and immovable property and
services necessary for the establishment and
operation of the Center" are concerned (Art. 11,
ibid.). It expressly waived the application of the
Philippine laws on the disbursement of funds of
petitioner SEAFDEC-AQD (Section 2, P.D. No. 292).

The then Minister of Justice likewise opined that

Philippine Courts have no jurisdiction over SEAFDECAQD in Opinion No. 139, Series of 1984

4.
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 there 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 member-states. In the case at bar, for instance,
the entertainment by the National Labor Relations
Commission of Mr. Madamba's reinstatement cases
would amount to interference by the Philippine
Government in the management decisions of the
SEARCA governing board; even worse, it could
compromise the desired impartiality of the
organization since it will have to suit its actuations to
the requirements of Philippine law, which may not
necessarily coincide with the interests of the other
member-states. It is precisely to forestall these
possibilities that in cases where the extent of the
immunity is specified in the enabling instruments of
international organizations, jurisdictional immunity
from the host country is invariably among the first
accorded. (See Jenks, Id.; See also Bowett, The Law
of International Institutions, pp. 284-1285).

Respondent Lazaga's invocation of estoppel with

respect to the issue of jurisdiction is unavailing
because estoppel does not apply to confer
jurisdiction to a tribunal that has none over a cause
of action. Jurisdiction is conferred by law. Where
there is none, no agreement of the parties can
provide one. Settled is the rule that the decision of a
tribunal not vested with appropriate jurisdiction is
null and void. Thus, in Calimlim vs. Ramirez, this
Court held:

A rule, that had been settled by unquestioned

acceptance and upheld in decisions so numerous to
cite is that the jurisdiction of a court over the subject
matter of the action is a matter of law and may not
be conferred by consent or agreement of the parties.
The lack of jurisdiction of a court may be raised at
any stage of the proceedings, even on appeal. This
doctrine has been qualified by recent
pronouncements which it stemmed principally from
the ruling in the cited case of Sibonghanoy. It is to be
regretted, however, that the holding in said case had
been applied to situations which were obviously not

19

contemplated therein. The exceptional circumstances

involved in Sibonghanoy which justified the
departure from the accepted concept of nonwaivability of objection to jurisdiction has been
ignored and, instead a blanket doctrine had been
repeatedly upheld that rendered the supposed ruling
in Sibonghanoy not as the exception, but rather the
general rule, virtually overthrowing altogether the
time-honored principle that the issue of jurisdiction is
not lost by waiver or by estoppel. (Calimlim vs.
Ramirez, G.R. No. L-34362, 118 SCRA 399; [1982])

Respondent NLRC'S citation of the ruling of this Court

in Lacanilao v. De Leon (147 SCRA 286 [1987]) to
justify its assumption of jurisdiction over SEAFDEC is
misplaced. On the contrary, the Court in said case
explained why it took cognizance of the case. Said
the Court:

We would note, finally, that the present petition

relates to a controversy between two claimants to
the same position; this is not a controversy between
the SEAFDEC on the one hand, and an officer or
employee, or a person claiming to be an officer or
employee, of the SEAFDEC, on the other hand. There
is before us no question involving immunity from the
jurisdiction of the Court, there being no plea for such
immunity whether by or on behalf of SEAFDEC, or by
an official of SEAFDEC with the consent of SEAFDEC
(Id., at 300; emphasis supplied).

WHEREFORE, finding SEAFDEC-AQD to be an

international agency beyond the jurisdiction of the
courts or local agency of the Philippine government,
the questioned decision and resolution of the NLRC
dated July 26, 1988 and January 9, 1989,
respectively, are hereby REVERSED and SET ASIDE
for having been rendered without jurisdiction. No
costs.

G.R. No. 78909

June 30, 1989

MATERNITY CHILDREN'S HOSPITAL, represented by

ANTERA L. DORADO, President, petitioner,
vs.
THE HONORABLE SECRETARY OF LABOR AND THE
REGIONAL DlRECTOR OF LABOR, REGION X,
respondents.

MEDIALDEA, J.:

This is a petition for certiorari seeking the annulment

of the Decision of the respondent Secretary of Labor
dated September 24, 1986, affirming with
modification the Order of respondent Regional
Director of Labor, Region X, dated August 4, 1986,
awarding salary differentials and emergency cost of
living allowances (ECOLAS) to employees of
petitioner, and the Order denying petitioner's motion
for reconsideration dated May 13, 1987, on the
ground of grave abuse of discretion.

Petitioner is a semi-government hospital, managed

by the Board of Directors of the Cagayan de Oro

20

Women's Club and Puericulture Center, headed by

Mrs. Antera Dorado, as holdover President. The
hospital derives its finances from the club itself as
well as from paying patients, averaging 130 per
month. It is also partly subsidized by the Philippine
Charity Sweepstakes Office and the Cagayan De Oro
City government.

Petitioner has forty-one (41) employees. Aside from

salary and living allowances, the employees are
given food, but the amount spent therefor is
deducted from their respective salaries (pp. 77-78,
Rollo).

all the petitioner's employees, the dispositive portion

of which reads:

WHEREFORE, premises considered, respondent

Maternity and Children Hospital is hereby ordered to
pay the above-listed complainants the total amount
indicated opposite each name, thru this Office within
ten (10) days from receipt thereof. Thenceforth, the
respondent hospital is also ordered to pay its
employees/workers the prevailing statutory minimum
wage and allowance.

SO ORDERED. (p. 34, Rollo)

On May 23, 1986, ten (10) employees of the
petitioner employed in different capacities/positions
filed a complaint with the Office of the Regional
Director of Labor and Employment, Region X, for
underpayment of their salaries and ECOLAS, which
was docketed as ROX Case No. CW-71-86.

On June 16, 1986, the Regional Director directed two

of his Labor Standard and Welfare Officers to inspect
the records of the petitioner to ascertain the truth of
the allegations in the complaints (p. 98, Rollo).
Payrolls covering the periods of May, 1974, January,
1985, November, 1985 and May, 1986, were duly
submitted for inspection.

On July 17, 1986, the Labor Standard and Welfare

Officers submitted their report confirming that there
was underpayment of wages and ECOLAs of all the
employees by the petitioner, the dispositive portion
of which reads:

IN VIEW OF THE FOREGOING, deficiency on wage and

ecola as verified and confirmed per review of the
respondent payrolls and interviews with the
complainant workers and all other information
gathered by the team, it is respectfully
recommended to the Honorable Regional Director,
this office, that Antera Dorado, President be
ORDERED to pay the amount of SIX HUNDRED FIFTY
FOUR THOUSAND SEVEN HUNDRED FIFTY SIX &
01/100 (P654,756.01), representing underpayment of
wages and ecola to the THIRTY SIX (36) employees of
the said hospital as appearing in the attached Annex
"F" worksheets and/or whatever action equitable
under the premises. (p. 99, Rollo)

Based on this inspection report and recommendation,

the Regional Director issued an Order dated August
4, 1986, directing the payment of P723,888.58,
representing underpayment of wages and ECOLAs to

Petitioner appealed from this Order to the Minister of

Labor and Employment, Hon. Augusto S. Sanchez,
who rendered a Decision on September 24, 1986,
modifying the said Order in that deficiency wages
and ECOLAs should be computed only from May 23,
1983 to May 23, 1986, the dispositive portion of
which reads:

WHEREFORE, the August 29, 1986 order is hereby

MODIFIED in that the deficiency wages and ECOLAs
should only be computed from May 23, 1983 to May
23, 1986. The case is remanded to the Regional
Director, Region X, for recomputation specifying the
amounts due each the complainants under each of
the applicable Presidential Decrees. (p. 40, Rollo)

On October 24, 1986, the petitioner filed a motion for

reconsideration which was denied by the Secretary of
Labor in his Order dated May 13, 1987, for lack of
merit (p. 43 Rollo).

The instant petition questions the all-embracing

applicability of the award involving salary
differentials and ECOLAS, in that it covers not only
the hospital employees who signed the complaints,
but also those (a) who are not signatories to the
complaint, and (b) those who were no longer in the
service of the hospital at the time the complaints
were filed.

Petitioner likewise maintains that the Order of the

respondent Regional Director of Labor, as affirmed
with modifications by respondent Secretary of Labor,
does not clearly and distinctly state the facts and the
law on which the award was based. In its "Rejoinder
to Comment", petitioner further questions the
authority of the Regional Director to award salary
differentials and ECOLAs to private respondents,
(relying on the case of Encarnacion vs. Baltazar, G.R.

21

No. L-16883, March 27, 1961, 1 SCRA 860, as

authority for raising the additional issue of lack of
jurisdiction at any stage of the proceedings, p. 52,
Rollo), alleging that the original and exclusive
jurisdiction over money claims is properly lodged in
the Labor Arbiter, based on Article 217, paragraph 3
of the Labor Code.

The primary issue here is whether or not the Regional

Director had jurisdiction over the case and if so, the
extent of coverage of any award that should be
forthcoming, arising from his visitorial and
enforcement powers under Article 128 of the Labor
Code. The matter of whether or not the decision
states clearly and distinctly statement of facts as
well as the law upon which it is based, becomes
relevant after the issue on jurisdiction has been
resolved.

This is a labor standards case, and is governed by

Art. 128-b of the Labor Code, as amended by E.O. No.
111. Labor standards refer to the minimum
requirements prescribed by existing laws, rules, and
regulations relating to wages, hours of work, cost of
living allowance and other monetary and welfare
benefits, including occupational, safety, and health
standards (Section 7, Rule I, Rules on the Disposition
of Labor Standards Cases in the Regional Office,
dated September 16, 1987). 1 Under the present
rules, a Regional Director exercises both visitorial and
enforcement power over labor standards cases, and
is therefore empowered to adjudicate money claims,
provided there still exists an employer-employee
relationship, and the findings of the regional office is
not contested by the employer concerned.

Prior to the promulgation of E.O. No. 111 on

December 24, 1986, the Regional Director's authority
over money claims was unclear. The complaint in the
present case was filed on May 23, 1986 when E.O.
No. 111 was not yet in effect, and the prevailing view
was that stated in the case of Antonio Ong, Sr. vs.
Henry M. Parel, et al., G.R. No. 76710, dated
December 21, 1987, thus:

. . . the Regional Director, in the exercise of his

visitorial and enforcement powers under Article 128
of the Labor Code, has no authority to award money
claims, properly falling within the jurisdiction of the
labor arbiter. . . .

. . . If the inspection results in a finding that the

employer has violated certain labor standard laws,
then the regional director must order the necessary
rectifications. However, this does not include
adjudication of money claims, clearly within the

ambit of the labor arbiter's authority under Article

217 of the Code.

The Ong case relied on the ruling laid down in

Zambales Base Metals Inc. vs. The Minister of Labor,
et al., (G.R. Nos. 73184-88, November 26, 1986, 146
SCRA 50) that the "Regional Director was not
empowered to share in the original and exclusive
jurisdiction conferred on Labor Arbiters by Article
217."

We believe, however, that even in the absence of E.

O. No. 111, Regional Directors already had
enforcement powers over money claims, effective
under P.D. No. 850, issued on December 16, 1975,
which transferred labor standards cases from the
arbitration system to the enforcement system.

To clarify matters, it is necessary to enumerate a

series of rules and provisions of law on the
disposition of labor standards cases.

Prior to the promulgation of PD 850, labor standards

cases were an exclusive function of labor arbiters,
under Article 216 of the then Labor Code (PD No.
442, as amended by PD 570-a), which read in part:

Art. 216. Jurisdiction of the Commission. The

Commission shall have exclusive appellate
jurisdiction over all cases decided by the Labor
Arbiters and compulsory arbitrators.

The Labor Arbiters shall have exclusive jurisdiction to

hear and decide the following cases involving all
workers whether agricultural or non-agricultural.

xxx

xxx

xxx

(c)
All money claims of workers, involving nonpayment or underpayment of wages, overtime
compensation, separation pay, maternity leave and
other money claims arising from employee-employer
relations, except claims for workmen's
compensation, social security and medicare benefits;

(d)

xxx

Violations of labor standard laws;

xxx

xxx

22

(Emphasis supplied)

The Regional Director exercised visitorial rights only

under then Article 127 of the Code as follows:

ART. 127.
Visitorial Powers. The Secretary
of Labor or his duly authorized representatives,
including, but not restricted, to the labor
inspectorate, shall have access to employers' records
and premises at any time of the day or night
whenever work is being undertaken therein, and the
right to copy therefrom, to question any employee
and investigate any fact, condition or matter which
may be necessary to determine violations or in aid in
the enforcement of this Title and of any Wage Order
or regulation issued pursuant to this Code.

With the promulgation of PD 850, Regional Directors

were given enforcement powers, in addition to
visitorial powers. Article 127, as amended, provided
in part:

SEC. 10. Article 127 of the Code is hereby amended

to read as follows:

Art. 127. Visitorial and enforcement powers.

xxx

xxx

xxx

(b)
The Secretary of Labor or his duly
authorized representatives shall have the power to
order and administer, after due notice and hearing,
compliance with the labor standards provisions of
this Code based on the findings of labor regulation
officers or industrial safety engineers made in the
course of inspection, and to issue writs of execution
to the appropriate authority for the enforcement of
their order.

xxx

xxx

xxx

Art. 216. Jurisdiction of Labor Arbiters and the

Commission. (a) The Labor Arbiters shall have
exclusive jurisdiction to hear and decide the following
cases involving all workers, whether agricultural or
non-agricultural:

xxx

xxx

xxx

(3)
All money claims of workers involving nonpayment or underpayment of wages, overtime or
premium compensation, maternity or service
incentive leave, separation pay and other money
claims arising from employer-employee relations,
except claims for employee's compensation, social
security and medicare benefits and as otherwise
provided in Article 127 of this Code.

xxx

xxx

xxx

(Emphasis supplied)

Under the then Labor Code therefore (PD 442 as

amended by PD 570-a, as further amended by PD
850), there were three adjudicatory units: The
Regional Director, the Bureau of Labor Relations and
the Labor Arbiter. It became necessary to clarify and
consolidate all governing provisions on jurisdiction
into one document. 2 On April 23, 1976, MOLE Policy
Instructions No. 6 was issued, and provides in part
(on labor standards cases) as follows:

POLICY INSTRUCTIONS NO. 6

TO: All Concerned

SUBJECT:
DISTRIBUTION OF JURISDICTION
OVER LABOR CASES

xxx

xxx

xxx

Labor Arbiters, on the other hand, lost jurisdiction

over labor standards cases. Article 216, as then
amended by PD 850, provided in part:

1.
The following cases are under the exclusive
original jurisdiction of the Regional Director.

SEC. 22. Article 216 of the Code is hereby amended

to read as follows:

a)
Labor standards cases arising from
violations of labor standard laws discovered in the

23

course of inspection or complaints where employeremployee relations still exist;

xxx

xxx

xxx

2.
The following cases are under the exclusive
original jurisdiction of the Conciliation Section of the
Regional Office:

a)
Labor standards cases where employeremployee relations no longer exist;

xxx

xxx

xxx

6.
The following cases are certifiable to the
Labor Arbiters:

of law are involved as determined by the Regional

Director, b) the amount involved exceeds
P100,000.00 or over 40% of the equity of the
employer, whichever is lower, c) the case requires
evidentiary matters not disclosed or verified in the
normal course of inspection, or d) there is no more
employer-employee relationship.

The purpose is clear: to assure the worker the rights

and benefits due to him under labor standards laws
without having to go through arbitration. The worker
need not litigate to get what legally belongs to him.
The whole enforcement machinery of the
Department of Labor exists to insure its expeditious
delivery to him free of charge. (Emphasis supplied)

Under the foregoing, a complaining employee who

was denied his rights and benefits due him under
labor standards law need not litigate. The Regional
Director, by virtue of his enforcement power, assured
"expeditious delivery to him of his rights and benefits
free of charge", provided of course, he was still in the
employ of the firm.

a)
Cases not settled by the Conciliation Section
of the Regional Office, namely:

1)
labor standard cases where employeremployee relations no longer exist;

xxx

xxx

xxx

(Emphasis supplied)

MOLE Policy Instructions No. 7 (undated) was likewise

subsequently issued, enunciating the rationale for,
and the scope of, the enforcement power of the
Regional Director, the first and second paragraphs of
which provide as follows:

POLICY INSTRUCTIONS NO. 7

TO:

All Regional Directors

SUBJECT:

LABOR STANDARDS CASES

Under PD 850, labor standards cases have been

taken from the arbitration system and placed under
the enforcement system, except where a) questions

After PD 850, Article 216 underwent a series of

amendments (aside from being re-numbered as
Article 217) and with it a corresponding change in
the jurisdiction of, and supervision over, the Labor
Arbiters:

1.
PD 1367 (5-1-78) gave Labor Arbiters
exclusive jurisdiction over unresolved issues in
collective bargaining, etc., and those cases arising
from employer-employee relations duly indorsed by
the Regional Directors. (It also removed his
jurisdiction over moral or other damages) In other
words, the Labor Arbiter entertained cases certified
to him. (Article 228, 1978 Labor Code.)

2.
PD 1391 (5-29-78) all regional units of the
National Labor Relations Commission (NLRC) were
integrated into the Regional Offices Proper of the
Ministry of Labor; effectively transferring direct
administrative control and supervision over the
Arbitration Branch to the Director of the Regional
Office of the Ministry of Labor. "Conciliable cases"
which were thus previously under the jurisdiction of
the defunct Conciliation Section of the Regional
Office for purposes of conciliation or amicable
settlement, became immediately assignable to the
Arbitration Branch for joint conciliation and
compulsory arbitration. In addition, the Labor Arbiter
had jurisdiction even over termination and laborstandards cases that may be assigned to them for
compulsory arbitration by the Director of the
Regional Office. PD 1391 merged conciliation and

24

compulsory arbitration functions in the person of the

Labor Arbiter. The procedure governing the
disposition of cases at the Arbitration Branch
paralleled those in the Special Task Force and Field
Services Division, with one major exception: the
Labor Arbiter exercised full and untrammelled
authority in the disposition of the case, particularly in
the substantive aspect, his decisions and orders
subject to review only on appeal to the NLRC. 3

3.
MOLE Policy Instructions No. 37 Because
of the seemingly overlapping functions as a result of
PD 1391, MOLE Policy Instructions No. 37 was issued
on October 7, 1978, and provided in part:

b)
evidentiary matters not disclosed or verified
in the normal course of inspection by labor
regulations officers are required for their proper
disposition.

3.

Disposition of Cases.

POLICY INSTRUCTIONS NO. 37

When a case is assigned to a Labor Arbiter, all issues

raised therein shall be resolved by him including
those which are originally cognizable by the Regional
Director to avoid multiplicity of proceedings. In other
words, the whole case, and not merely issues
involved therein, shall be assigned to and resolved
by him.

TO:

xxx

All Concerned

SUBJECT:
ARBITERS

ASSIGNMENT OF CASES TO LABOR

Pursuant to the provisions of Presidential Decree No.

1391 and to insure speedy disposition of labor cases,
the following guidelines are hereby established for
the information and guidance of all concerned.

1.

Conciliable Cases.

Cases which are conciliable per se i.e., (a) labor

standards cases where employer-employee
relationship no longer exists; (b) cases involving
deadlock in collective bargaining, except those falling
under P.D. 823, as amended; (c) unfair labor practice
cases; and (d) overseas employment cases, except
those involving overseas seamen, shall be assigned
by the Regional Director to the Labor Arbiter for
conciliation and arbitration without coursing them
through the conciliation section of the Regional
Office.

2.

xxx

(Emphasis supplied)

4.
PD 1691(5-1-80) original and exclusive
jurisdiction over unresolved issues in collective
bargaining and money claims, which includes moral
or other damages.

Despite the original and exclusive jurisdiction of labor

arbiters over money claims, however, the Regional
Director nonetheless retained his enforcement
power, and remained empowered to adjudicate
uncontested money claims.

5.
BP 130 (8-21-8l) strengthened voluntary
arbitration. The decree also returned the Labor
Arbiters as part of the NLRC, operating as Arbitration
Branch thereof.

6.
BP 227(6-1- 82) original and exclusive
jurisdiction over questions involving legality of strikes
and lock-outs.

Labor Standards Cases.

Cases involving violation of labor standards laws

where employer- employee relationship still exists
shall be assigned to the Labor Arbiters where:

a)

xxx

intricate questions of law are involved; or

The present petition questions the authority of the

Regional Director to issue the Order, dated August 4,
1986, on the basis of his visitorial and enforcement
powers under Article 128 (formerly Article 127) of the
present Labor Code. It is contended that based on
the rulings in the Ong vs. Parel (supra) and the
Zambales Base Metals, Inc. vs. The Minister of Labor
(supra) cases, a Regional Director is precluded from
adjudicating money claims on the ground that this is

25

an exclusive function of the Labor Arbiter under

Article 217 of the present Code.

On August 4, 1986, when the order was issued,

Article 128(b) 4 read as follows:

(b)
The Minister of Labor or his duly authorized
representatives shall have the power to order and
administer, after due notice and hearing, compliance
with the labor standards provisions of this Code
based on the findings of labor regulation officers or
industrial safety engineers made in the course of
inspection, and to issue writs of execution to the
appropriate authority for the enforcement of their
order, except in cases where the employer contests
the findings of the labor regulations officer and raises
issues which cannot be resolved without considering
evidentiary matters that are not verifiable in the
normal course of inspection. (Emphasis supplied)

On the other hand, Article 217 of the Labor Code as

amended by P.D. 1691, effective May 1, 1980; Batas
Pambansa Blg. 130, effective August 21, 1981; and
Batas Pambansa Blg. 227, effective June 1, 1982,
inter alia, provides:

ART. 217.
Jurisdiction of Labor Arbiters and
the Commission. (a) The Labor Arbiters shall have
the original and exclusive jurisdiction to hear and
decide within thirty (30) working days after
submission of the case by the parties for decision,
the following cases involving all workers, whether
agricultural or non-agricultural:

1.

Unfair labor practice cases;

2.
Those that workers may file involving
wages, hours of work and other terms and conditions
of employment;

3.
All money claims of workers, including those
based on non-payment or underpayment of wages,
overtime compensation, separation pay and other
benefits provided by law or appropriate agreement,
except claims for employees' compensation, social
security, medicare and maternity benefits;

4. Cases involving household services; and

5. Cases arising from any violation of Article 265 of

this Code, including questions involving the legality
of strikes and lock-outs. (Emphasis supplied)

The Ong and Zambales cases involved workers who

were still connected with the company. However, in
the Ong case, the employer disputed the adequacy
of the evidentiary foundation (employees' affidavits)
of the findings of the labor standards inspectors
while in the Zambales case, the money claims which
arose from alleged violations of labor standards
provisions were not discovered in the course of
normal inspection. Thus, the provisions of MOLE
Policy Instructions Nos. 6, (Distribution of Jurisdiction
Over Labor Cases) and 37 (Assignment of Cases to
Labor Arbiters) giving Regional Directors adjudicatory
powers over uncontested money claims discovered in
the course of normal inspection, provided an
employer-employee relationship still exists, are
inapplicable.

In the present case, petitioner admitted the charge of

underpayment of wages to workers still in its employ;
in fact, it pleaded for time to raise funds to satisfy its
obligation. There was thus no contest against the
findings of the labor inspectors.

Barely less than a month after the promulgation on

November 26, 1986 of the Zambales Base Metals
case, Executive Order No. 111 was issued on
December 24, 1986, 5 amending Article 128(b) of the
Labor Code, to read as follows:

(b)
THE PROVISIONS OF ARTICLE 217 OF THIS
CODE TO THE CONTRARY NOTWITHSTANDING AND IN
CASES WHERE THE RELATIONSHIP OF EMPLOYEREMPLOYEE STILL EXISTS, the Minister of Labor and
Employment or his duly authorized representatives
shall have the power to order and administer, after
due notice and hearing, compliance with the labor
standards provisions of this Code AND OTHER LABOR
LEGISLATION based on the findings of labor
regulation officers or industrial safety engineers
made in the course of inspection, and to issue writs
of execution to the appropriate authority for the
enforcement of their orders, except in cases where
the employer contests the findings of the labor
regulation officer and raises issues which cannot be
resolved without considering evidentiary matters
that are not verifiable in the normal course of
inspection. (Emphasis supplied)

As seen from the foregoing, EO 111 authorizes a

Regional Director to order compliance by an
employer with labor standards provisions of the
Labor Code and other legislation. It is Our considered

26

opinion however, that the inclusion of the phrase, "

The provisions of Article 217 of this Code to the
contrary notwithstanding and in cases where the
relationship of employer-employee still exists" ... in
Article 128(b), as amended, above-cited, merely
confirms/reiterates the enforcement adjudication
authority of the Regional Director over uncontested
money claims in cases where an employer-employee
relationship still exists. 6

Section 2.
Complaint inspection. All such
complaints shall immediately be forwarded to the
Regional Director who shall refer the case to the
appropriate unit in the Regional Office for assignment
to a Labor Standards and Welfare Officer (LSWO) for
field inspection. When the field inspection does not
produce the desired results, the Regional Director
shall summon the parties for summary investigation
to expedite the disposition of the case. . . .

Viewed in the light of PD 850 and read in

coordination with MOLE Policy Instructions Nos. 6, 7
and 37, it is clear that it has always been the
intention of our labor authorities to provide our
workers immediate access (when still feasible, as
where an employer-employee relationship still exists)
to their rights and benefits, without being
inconvenienced by arbitration/litigation processes
that prove to be not only nerve-wracking, but
financially burdensome in the long run.

Section 3.
Complaints where no employeremployee relationship actually exists. Where
employer-employee relationship no longer exists by
reason of the fact that it has already been severed,
claims for payment of monetary benefits fall within
the exclusive and original jurisdiction of the labor
arbiters. . . . (Emphasis supplied)

Note further the second paragraph of Policy

Instructions No. 7 indicating that the transfer of labor
standards cases from the arbitration system to the
enforcement system is

Likewise, it is also clear that the limitation embodied

in MOLE Policy Instructions No. 7 to amounts not
exceeding P100,000.00 has been dispensed with, in
view of the following provisions of pars. (b) and (c),
Section 7 on "Restitution", the same Rules, thus:

xxx
. . to assure the workers the rights and benefits due
to him under labor standard laws, without having to
go through arbitration. . .

xxx

xxx

(b)
Plant-level restitutions may be effected for
money claims not exceeding Fifty Thousand
(P50,000.00). . . .

so that

. . the workers would not litigate to get what legally

belongs to him. .. ensuring delivery . . free of charge.

Social justice legislation, to be truly meaningful and

rewarding to our workers, must not be hampered in
its application by long-winded arbitration and
litigation. Rights must be asserted and benefits
received with the least inconvenience. Labor laws are
meant to promote, not defeat, social justice.

This view is in consonance with the present "Rules on

the Disposition of Labor Standard Cases in the
Regional Offices " 7 issued by the Secretary of Labor,
Franklin M. Drilon on September 16, 1987.

Thus, Sections 2 and 3 of Rule II on "Money Claims

Arising from Complaint Routine Inspection", provide
as follows:

(c)
Restitutions in excess of the aforementioned
amount shall be effected at the Regional Office or at
the worksite subject to the prior approval of the
Regional Director.

which indicate the intention to empower the Regional

Director to award money claims in excess of
P100,000.00; provided of course the employer does
not contest the findings made, based on the
provisions of Section 8 thereof:

Section 8.
Compromise agreement. Should
the parties arrive at an agreement as to the whole or
part of the dispute, said agreement shall be reduced
in writing and signed by the parties in the presence
of the Regional Director or his duly authorized
representative.

E.O. No. 111 was issued on December 24, 1986 or

three (3) months after the promulgation of the
Secretary of Labor's decision upholding private
respondents' salary differentials and ECOLAs on

27

September 24, 1986. The amendment of the

visitorial and enforcement powers of the Regional
Director (Article 128-b) by said E.O. 111 reflects the
intention enunciated in Policy Instructions Nos. 6 and
37 to empower the Regional Directors to resolve
uncontested money claims in cases where an
employer-employee relationship still exists. This
intention must be given weight and entitled to great
respect. As held in Progressive Workers' Union, et. al.
vs. F.P. Aguas, et. al. G.R. No. 59711-12, May 29,
1985, 150 SCRA 429:

. . It would be highly derogatory to the rights of the

workers, if after categorically finding the respondent
hospital guilty of underpayment of wages and
ECOLAs, we limit the award to only those who signed
the complaint to the exclusion of the majority of the
workers who are similarly situated. Indeed, this would
be not only render the enforcement power of the
Minister of Labor and Employment nugatory, but
would be the pinnacle of injustice considering that it
would not only discriminate but also deprive them of
legislated benefits.

. . The interpretation by officers of laws which are

entrusted to their administration is entitled to great
respect. We see no reason to detract from this
rudimentary rule in administrative law, particularly
when later events have proved said interpretation to
be in accord with the legislative intent. ..

. . . (pp. 38-39, Rollo).

The proceedings before the Regional Director must,

perforce, be upheld on the basis of Article 128(b) as
amended by E.O. No. 111, dated December 24, 1986,
this executive order "to be considered in the nature
of a curative statute with retrospective application."
(Progressive Workers' Union, et al. vs. Hon. F.P.
Aguas, et al. (Supra); M. Garcia vs. Judge A. Martinez,
et al., G.R. No. L- 47629, May 28, 1979, 90 SCRA
331).

We now come to the question of whether or not the

Regional Director erred in extending the award to all
hospital employees. We answer in the affirmative.

The Regional Director correctly applied the award

with respect to those employees who signed the
complaint, as well as those who did not sign the
complaint, but were still connected with the hospital
at the time the complaint was filed (See Order, p. 33
dated August 4, 1986 of the Regional Director,
Pedrito de Susi, p. 33, Rollo).

This view is further bolstered by the provisions of

Sec. 6, Rule II of the "Rules on the Disposition of
Labor Standards cases in the Regional Offices"
(supra) presently enforced, viz:

SECTION 6.
Coverage of complaint inspection.
A complaint inspection shall not be limited to the
specific allegations or violations raised by the
complainants/workers but shall be a thorough inquiry
into and verification of the compliance by employer
with existing labor standards and shall cover all
workers similarly situated. (Emphasis supplied)

However, there is no legal justification for the award

in favor of those employees who were no longer
connected with the hospital at the time the
complaint was filed, having resigned therefrom in
1984, viz:

Jean (Joan) Venzon (See Order, p. 33, Rollo)

Rosario Paclijan
Adela Peralta
Mauricio Nagales

The justification for the award to this group of

employees who were not signatories to the complaint
is that the visitorial and enforcement powers given to
the Secretary of Labor is relevant to, and exercisable
over establishments, not over the individual
members/employees, because what is sought to be
achieved by its exercise is the observance of, and/or
compliance by, such firm/establishment with the
labor standards regulations. Necessarily, in case of
an award resulting from a violation of labor
legislation by such establishment, the entire
members/employees should benefit therefrom. As
aptly stated by then Minister of Labor Augusto S.
Sanchez:

Consesa Bautista
Teresita Agcopra
Felix Monleon
Teresita Salvador
Edgar Cataluna; and
10.

Raymond Manija ( p.7, Rollo)

The enforcement power of the Regional Director

cannot legally be upheld in cases of separated
employees. Article 129 of the Labor Code, cited by
petitioner (p. 54, Rollo) is not applicable as said

28

article is in aid of the enforcement power of the

Regional Director; hence, not applicable where the
employee seeking to be paid underpayment of wages
is already separated from the service. His claim is
purely a money claim that has to be the subject of
arbitration proceedings and therefore within the
original and exclusive jurisdiction of the Labor
Arbiter.

Petitioner has likewise questioned the order dated

August 4, 1986 of the Regional Director in that it
does not clearly and distinctly state the facts and the
law on which the award is based.

We invite attention to the Minister of Labor's ruling

thereon, as follows:

Finally, the respondent hospital assails the order

under appeal as null and void because it does not
clearly and distinctly state the facts and the law on
which the awards were based. Contrary to the
pretensions of the respondent hospital, we have
carefully reviewed the order on appeal and we found
that the same contains a brief statement of the (a)
facts of the case; (b) issues involved; (c) applicable
laws; (d) conclusions and the reasons therefor; (e)
specific remedy granted (amount awarded). (p. 40,
Rollo)

ACCORDINGLY, this petition should be dismissed, as

it is hereby DISMISSED, as regards all persons still
employed in the Hospital at the time of the filing of
the complaint, but GRANTED as regards those
employees no longer employed at that time.

SO ORDERED.

At bar is a Petition for Certiorari under Rule 65 of the

Revised Rules of Court with a Prayer for Preliminary
Injunction and or Restraining Order brought by
Batong Buhay Gold Mines, Inc. (BBGMI for brevity) to
annul three orders issued by respondent
Undersecretary Dionisio dela Serna of the
Department of Labor and Employment, dated
September 16, 1988, December 14, 1988 and
February 13, 1989, respectively.

The Order of September 16, 1988 stated the facts as

follows:

"xxx on 5 February 1987, Elsie Rosalinda B. Ty,

Antonia L. Mendelebar, Ma. Concepcion O. Reyes and
1,247 others filed a complaint against Batong Buhay
Gold Mines, Inc. for: (1) Non-payment of their basic
pay and allowances for the period of 6 July 1983 to 5
July 1984, inclusive, under Wage Order No. 2; (2)
Non-payment of their basic pay and allowances for
the period 16 June 1984 to 5 October 1986, inclusive
under Wage Order No. 5; (3) Non-payment of their
salaries for the period 16 March 1986 to the present;
(4) Non-payment of their 13th month pay for 1985,
1986 and 1987; (5) Non-payment of their vacation
and sick leave, and the compensatory leaves of mine
site employees; and (6) Non-payment of the salaries
of employees who were placed on forced leaves
since November, 1985 to the present, if this is not
feasible, the affected employees be awarded
corresponding separation pay.

On 9 February 1987, the Regional Director set the

case for hearing on 17 February 1987.

On 17 February 1987, the respondent moved for the

resetting of the case to 2 March 1987.

On 27 February 1987, the complainants filed a

Motion for the issuance of an inspection authority.

BATONG BUHAY GOLD MINES, INC., petitioner, vs.

HONORABLE DIONISIO DELA SERNA IN HIS CAPACITY
AS THE UNDERSECRETARY OF THE DEPARTMENT OF
LABOR AND EMPLOYMENT, ELSIE ROSALINDA TY,
ANTONIO MENDELEBAR, MA. CONCEPCION Q. REYES,
AND THE OTHER COMPLAINANTS* IN CASE NO. NCRLSED-CI-2047-87; MFT CORPORATION AND SALTER
HOLDINGS PTY. LTD., respondents.
RESOLUTION
PURISIMA, J.:

xxx

On 13 July 1987, the Labor Standards and Welfare

Officers submitted their report with the following
recommendations:

WHEREFORE, premises considered, this case is

hereby submitted with the recommendation that an
Order of Compliance be issued directing respondent

29

Batong Buhay Gold Mines Inc. to pay complainants

Elsie Rosalina Ty, et al. FOUR MILLION EIGHT
HUNDRED EIGHTEEN THOUSAND SEVEN HUNDRED
FORTY-SIX PESOS AND FORTY CENTAVOS
(P4,818,746.40) by way of unpaid salaries of workers
from March 16, 1987 to present, unpaid and ECOLA
differentials under Wage Order Nos. 2 and 5 unpaid
13th months pay for 1985 and 1986, and upaid (sic)
vacation/sick/compensatory leave benefits.

On 31 July 1987, the Regional Director[1] adopted

the recommendation of the LSWOs and issued an
order directing the respondent to pay the
complainants the sum of P4,818,746.40 representing
their unpaid 13th month pay for 1985 and 1986,
wage and ECOLA differentials under wage order Nos.
2 and 5, unpaid salaries from 16 March 1986 to
present and vacation/sick leave benefits for 1984,
1985 and 1986.

On 19 August 1987, the complainants filed an exparte motion for the issuance of a writ of execution
and appointment of special sheriff.

xxx

On 21 August 1987, the Regional Director issued an

Order directing the respondent to put up a cash or
surety bond otherwise a writ of execution will be
issued.

three (3) units of Peterbuilt trucks and then sold the

same by public auction. Various materials and motor
vehicles were also seized on different dates and sold
at public auction by said sheriff.

xxx xxx

xxx

On 11 December 1987, the respondent finally posted

a supersedeas bond which prompted this Office to
issue an Order dated 26 January 1988, restraining
the complainants and sheriff Ramos from enforcing
the writ of execution. xxx[2]

BBGMI appealed the Order dated July 31, 1987 of

Regional Director Luna C. Piezas to respondent
Undersecretary Dionisio de la Serna, contending that
the Regional Director had no jurisdiction over the
case.

On September 16, 1988, the public respondent

issued the first challenged Order upholding the
jurisdiction of the Regional Director and annulling all
the auction sales conducted by Special Sheriff John
Ramos. The decretal portion of the said Order ruled:

WHEREFORE, the Order dated 31 July 1987 of the

Regional Director, National Capital Region, is hereby
AFFIRMED. Accordingly, the writ of execution dated
14 September 1987 issued in connection thereto is
hereby declared VALID.

xxx

When the respondent failed to post a cash/surety

bond, and upon motion for the issuance of a writ of
execution by the complainants, the Regional Director,
on 14 September 1987 issued a writ of execution
appointing Mr. John Espiridion C. Ramos as Special
Sheriff and directing him to do the following:

You are to collect the above-stated amount from the

respondent and deposit the same with Cashier of this
Office for appropriate disposition to herein
complainants under the supervision of the office of
the Director. Otherwise, you are to execute this writ
by attaching the goods and chattels of the
respondent not exempt from execution or in case of
insufficiency thereof against the real or immovable
property of the respondent.

However, the public auction sales conducted by

special sheriff John Ramos pursuant to the writ of
execution dated 14 September 1987 on 24
September 2, 20, 23, and 29 October 1987 are all
hereby declared NULL AND VOID. Furthermore, the
personal properties sold and the proceeds thereof
which have been turned over to the complainants
thru their legal counsel are hereby ordered returned
to the custody of the respondent and the buyers
respectively.

SO ORDERED.[3]

On October 13, 1988, a Motion for Reconsideration of

the aforesaid order was presented by the
complainants in Case No. NCR-LSED-CI-2047-87 but
the same was denied.

The Special Sheriff proceeded to execute the

appealed Order on 17 September 1987 and seized

30

On November 7, 1988, a Motion for Intervention was

filed by MFT Corporation, inviting attention to a Deed
of Sale executed in its favor by Fidel Bermudez, the
highest bidder in the auction sale conducted on
October 29, 1987.

On December 2, 1988, another Motion for

Intervention was filed, this time by Salter Holdings
Pty., Ltd., claiming that MFT Corporation assigned its
rights over the subject properties in favor of movant
as evidenced by a Sales Agreement between MFT
Corp. and Salter Holdings Pty., Ltd.

The two Motions for Intervention were granted in the

second questioned order dated December 14, 1988,
directing the exclusion from annulment of the
properties sold at the October 29, 1987 auction sale
and claimed by the intervenors, including one cluster
of junk mining machineries, equipment and supplies,
and disposing thus:

WHEREFORE, in view of the foregoing, the motions

for reconsideration filed by intervenors MFT and
Salter are hereby granted. Correspondingly, this
Offices Order dated 16 September 1988 is hereby
modified to exclude from annulment the one lot of
junk mining machineries, equipment and supplies asis-where-is sold by Sheriff John C. Ramos in the
auction sale of 29 October 1987.

xxx xxx

xxx

Motions for Reconsideration were interposed by

Batong Buhay Gold Mining, Inc. and the respondent
employees but to no avail. The same were likewise
denied in the third assailed Order dated February 13,
1989.

Hence, the petition under scrutiny, ascribing grave

abuse of discretion amounting to lack or excess of
jurisdiction to the public respondent in issuing the
three Orders under attack.

The questioned Orders aforementioned have given

rise to the issues: (1) whether the Regional Director
has jurisdiction over the complaint filed by the
employees of BBGMI; and (2) whether or not the
auction sales conducted by the said Special Sheriff
are valid.

Anent the first issue, an affirmative ruling is

indicated. The Regional Director has jurisdiction over

the BBGMI employees who are the complainants in

Case Number NCR-LSED-CI-2047-87.

The subject labor standards case of the petition

arose from the visitorial and enforcement powers by
the Regional Director of Department of Labor and
Employment (DOLE). Labor standards refers to the
minimum requirements prescribed by existing laws,
rules and regulations relating to wages, hours of
work, cost of living allowance and other monetary
and welfare benefits, including occupational, safety
and health standards.[4] Labor standards cases are
governed by Article 128(b) of the Labor Code.

The pivot of inquiry here is whether the Regional

Director has jurisdiction over subject labor standards
case.

As can be gleaned from the records on hand, subject

labor standards case was filed on February 5, 1987 at
which time Article 128 (b) read as follows[5]:

Art. 128 ( b) Visitorial and enforcement powers -

(b) The Minister of Labor or his duly authorized

representative shall have the power to order and
administer, after due notice and hearing, compliance
with the labor standards provisions of this Code
based on the findings of labor regulation officers or
industrial safety engineers made in the course of
inspection, and to issue writs of execution to the
appropriate authority for the enforcement of their
order, except in cases where the employer contests
the findings of the labor regulations officers and
raises issues which cannot be resolved without
considering evidentiary matters that are not
verifiable in the ordinary course of inspection.

Petitioner theorizes that the Regional Director is

without jurisdiction over subject case, placing
reliance on the ruling in Zambales Base Inc. vs.
Minister of Labor[6]and Oreshoot Mining Company
vs. Arellano.[7]

Respondent Undersecretary Dionision C. Dela Serna,

on the other hand, upheld the jurisdiction of Regional
Director Luna C. Piezas by relying on E.O. 111, to
quote:

Considering therefore that there still exists an

employer-employee relationship between the parties;
that the case involves violations of the labor

31

standard provisions of the labor code; that the issues

therein could be resolved without considering
evidentiary matters that are not verifiable in the
normal course of inspection; and, if only to give
meaning and not render nugatory and meaningless
the visitorial and enforcement powers of the
Secretary of Labor and Employment as provided by
Article 128(b) of the Labor Code, as amended by
Section 2 of Executive Order No. 111 which states:

The provisions of article 217 of this code to the

contrary notwithstanding and in cases where the
relationship of employer-employee still exists, the
Minister of Labor and Employment or his duly
authorized representative shall have the power to
order and administer, after due notice and hearing,
compliance with the labor standards provision of this
Code based on the findings of the findings of labor
regulation officers or industrial safety engineers
made in the course of inspection, and to issue writs
of execution to the appropriate authority for the
enforcement of their order, except in cases where
the employer contests the findings of the labor
regulations officers and raises issues which cannot
be resolved without considering evidentiary matters
that are not verifiable in the ordinary course of
inspection.

We agree with the complainants that the regional

office a quo has jurisdiction to hear and decide the
instant labor standard case.

xxx xxx

xxx[8]

The Court agrees with the public respondent. In the

case of Maternity Childrens Hospital vs Secretary of
Labor (174 SCRA 632), the Court in upholding the
jurisdiction of the Regional Director over the
complaint on underpayment of wages and ECOLAs
filed on May 23, 1986, by the employees of Maternity
Childrens Hospital, held:

This is a labor standards case and is governed by

Art. 128(b) of the Labor Code, as amended by E.O.
111.

xxx xxx

xxx

Prior to the promulgation of E.O. 111 on December

24, 1986, the Regional Directors authority over
money claims was unclear. The complaint in the
present case was filed on May 23, 1986 when E.O.
111 was not yet in effect. xxx
xxx

We believe, however , that even in the absence of

E.O. 111 , Regional Directors already had
enforcement powers over money claims, effective
under P.D. 850, issued on December 16, 1975, which
transferred labor standards cases from the
arbitration system to the enforcement system.

In the aforecited case, the Court in reinforcing its

conclusion that Regional Director has jurisdiction
over labor standards cases, treated E.O. 111 as a
curative statute, ruling as follows:

E.O. No. 111 was issued on December 24, 1986 or

three(3) months after the promulgation of the
Secretary of Labors decision upholding private
respondents salary differentials and ECOLAs on
September 24, 1986. The amendment of the
visitorial and enforcement powers of the Regional
Director (Article 128(b)) by said E.O. 111 reflects the
intention enunciated in Policy Instructions Nos. 6 and
37 to empower the Regional Directors to resolve
uncontested money claims in cases where an
employer-employee relationship still exists. This
intention must be given weight and entitled to great
respect. As held in Progressive Workers Union, et al.
vs. F.P. Aguas, et al. G.R. No. 59711-12, May 29,
1985, 150 SCRA 429:

.xx The interpretation by officers of laws which are

entrusted to their administration is entitled to great
respect. We see no reason to detract from this
rudimentary rule in administrative law, particularly
when later events have proved said interpretation to
be in accord with the legislative intent. xx

The proceedings before the Regional Director must,

perforce be upheld on the basis of Article 128(b) as
amended by E.O. No. 111, dated December 24, 1986,
this executive order to be considered in the nature
of a curative statute with retrospective application.
(Progressive Workers Union, et al. vs. Hon. Aguas, et
al. (Supra); M. Garcia vs. Judge A. Martinez, et al.
G.R.No. l-47629, may 28,1979, 90 SCRA 331).

With regard to the petitioners reliance on the cases

of Zambales Base, Inc. vs. Minister of Labor (supra)
and Oreshoot Mining Company vs. Arellano, (supra),
this is misplaced. In the case of Zambales Base, Inc.,
the court has already ruled that:

xxx, in view of the promulgation of Executive Order

No. 111, Zambales Base Metals vs. Minister of Labor
is no longer good law. (Emphasis supplied) Executive

32

Order No. 111 is in the character of a curative law,

that is to say, it was intended to remedy a defect
that, in the opinion of the Legislature (the incumbent
Chief Executive in this case, in the exercise of her
lawmaking powers under the Freedom Constitution)
had attached to the provision under the amendment.

xxx xxx

amounts complained of by the employees or absence

of violation of labor standards laws were never
raised. Raising lack of jurisdiction in a Motion to
Dismiss is not the contest contemplated by the
exception clause under Article 128(b) of the Labor
Code which would take the case out of the
jurisdiction of the Regional Director and bring it
before the Labor Arbiter.

xxx[9]

The case of Oreshoot Mining Corporation, on the

other hand, involved money claims of illegally
dismissed employees. As the employer-employee
relationship has already ceased and reinstatement is
sought, jurisdiction necessarily falls under the Labor
Arbiter. Petitioner should not have used this to
support its theory as this petition involves labor
standards cases and not monetary claims of illegally
dismissed employees.

The only instance when there was a semblance of

raising the aforestated grounds, was when they filed
an Appeal Memorandum dated January 14, 1988,
before the respondent undersecretary. In the said
Appeal Memorandum, petitioner comes up with the
defense that the Regional Director was without
jurisdiction, as employer-employee relationship was
absent, since petitioner had ceased doing business
since 1985.

The Court would have ruled differently had the

petitioner shown that subject labor standards case is
within the purview of the exception clause in Article
128 (b) of the Labor Code. Said provision requires
the concurrence of the following elements in order to
divest the Regional Director or his representatives of
jurisdiction, to wit: (a) that the petitioner (employer)
contests the findings of the labor regulations officer
and raises issues thereon; (b) that in order to resolve
such issues, there is a need to examine evidentiary
matters; and (c) that such matters are not verifiable
in the normal course of inspection.[10]

Records indicate that the Labor Standards and

Welfare Officers, pursuant to Complaint Inspection
Authority No. CI-2-047-87, were not allowed to look
into records, vouchers and other related documents.
The officers of the petitioner alleged that the
company is presently under receivership of the
Development Bank of the Philippines.[11] In lieu of
this, the Regional Director had ordered that a
summary investigation be conducted.[12] Despite
proper notices, the petitioner refused to appear
before the Regional Director. To give it another
chance, an order to file its position paper was issued
to substantiate its defenses. Notwithstanding all
these opportunities to be heard, petitioner chose not
to avail of such.

Nowhere in the records does it appear that the

petitioner alleged any of the aforestated grounds. In
fact, in its Motion for Reconsideration of the Order of
the Regional Director dated August 20, 1987, the
grounds which petitioner raised were the following:

As held in the case of M. Ramirez Industries vs. Sec.

of Labor and Employment, (266 SCRA 111):

1. This Honorable Office has no jurisdiction to hear

this case and its Order of 31 October 1987 is
therefore null and void;

2. Batong Buhay Gold Mines, Inc. is erroneously

impleaded as the sole party respondent, the
complaint should have been directed also against the
Asset Privatization Trust.

In the other pleadings filed by petitioner in NCRLSED-C1-2047-87, such as the Urgent Omnibus
Motion to declare void the Writ of Execution for lack
of jurisdiction and the Oppositions it filed on the
Motions for Intervention questioning the legal
personality of the intervenors, questions as to the

xxx Under Art. 128(a) of the Labor Code, the

Secretary of Labor or his duly authorized
representatives, such as the Regional Directors, has
visitorial powers which authorize him to inspect the
records nd premises of an employer at any time of
the day or night whenever work is being undertaken
therein, to question any employee and investigate
any fact, condition or matter, and to determine
violations of labor laws, wage orders or rules and
regulations. If the employer refuses to attend the
inspection or conference or to submit any record,
such as payrolls and daily time records, he will be
deemed to have waived his right to present
evidence. (emphasis supplied)

Petitioners refusal to allow the Labor Standards and

Welfare Officers to conduct inspection in the
premises of their head office in Makati and the failure

33

to file their position paper is equivalent to a waiver of

its right to contest the claims of the employees. This
Court had occasion to hold there is no violation of
due process where the Regional Director merely
required the submission of position papers and
resolved the case summarily thereafter.[13]
Furthermore, the issuance of the compliance order
was well within the jurisdiction of the Regional
Director, as Section 14 of the Rules on the
Disposition of Labor Standards Cases provides:

Section 14. Failure to Appear - Where the employer

or the complainant fails or refuses to appear during
the investigation, despite proper notice, for two (2)
consecutive hearings without justifiable reasons, the
hearing officer may recommend to the Regional
Director the issuance of a compliance order based on
the evidence at hand or an order of dismissal of the
complaint as the case may be. (Emphasis supplied)

It bears stressing that this petition involves a labor

standards case and it is in keeping with the law that
the worker need not litigate to get what legally
belongs to him, for the whole enforcement
machinery of the Department of Labor exists to
insure its expeditious delivery to him free of
charge.[14]

Thus, their claim of closure for business, among

other things, are factual issues which cannot be
brought here for the first time. As petitioner refused
to participate in the proceedings below where it
could have ventilated the appropriate defenses, to do
so in this petition is unavailing. The reason for this is
that factual issues are not proper subjects of a
special civil action for certiorari to the Supreme
Court.[15]

It is therefore abundantly clear that at the time of the

filing of the claims of petitioners employees, the
Regional Director was already exercising visitorial
and enforcement powers.

Regional Directors visitorial and enforcement powers

under Art. 128 (b) has undergone series of
amendments which the Court feels to be worth
mentioning.

Confusion was engendered by the promulgation of

the decision in the case of Servandos Inc. vs.
Secretary of Labor and Employment and the Regional
Director, Region VI, Department of Labor and
Employment.[16] In the said case, the Regional
Director took cognizance of the labor standards

cases of the employees of Servandos Inc., but this

Court held that:

In the case of Briad Agro Development Corporation

vs. Dela Cerna and Camus Engineering Corp. vs. Sec.
Of labor applying E.O. 111 the Court recognized the
concurrent jurisdiction of the Secretary of labor (or
Regional Directors) and the labor Arbiters to pass on
employees money claims, including those cases
which the labor Arbiters had previously exercised
jurisdiction. However, in a subsequent modificatory
resolution in the Briad Agro Case, dated 9 November
1989, the Court modified its original decision in view
of the enactment of RA 6715, and upheld the power
of the Regional Directors to adjudicate money claims
subject to the conditions set forth in Section 2 of said
law (RA 6715).

The power then of the Regional Director (under the

present state of law) to adjudicate employees money
claims is subject to the concurrence of all the
requisites provided under Sec. 2 of RA 6715, to wit:

(a) the claim is represented by an employer or

person employed in domestic or household service,
or househelper;

(b) the claim arises from employer-employee

relationship;

(c) the claimant does not seek reinstatement; and

(d) the aggregate money claim of each employee or

househelper does not exceed P5,000.

xxx xxx

xxx[17]

The Servando ruling, in effect, expanded the

jurisdictional limitation provided for by RA 6715 as to
include labor standards cases under Article 128 (b)
and no longer limited to ordinary monetary claims
under Article 129.

In fact, in the Motion for Reconsideration[18]

presented by the private respondents in the
Servando case, the court applied more squarely the
P5,000 limit to the visitorial and enforcement power
of the Regional Director, to wit:

34

To construe the visitorial power of the Secretary of

Labor to order and enforce compliance with labor
laws as including the power to hear and decide cases
involving employees claims for wages, arising from
employer-employee relations, even if the amount of
said claims exceed P5,000 for each employee, would,
in our considered opinion, emasculate and render
meaningless, if not useless, the provisions of Art. 217
(a) and (6) and Article 129 of the Labor Code which,
as above-pointed out, confer exclusive jurisdiction on
the Labor Arbiter to hear and decide such
employees claims, regardless of amount, can be
heard and determined by the Secretary of Labor
under his visitorial power. This does not, however,
appear to be the legislative intent.

But prevailing law and jurisprudence rendered the

Servando ruling inapplicable. In the recent case of
Francisco Guico, Jr. versus The Honorable Secretary
of Labor & Employment Leonardo A. Quisumbing, GR
# 131750, promulgated on November 16, 1998, this
Court upheld the jurisdiction of the Regional Director
notwithstanding the fact that the amounts awarded
exceeded P5,000.

Republic Act 7730, the law governing the visitorial

and enforcement powers of the Labor Secretary and
his representatives reads:

Article 128 (b) Notwithstanding the provisions of

Articles 129 and 217 of this Code to the contrary,
and in cases where the relationship of employeremployee still exists, the Secretary of Labor and
Employment or his duly authorized representatives
shall have the power to issue compliance orders to
give effect to the labor standards provisions of this
Code and other labor legislation based on the
findings of labor employment and enforcement
officers or industrial safety engineers made in the
course of inspection. The Secretary or his duly
authorized representative shall issue writs of
execution to the appropriate authority for the
enforcement of their orders, except in cases where
the employer contests the findings of the labor
employment and enforcement officer and raises
issues supported by documentary proofs which were
not considered in the course of inspection.

xxx xxx

xxx (emphasis supplied)

The present law, RA 7730, can be considered a

curative statute to reinforce the conclusion that the
Regional Director has jurisdiction over the present
labor standards case.

Well-settled is the rule that jurisdiction over the

subject matter is determined by the law in force
when the action was commenced, unless a
subsequent statute provides for its retroactive
application, as when it is a curative legislation.[19]

Curative statutes are intended to supply defects,

abridge superfluities in existing laws and curb certain
evils. They are intended to enable persons to carry
into effect that which they have designed and
intended, but has failed of expected legal
consequence by reason of some statutory disability
or irregularity in their own action. They make valid
that which, before the enactment of the statute, was
invalid.[20]

In arriving at this conclusion, the case of Briad Agro

Development vs. De la Cerna[21] comes to the fore.
In the said case, RA 6715 was held to be a curative
statute. There, the Court ruled that RA 6715 is
deemed a curative statute and should be applied to
pending cases. The rationale of the ruling of the
Court was that prior to RA 6715, Article 217 as
amended by E.O. 111, created a scenario where the
Labor Arbiter and the Regional Director of DOLE had
overlapping jurisdiction over money claims. Such a
situation was viewed as a defect in the law so that
when RA 6715 was passed, it was treated or
interpreted by the Court as a rectification of the
infirmity of the law, and therefore curative in nature,
with retroactive application.

Parenthetically, the same rationale applies in treating

RA 7730 as a curative statute. Explicit in its title[22]
is the legislative intent to rectify the error brought
about by this Courts ruling that RA 6715 covers even
labor standards cases where the amounts to be
awarded by the Regional Director exceed P5,000 as
provided for under RA 6715. Congressional records
relative to Republic Act 7730 reveal that, this bill
seeks to do away with the jurisdictional limitations
imposed thru said ruling (referring to Servando) and
to finally settle any lingering doubts on the visitorial
and enforcement powers of the Secretary of Labor
and Employment.[23]

All the foregoing studiedly considered, the

ineluctable conclusion is that the application of RA
7730 to the case under consideration is proper.

Thus, it is decisively clear that the public respondent

did not act with grave abuse of discretion in issuing
the Order dated September 16, 1988.

35

The second issue for resolution is the validity of the

auction sales conducted by Special Sheriff Ramos. It
bears stressing that the writ of execution issued by
the Regional Director led to the several auction sales
conducted on September 24, 1987, October 2, 1987,
October 23, 1987, October 29, 1987 and October 30,
1987.

In the first Order of public respondent, the five (5)

auction sales were declared null and void. As the
public respondent put it, the scandalously low price
for which the personal properties of the respondent
were sold leads us to no other recourse but to
invalidate the auction sales conducted by the special
sheriff.[24]

4. One (1) unit Forklift; one (1) unit crowler crane,

Engine No. (not visible); and one (1) Lot of scrap
irons impounded inside the Batong Buhay
Compound, Calanan, Kalinga Apayao.

5. One (1) unit panel Isuzu with Engine No. 821

POF200207, Plate No. PBV 386.

Proceeds of Sale....P228,750.00

Personal Properties Sold on October 23, 1987:

In the September 16, 1988 Order[25] of public
respondent, the personal properties and
corresponding prices for which they were sold were
as follows:

1. One (1) Unit Toyota Land Cruiser, with Engine No.

BO4466340, Chassis No. 81400500227, Plate No. BAT
353, burned, damage not running condition, type of
body jeep motor not visible.

Personal properties sold on September 24, 1987:

2. Two (2) units peterbuilts, damaged, burned motor
Nos. (not visible) and Chassis Nos. not visible.
1. One (1) unit peterbuilt truck Model 1978 with
Engine No. 6A4102-65, Chassis No. 139155-P not
running condition.

2. One (1) unit 1978 Model peterbuilt truck with

Engine No. 6467-8040, Chassis No. 6A410235, truck
with Engine No. (Truck 4) not running condition.

3. One (1) unit 1978 Model peterbuilt truck with

Engine No. 6A410319, Chassis No. 139163-P Truck
No. 4 not running condition.

3. One (1) Unit Layland, burned, damaged and Motor

No. not visible.

4. Two (units) air compressor, burned, damaged and

one (1) generator.

5. One (1) Unit Loader Michigan 50, damaged and

burned, and

Proceeds of Sale ............P178,000.00

6. One (1) rock crasher, damaged, burned, scrap

iron junk.

Personal Properties Sold on October 2, 1987:

Proceeds of Sale...........P98,000.00

1. One (1) unit peterbuilt truck model 1978, with

Engine No. 6A410347, Chassis No. 1391539-P.

Properties sold on October 29, 1987:

1. One (1) lot of scrap construction materials

2. One (1) unit peterbuilt truck Model 1978 with
Engine No. 6A410325, Chassis No. 139149.
2. One (1) lot of scrap mining machineries
equipments and supplies.
3. One (1) unit payloader (caterpillar with Engine No.
(not visible) 966.

36

3. One (1) lot of junk machineries, equipments and

supplies.

connected with, and tending to cause, the

inadequacy.[26]

Proceeds of Sale............P1,699,999.99

Consequently, in declaring the nullity of the subject

auction sales on the ground of inadequacy of price,
the public respondent acted with grave abuse of
discretion amounting to lack or excess of jurisdiction.

Personal Properties Sold on October 20, 1987*

1. One (1) lot of scrap construction materials

2. One (1) lot of scrap mining machineries,

equipments and supplies

But, this is not to declare the questioned auction

sales as valid. The same are null and void since on
the properties of petitioner involved was constituted
a mortgage between petitioner and the Development
Bank of the Philippines, as shown by the:

(a) Deed of Mortgage dated December 28,1973;

Proceeds of Sale...........P2,185,000.00

Total Proceeds Sale.... P4,389,749.99

(b) Joint Mortgage (Amending Deed of Mortgage)

dated August 25, 1975;

to satisfy the judgment award in the amount of

P4,818,746.00.

(c) Amendment to Joint Mortgage dated October 18,

1976.

As a general rule, findings of fact and conclusion of

law arrived at by quasi-judicial agencies are not to be
disturbed absent any showing of grave abuse of
discretion tainting the same. But in the case under
scrutiny, there was grave abuse of discretion when
the public respondent, without any evidentiary
support, adjudged such prices as scandalously low.
He merely relied on the self-serving assertion by the
petitioner that the value of the auctioned properties
was more than the price bid. Obviously, this
ratiocination did not suffice to set aside the auction
sales.

(d) Confirmation of Mortgage dated March 27,1979;

and

The presumption of regularity in the performance of

official function is applicable here. Conformably, any
party alleging irregularity vitiating auction sales must
come forward with clear and convincing proof.

(e) Additional Joint First Mortgage dated March 31,

1981.[27]

The aforementioned documents were executed

between the petitioner and Development Bank of the
Philippines (DBP) even prior to the filing of the
complaint of petitioners employees. The properties
having been mortgaged to DBP, the applicable law is
Section 14 of Executive Order No. 81, dated 3
December 1986, otherwise known as the The 1986
Revised Charter of the Development Bank of the
Philippines, which exempts the properties of
petitioner mortgaged to DBP from attachment or
execution sales. Section 14 of E.O. 81, reads:

Furthermore, it is a well-settled principle that:

Mere inadequacy of price is not, of itself sufficient

ground to set aside an execution sale where the sale
is regular, proper and legal in other respects, the
parties stand on an equal footing, there are no
confidential relation between them, there is no
element of fraud, unfairness, or oppression, and
there is no misconduct, accident, mistake or surprise

Sec. 14. Exemption from Attachment. The

provisions of any law to the contrary
notwithstanding, securities on loans and/or other
accommodations granted by the Bank or its
predecessor-in-interest shall not be subject to
attachment, execution or any other court process,
nor shall they be included in the property of insolvent
persons or institutions, unless all debts and
obligations of the Bank or its predecessor-in-interest,
penalties, collection of expenses, and other charges,

37

subject to the provisions of paragraph (e) of Sec. 9 of

this Charter.

In fact, a letter dated January 31, 1990 of Jose C.

Sison, Associate Executive Trustee of the Asset
Privatization Trust, to the Office of the Clerk of Court
of the Supreme Court, certified that the petitioner is
covered by Proclamation No. 50 issued on December
8, 1986 by President Corazon C. Aquino.

Quoted hereunder are the pertinent portions of the

said letter:[28]

RE: BBGMI vs. Hon. dela Serna, GR No. 86963

xxx xxx

xxx

(sgd)

JOSE C. SISON

The exemption referred to in the aforecited letter is

one of the circumstances contemplated by Rule 39 of
the Revised Rules of Court, to wit:

Supreme Court Certiorari

Sec. 13. Property exempt from execution. - Except

as otherwise expressly provided by law, the following
properties, and no other, shall be exempt from
execution:

SIR:

xxx xxx

xxx

xxx

(m) Properties specially exempted by law.

xxx

xxx all the assets (real and personal/chattel) of

Batong Buhay Gold Mines, Inc. (BBGMI) have been
transferred and entrusted to the Asset Privatization
Trust (APT) by virtue of Proclamation No. 50 dated
December 8, 1986 of her Excellency, President
Corazon C. Aquino. All the said assets of BBGMI are
covered by real and chattel mortgages executed in
favor of the Philippine National Bank (PNB), the
Development Bank of the Philippines (DBP) and the
National Investment and Development Corporation
(NIDC).

xxx xxx

xxx

Section 14, Executive Order No. 81:

xxx xxx

xxx

xxx xxx

xxx

Private respondents contend that even if subject

properties were mortgaged to DBP (now under Asset
Privatization Trust), Article 110[29] of the Labor
Code, as amended by RA 6715, applies just the
same. According to them, the said provision of law
grants preference to money claims of workers over
and above all credits of the petitioner. This
contention is untenable. In the case of DBP vs. NLRC,
[30] the Supreme Court held that the workers
preference regarding wages and other monetary
claims under Article 110 of the Labor Code, as
amended, contemplates bankruptcy or liquidation
proceedings of the employers business. What is
more, it does not disregard the preferential lien of
mortgagees considered as preferred credits under
the provisions of the New Civil Code on the
classification, concurrence and preference of credits.

xxx

Pursuant to the above-quoted provision of law, you

are hereby warned that all the assets (real and
personal /chattel) of BBGMI are exempted from writs
of execution, attachment, or any other lien or court
processes. The Government, through APT, shall
initiate any administrative measures and remedies
against you for any violation of the vested rights of
PNB, DBP and APT.

We now come to the issue with respect to the second

Order, dated December 14, 1988, which declared as
valid the auction sale conducted on October 29, 1987
by Special Sheriff John Ramos. Public respondent had
no authority to validate the said auction sale on the
ground that the intervenors, MFT Corporation and
Salter Holdings Pty., Ltd., as purchasers for value,
acquired legal title over subject properties.

38

It is well to remember that the said properties were

transferred to the intervenors, when Fidel Bermudez,
the highest bidder at the auction sale, sold the
properties to MFT Corporation which, in turn, sold the
same properties to Salter Holdings Pty., Ltd. Public
respondent opined that the contract of sale between
the intervenors and the highest bidder should be
respected as these sales took place during the
interregnum after the auction sale was conducted on
October 29, 1987 and before the issuance of the first
disputed Order declaring all the auction sales null
and void.

On this issue, the Court rules otherwise.

As regards personal properties, the general rule is

that title, like a stream, cannot rise higher than its
source.[31] Consequently, a seller without title
cannot transfer a title better than what he holds.
MFT Corporation and Salter Holdings Pty., Ltd. trace
their title from Fidel Bermudez, who was the highest
bidder of a void auction sale over properties exempt
from execution. Such being the case, the
subsequent sale made by him (Fidel Bermudez) is
incapable of vesting title or ownership in the vendee.

The Order dated December 14, 1988, declaring the

October 29, 1987 auction sale as valid, was issued
with grave abuse of discretion amounting to lack or
excess of jurisdiction.

WHEREFORE, the petition is hereby GRANTED, insofar

as the Order dated December 14, 1988 of
Undersecretary Dionisio dela Serna is concerned,
which Order is SET ASIDE. The Order of September
16, 1988, upholding the jurisdiction of the Regional
Director, is AFFIRMED. No pronouncement as to
costs.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and GonzagaReyes, JJ., concur.

39

DECISION

TINGA, J.:

The present controversy concerns a matter of first

impression, requiring as it does the determination of
the demarcation line between the prerogative of
the Department of Labor and Employment (DOLE)
Secretary and his duly authorized representatives,
on the one hand, and the jurisdiction of the National
Labor Relations Commission, on the other, under
Article 128 (b) of the Labor Code in an instance
where the employer has challenged the jurisdiction
of the DOLE at the very first level on the ground that
no employer-employee relationship ever existed
between the parties.

I.
PEOPLES BROADCASTING
179652

G.R. No.

(BOMBO RADYO PHILS., INC.),

Petitioner,

Present:

The instant petition for certiorari under Rule 65

assails the decision and the resolution of the Court of
Appeals dated 26 October 2006 and 26 June 2007,
respectively, in C.A. G.R. CEB-SP No. 00855.[1]

CARPIO
MORALES, J.,*
Acting Chairperson,
- versus -

TINGA,
VELASCO, JR.,

LEONARDO-DE CASTRO,** and

BRION, JJ.

THE SECRETARY OF THE

DEPARTMENT OF LABOR AND

Promulgated:

EMPLOYMENT, THE REGIONAL

DIRECTOR, DOLE REGION VII,

May 8, 2009

and JANDELEON JUEZAN,

The petition traces its origins to a complaint

filed by Jandeleon Juezan (respondent) against
Peoples Broadcasting Service, Inc. (Bombo Radyo
Phils., Inc) (petitioner) for illegal deduction, nonpayment of service incentive leave, 13th month pay,
premium pay for holiday and rest day and illegal
diminution of benefits, delayed payment of wages
and non-coverage of SSS, PAG-IBIG and Philhealth
before the Department of Labor and Employment
(DOLE) Regional Office No. VII, Cebu City.[2] On the
basis of the complaint, the DOLE conducted a plant
level inspection on 23 September 2003. In the
Inspection Report Form,[3] the Labor Inspector wrote
under the heading Findings/Recommendations
non-diminution of benefits and Note: Respondent
deny employer-employee relationship with the
complainant- see Notice of Inspection results. In the
Notice of Inspection Results[4] also bearing the date
23 September 2003, the Labor Inspector made the
following notations:

Respondents.
x---------------------------------------------------------------------------x
Management representative informed that
complainant is a drama talent hired on a per drama
participation basis hence no employer-

40

employeeship [sic] existed between them. As proof

of this, management presented photocopies of cash
vouchers, billing statement, employments of specific
undertaking (a contract between the talent director &
the complainant), summary of billing of drama
production etc. They (mgt.) has [sic] not control of
the talent if he ventures into another contract w/
other broadcasting industries.

maintained that there is no employer-employee

relationship had ever existed between it and
respondent because it was the drama directors and
producers who paid, supervised and disciplined
respondent. It also added that the case was beyond
the jurisdiction of the DOLE and should have been
considered by the labor arbiter because
respondents claim exceeded P5,000.00.

On the other hand, complainant Juezans alleged

violation of non-diminution of benefits is computed
as follows:

The Court of Appeals held that petitioner was

not deprived of due process as the essence thereof is
only an opportunity to be heard, which petitioner had
when it filed a motion for reconsideration with the
DOLE Secretary. It further ruled that the latter had
the power to order and enforce compliance with labor
standard laws irrespective of the amount of
individual claims because the limitation imposed by
Article 29 of the Labor Code had been repealed by
Republic Act No. 7730.[10] Petitioner sought
reconsideration of the decision but its motion was
denied.[11]

@ P 2,000/15 days + 1.5 mos = P 6,000

(August 1/03 to Sept 15/03)

Note: Recommend for summary investigation

or whatever action deem proper.[5]

Petitioner was required to rectify/restitute the

violations within five (5) days from receipt. No
rectification was effected by petitioner; thus,
summary investigations were conducted, with the
parties eventually ordered to submit their respective
position papers.[6]

In his Order dated 27 February 2004,[7] DOLE

Regional Director Atty. Rodolfo M. Sabulao (Regional
Director) ruled that respondent is an employee of
petitioner, and that the former is entitled to his
money claims amounting to P203,726.30. Petitioner
sought reconsideration of the Order, claiming that
the Regional Director gave credence to the
documents offered by respondent without examining
the originals, but at the same time he missed or
failed to consider petitioners evidence. Petitioners
motion for reconsideration was denied.[8] On appeal
to the DOLE Secretary, petitioner denied once more
the existence of employer-employee relationship. In
its Order dated 27 January 2005, the Acting DOLE
Secretary dismissed the appeal on the ground that
petitioner did not post a cash or surety bond and
instead submitted a Deed of Assignment of Bank
Deposit.[9]

Petitioner elevated the case to the Court of

Appeals, claiming that it was denied due process
when the DOLE Secretary disregarded the evidence it
presented and failed to give it the opportunity to
refute the claims of respondent. Petitioner

Before this Court, petitioner argues that the

National Labor Relations Commission (NLRC), and not
the DOLE Secretary, has jurisdiction over
respondents claim, in view of Articles 217 and 128 of
the Labor Code.[12] It adds that the Court of Appeals
committed grave abuse of discretion when it
dismissed petitioners appeal without delving on the
issues raised therein, particularly the claim that no
employer-employee relationship had ever existed
between petitioner and respondent. Finally,
petitioner avers that there is no appeal, or any plain,
speedy and adequate remedy in the ordinary course
of law available to it.

On the other hand, respondent posits that the

Court of Appeals did not abuse its discretion. He
invokes Republic Act No. 7730, which removes the
jurisdiction of the Secretary of Labor and
Employment or his duly authorized representatives,
from the effects of the restrictive provisions of Article
129 and 217 of the Labor Code, regarding the
confinement of jurisdiction based on the amount of
claims.[13] Respondent also claims that petitioner
was not denied due process since even when the
case was with the Regional Director, a hearing was
conducted and pieces of evidence were presented.
Respondent stands by the propriety of the Court of
Appeals ruling that there exists an employeremployee relationship between him and petitioner.
Finally, respondent argues that the instant petition
for certiorari is a wrong mode of appeal considering
that petitioner had earlier filed a Petition for
Certiorari, Mandamus and Prohibition with the Court
of Appeals; petitioner, instead, should have filed a
Petition for Review.[14]

41

employer-employee relationship must have existed

even before the emergence of the controversy.
Necessarily, the DOLEs power does not apply in two
instances, namely: (a) where the employer-employee
relationship has ceased; and (b) where no such
relationship has ever existed.

II.

The significance of this case may be reduced

to one simple questiondoes the Secretary of Labor
have the power to determine the existence of an
employer-employee relationship?

To resolve this pivotal issue, one must look into

the extent of the visitorial and enforcement power of
the DOLE found in Article 128 (b) of the Labor Code,
as amended by Republic Act 7730. It reads:

Article 128 (b) Notwithstanding the provisions

of Articles 129 and 217 of this Code to the contrary,
and in cases where the relationship of employeremployee still exists, the Secretary of Labor and
Employment or his duly authorized representatives
shall have the power to issue compliance orders to
give effect to the labor standards provisions of this
Code and other labor legislation based on the
findings of labor employment and enforcement
officers or industrial safety engineers made in the
course of inspection. The Secretary or his duly
authorized representative shall issue writs of
execution to the appropriate authority for the
enforcement of their orders, except in cases where
the employer contests the findings of the labor
employment and enforcement officer and raises
issues supported by documentary proofs which were
not considered in the course of inspection. (emphasis
supplied)

xxx

The provision is quite explicit that the visitorial and

enforcement power of the DOLE comes into play only
in cases when the relationship of employeremployee still exists. It also underscores the
avowed objective underlying the grant of power to
the DOLE which is to give effect to the labor
standard provision of this Code and other labor
legislation. Of course, a persons entitlement to
labor standard benefits under the labor laws
presupposes the existence of employer-employee
relationship in the first place.

The clause in cases where the relationship of

employer-employee still exists signifies that the

The first situation is categorically covered by Sec.

3, Rule 11 of the Rules on the Disposition of Labor
Standards Cases[15] issued by the DOLE Secretary. It
reads:

Rule II MONEY CLAIMS ARISING FROM

COMPLAINT/ROUTINE INSPECTION

Sec. 3. Complaints where no employer-employee

relationship actually exists. Where employeremployee relationship no longer exists by reason of
the fact that it has already been severed, claims for
payment of monetary benefits fall within the
exclusive and original jurisdiction of the labor
arbiters. Accordingly, if on the face of the complaint,
it can be ascertained that employer-employee
relationship no longer exists, the case, whether
accompanied by an allegation of illegal dismissal,
shall immediately be endorsed by the Regional
Director to the appropriate branch of the National
Labor Relations Commission (NLRC).

In the recent case of Bay Haven, Inc. v. Abuan,[16]

this Court recognized the first situation and
accordingly ruled that a complainants allegation of
his illegal dismissal had deprived the DOLE of
jurisdiction as per Article 217 of the Labor Code.[17]

In the first situation, the claim has to be referred to

the NLRC because it is the NLRC which has
jurisdiction in view of the termination of the
employer-employee relationship. The same
procedure has to be followed in the second situation
since it is the NLRC that has jurisdiction in view of the
absence of employer-employee relationship between
the evidentiary parties from the start.

Clearly the law accords a prerogative to the NLRC

over the claim when the employer-employee
relationship has terminated or such relationship has
not arisen at all. The reason is obvious. In the
second situation especially, the existence of an
employer-employee relationship is a matter which is

42

not easily determinable from an ordinary inspection,

necessarily so, because the elements of such a
relationship are not verifiable from a mere ocular
examination. The intricacies and implications of an
employer-employee relationship demand that the
level of scrutiny should be far above the cursory and
the mechanical. While documents, particularly
documents found in the employers

legislative branch is entitled to impose. The

rationale underlying this limitation is to eliminate the
prospect of competing conclusions of the Secretary
of Labor and the NLRC, on a matter fraught with
questions of fact and law, which is best resolved by
the quasi-judicial body, which is the NRLC, rather
than an administrative official of the executive
branch of the government. If the Secretary of Labor
proceeds to exercise his visitorial and enforcement
powers absent the first requisite, as the dissent
proposes, his office confers jurisdiction on itself
which it cannot otherwise acquire.

office are the primary source materials, what may

prove decisive are factors related to the history of
the employers business operations, its current state
as well as accepted contemporary practices in the
industry. More often than not, the question of
employer-employee relationship becomes a battle of
evidence, the determination of which should be
comprehensive and intensive and therefore best left
to the specialized quasi-judicial body that is the
NLRC.

The approach suggested by the dissent is

frowned upon by common law. To wit:

It can be assumed that the DOLE in the exercise of

its visitorial and enforcement power somehow has to
make a determination of the existence of an
employer-employee relationship. Such prerogatival
determination, however, cannot be coextensive with
the visitorial and enforcement power itself. Indeed,
such determination is merely preliminary, incidental
and collateral to the DOLEs primary function of
enforcing labor standards provisions. The
determination of the existence of employer-employee
relationship is still primarily lodged with the NLRC.
This is the meaning of the clause in cases where the
relationship of employer-employee still exists in Art.
128 (b).

[I]t is a general rule, that no court of limited

jurisdiction can give itself jurisdiction by a wrong
decision on a point collateral to the merits of the
case upon which the limit to its jurisdiction depends;
and however its decision may be final on all
particulars, making up together that subject matter
which, if true, is within its jurisdiction, and however
necessary in many cases it may be for it to make a
preliminary inquiry, whether some collateral matter
be or be not within the limits, yet, upon this
preliminary question, its decision must always be
open to inquiry in the superior court.[18]

Thus, before the DOLE may exercise its powers

under Article 128, two important questions must be
resolved: (1) Does the employer-employee
relationship still exist, or alternatively, was there ever
an employer-employee relationship to speak of; and
(2) Are there violations of the Labor Code or of any
labor law?

A more liberal interpretative mode,

pragmatic or functional analysis, has also emerged
in ascertaining the jurisdictional boundaries of
administrative agencies whose jurisdiction is
established by statute. Under this approach, the
Court examines the intended function of the tribunal
and decides whether a particular provision falls
within or outside that function, rather than making
the provision itself the determining centerpiece of
the analysis.[19] Yet even under this more expansive
approach, the dissent fails.

The existence of an employer-employee relationship

is a statutory prerequisite to and a limitation on the
power of the Secretary of Labor, one which the

A reading of Art. 128 of the Labor Code reveals that

the Secretary of Labor or his authorized
representatives was granted visitorial and
enforcement powers for the purpose of determining
violations of, and enforcing, the Labor Code and any
labor law, wage order, or rules and regulations issued
pursuant thereto. Necessarily, the actual existence
of an employer-employee relationship affects the
complexion of the putative findings that the

43

Secretary of Labor may determine, since employees

are entitled to a different set of rights under the
Labor Code from the employer as opposed to nonemployees. Among these differentiated rights are
those accorded by the labor standards provisions
of the Labor Code, which the Secretary of Labor is
mandated to enforce. If there is no employeremployee relationship in the first place, the duty of
the employer to adhere to those labor standards with
respect to the non-employees is questionable.

This decision should not be considered as placing an

undue burden on the Secretary of Labor in the
exercise of visitorial and enforcement powers, nor
seen as an unprecedented diminution of the same,
but rather a recognition of the statutory limitations
thereon. A mere assertion of absence of employeremployee relationship does not deprive the DOLE of
jurisdiction over the claim under Article 128 of the
Labor Code. At least a prima facie showing of such
absence of relationship, as in this case, is needed to
preclude the DOLE from the exercise of its power.
The Secretary of Labor would not have been
precluded from exercising the powers under Article
128 (b) over petitioner if another person with bettergrounded claim of employment than that which
respondent had. Respondent, especially if he were
an employee, could have very well enjoined other
employees to complain with the DOLE, and, at the
same time, petitioner could ill-afford to disclaim an
employment relationship with all of the people under
its aegis.

Without a doubt, petitioner, since the inception of

this case had been consistent in maintaining that
respondent is not its employee. Certainly, a
preliminary determination, based on the evidence
offered, and noted by the Labor Inspector during the
inspection as well as submitted during the
proceedings before the Regional Director puts in
genuine doubt the existence of employer-employee
relationship. From that point on, the prudent recourse
on the part of the DOLE should have been to refer
respondent to the NLRC for the proper dispensation
of his claims. Furthermore, as discussed earlier,
even the evidence relied on by the Regional Director
in his order are mere self-serving declarations of
respondent, and hence cannot be relied upon as
proof of employer-employee relationship.

III.

Aside from lack of jurisdiction, there is another

cogent reason to to set aside the Regional Directors
27 February 2004 Order. A careful study of the case
reveals that the said Order, which found respondent
as an employee of petitioner and directed the
payment of respondents money claims, is not
supported by substantial evidence, and was even
made in disregard of the evidence on record.

It is not enough that the evidence be simply

considered. The standard is substantial evidence as
in all other quasi-judicial agencies. The standard
employed in the last sentence of Article 128(b) of the
Labor Code that the documentary proofs be
considered in the course of inspection does not
apply. It applies only to issues other than the
fundamental issue of existence of employeremployee relationship. A contrary rule would lead to
controversies on the part of labor officials in
resolving the issue of employer-employee
relationship. The onset of arbitrariness is the advent
of denial of substantive due process.

As a general rule, the Supreme Court is not a trier of

facts. This applies with greater force in cases before
quasi-judicial agencies whose findings of fact are
accorded great respect and even finality. To be sure,
the same findings should be supported by substantial
evidence from which the said tribunals can make its
own independent evaluation of the facts. Likewise, it
must not be rendered with grave abuse of discretion;
otherwise, this Court will not uphold the tribunals
conclusion.[20] In the same manner, this Court will
not hesitate to set aside the labor tribunals findings
of fact when it is clearly shown that they were
arrived at arbitrarily or in disregard of the evidence
on record or when there is showing of fraud or error
of law.[21]

At the onset, it is the Courts considered view that

the existence of employer- employee relationship
could have been easily resolved, or at least prima
facie determined by the labor inspector, during the
inspection by looking at the records of petitioner
which can be found in the work premises.
Nevertheless, even if the labor inspector had noted
petitioners manifestation and documents in the
Notice of Inspection Results, it is clear that he did not
give much credence to said evidence, as he did not
find the need to investigate the matter further.
Considering that the documents shown by petitioner,
namely: cash vouchers, checks and statements of
account, summary billings evidencing payment to
the alleged real employer of respondent, lettercontracts denominated as Employment for a
Specific Undertaking, prima facie negate the
existence of employer-employee relationship, the
labor inspector could have exerted a bit more effort

44

and looked into petitioners payroll, for example, or

its roll of employees, or interviewed other employees
in the premises. After all, the labor inspector, as a
labor regulation officer is given access to
employers records and premises at any time of day
or night whenever work is being undertaken therein,
and the right to copy therefrom, to question any
employee and investigate any fact, condition or
matter which may be necessary to determine
violations or which may aid in the enforcement of
this Code and of any labor law, wage order or rules
and regulations pursuant thereto.[22] Despite
these far-reaching powers of labor regulation officers,
records reveal that no additional efforts were
exerted in the course of the inspection.

SERVICES, INC. (DYMF- Bombo Radyo Cebu) since

1990 up to the present.

Furtherly certifies that Mr. Juezan is receiving

a monthly salary of FIFTEEN THOUSAND (P15,000.00)
PESOS.
This certification is issued upon the request of
the above stated name to substantiate loan
requirement.

Given this 18th day of April 2000, Cebu City ,

Philippines.

The Court further examined the records and

discovered to its dismay that even the Regional
Director turned a blind eye to the evidence presented
by petitioner and relied instead on the self-serving
claims of respondent.

(signed)
GREMAN B.
SOLANTE

In his position paper, respondent claimed that he

was hired by petitioner in September 1996 as a radio
talent/spinner, working from 8:00 am until 5 p.m., six
days a week, on a gross rate of P60.00 per script,
earning an average of P15,0000.00 per month,
payable on a semi-monthly basis. He added that the
payment of wages was delayed; that he was not
given any service incentive leave or its monetary
commutation, or his 13th month pay; and that he
was not made a member of the Social Security
System (SSS), Pag-Ibig and PhilHealth. By January
2001, the number of radio programs of which
respondent was a talent/spinner was reduced,
resulting in the reduction of his monthly income from
P15,000.00 to only P4,000.00, an amount he could
barely live on. Anent the claim of petitioner that no
employer-employee relationship ever existed,
respondent argued that that he was hired by
petitioner, his wages were paid under the payroll of
the latter, he was under the control of petitioner and
its agents, and it was petitioner who had the power
to dismiss him from his employment.[23] In support
of his position paper, respondent attached a
photocopy of an identification card purportedly
issued by petitioner, bearing respondents picture
and name with the designation Spinner; at the
back of the I.D., the following is written: This
certifies that the card holder is a duly Authorized
MEDIA Representative of BOMBO RADYO PHILIPPINES
THE NO.1 Radio Network in the Country ***BASTA
RADYO BOMBO***[24] Respondent likewise included
a Certification which reads:

This is to certify that MR. JANDELEON JUEZAN

is a program employee of PEOPLES BROADCASTING

Station
Manager

On the other hand, petitioner maintained in its

position paper that respondent had never been its
employee. Attached as annexes to its position paper
are photocopies of cash vouchers it issued to drama
producers, as well as letters of employment
captioned Employment for a Specific Undertaking,
wherein respondent was appointed by different
drama directors as spinner/narrator for specific radio
programs.[25]

In his Order, the Regional Director merely made a

passing remark on petitioners claim of lack of
employer-employee relationshipa token paragraph
and proceeded to a detailed recitation of
respondents allegations. The documents introduced
by petitioner in its position paper and even those
presented during the inspection were not given an
iota of credibility. Instead, full recognition and
acceptance was accorded to the claims of
respondentfrom the hours of work to his monthly

45

salary, to his alleged actual duties, as well as to his

alleged evidence. In fact, the findings are
anchored almost verbatim on the self-serving
allegations of respondent.

Furthermore, respondents pieces of evidencethe

identification card and the certification issued by
petitioners Greman Solante are not even
determinative of an employer-employee relationship.
The certification, issued upon the request of
respondent, specifically stated that MR. JANDELEON
JUEZAN is a program employee of PEOPLES
BROADCASTING SERVICES, INC. (DYMF- Bombo
Radyo Cebu), it is not therefore crystal clear that
complainant is a station employee rather than a
program employee hence entitled to all the benefits
appurtenant thereto,[26] as found by the DOLE
Regional Director. Respondent should be bound by
his own evidence. Moreover, the classification as to
whether one is a station employee and program
employee, as lifted from Policy Instruction No. 40,
[27] dividing the workers in the broadcast industry
into only two groups is not binding on this Court,
especially when the classification has no basis either
in law or in fact.[28]

Even the identification card purportedly issued by

petitioner is not proof of employer-employee
relationship since it only identified respondent as an
Authorized Representative of Bombo Radyo, and
not as an employee. The phrase gains significance
when compared vis a vis the following notation in the
sample identification cards presented by petitioner in
its motion for reconsideration:

1.
This is to certify that the person whose picture
and signature appear hereon is an employee of
Bombo Radio Philippines.
2.
This ID must be worn at all times within
Bombo Radyo Philippines premises for proper
identification and security. Furthermore, this is the
property of Bombo Radyo Philippines and must be
surrendered upon separation from the company.

HUMAN RESOURCE
DEPARMENT
(Signed)
JENALIN D. PALER

Respondent tried to address the discrepancy

between his identification card
and the standard
identification cards issued by petitioner to its
employees by arguing that what he annexed to his
position paper was the old identification card issued
to him by petitioner. He then presented a photocopy
of another old identification card, this time
purportedly issued to one of the employees who was
issued the new identification card presented by
petitioner.[29] Respondents argument does not
convince. If it were true that he is an employee of
petitioner, he would have been issued a new
identification card similar to the ones presented by
petitioner, and he should have presented a copy of
such new identification card. His failure to show a
new identification card merely demonstrates that
what he has is only his Media ID, which does not
constitute proof of his employment with petitioner.

It has long been established that in administrative

and quasi-judicial proceedings, substantial evidence
is sufficient as a basis for judgment on the existence
of employer-employee relationship. Substantial
evidence, which is the quantum of proof required in
labor cases, is that amount of relevant evidence
which a reasonable mind might accept as adequate
to justify a conclusion.[30] No particular form of
evidence is required to prove the existence of such
employer-employee relationship. Any competent and
relevant evidence to prove the relationship may be
admitted.[31] Hence, while no particular form of
evidence is required, a finding that such relationship
exists must still rest on some substantial evidence.
Moreover, the substantiality of the evidence depends
on its quantitative as well as its qualitative aspects.
[32]

In the instant case, save for respondents self-serving

allegations and self-defeating evidence, there is no
substantial basis to warrant the Regional Directors
finding that respondent is an employee of petitioner.
Interestingly, the Order of the Secretary of Labor
denying petitioners appeal dated 27 January 2005,
as well as the decision of the Court of Appeals
dismissing the petition for certiorari, are silent on
the issue of the existence of an employer-employee
relationship, which further suggests that no real and
proper determination the existence of such
relationship was ever made by these tribunals. Even
the dissent skirted away from the issue of the
existence of employer-employee relationship and
conveniently ignored the dearth of evidence
presented by respondent.

HRD HEAD

46

Although substantial evidence is not a function of

quantity but rather of quality, the peculiar
environmental circumstances of the instant case
demand that something more should have been
proffered.[33] Had there been other proofs of
employment, such as respondents inclusion in
petitioners payroll, or a clear exercise of control, the
Court would have affirmed the finding of employeremployee relationship. The Regional Director,
therefore, committed grievous error in ordering
petitioner to answer for respondents claims.
Moreover, with the conclusion that no employeremployee relationship has ever existed between
petitioner and respondent, it is crystal-clear that the
DOLE Regional Director had no jurisdiction over
respondents complaint. Thus, the improvident
exercise of power by the Secretary of Labor and the
Regional Director behooves the court to subject their
actions for review and to invalidate all the
subsequent orders they issued.

IV.

The records show that petitioners appeal was

denied because it had allegedly failed to post a cash
or surety bond. What it attached instead to its
appeal was the Letter Agreement[34] executed by
petitioner and its bank, the cash voucher,[35] and
the Deed of Assignment of Bank Deposits.[36]
According to the DOLE, these documents do not
constitute the cash or surety bond contemplated by
law; thus, it is as if no cash or surety bond was
posted when it filed its appeal.

While the requirements for perfecting an appeal must

be strictly followed as they are considered
indispensable interdictions against needless delays
and for orderly discharge of judicial business, the law
does admit exceptions when warranted by the
circumstances. Technicality should not be allowed to
stand in the way of equitably and completely
resolving the rights and obligations of the parties.
[37] Thus, in some cases, the bond requirement on
appeals involving monetary awards had been
relaxed, such as when (i) there was substantial
compliance with the Rules; (ii) the surrounding facts
and circumstances constitute meritorious ground to
reduce the bond; (iii) a liberal interpretation of the
requirement of an appeal bond would serve the
desired objective of resolving controversies on the
merits; or (iv) the appellants, at the very least
exhibited their willingness and/or good faith by
posting a partial bond during the reglementary
period.[38]

A review of the documents submitted by

petitioner is called for to determine whether they
should have been admitted as or in lieu of the surety
or cash bond to sustain the appeal and serve the
ends of substantial justice.

The Deed of Assignment reads:

DEED OF ASSIGNMENT OF BANK DEPOSIT

WITH SPECIAL POWER OF ATTORNEY

The Court does not agree.

The provision on appeals from the DOLE

Regional Offices to the DOLE Secretary is in the last
paragraph of Art. 128 (b) of the Labor Code, which
reads:

An order issued by the duly authorized

representative of the Secretary of Labor and
Employment under this article may be appealed to
the latter. In case said order involves a monetary
award, an appeal by the employer may be perfected
only upon the posting of a cash or surety bond issued
by a reputable bonding company duly accredited by
the Secretary of Labor and Employment in the
amount equivalent to the monetary award in the
order appealed from. (emphasis supplied)

KNOW ALL MEN BY THESE PRESENTS:

That I, GREMAN B. SOLANTE in my capacity

as Station Manager of DYMF Cebu City, PEOPLES
BROADCASTING SERVICES, INC., a corporation duly
authorized and existing under and by virtue of the
laws of the Philippines, for and in consideration of the
sum of PESOS: TWO HUNDRED THREE THOUSAND
SEVEN HUNDRED TWENTY SIX PESOS & 30/100 ONLY
(P203,726.30) Phil. Currency, as CASH BOND
GUARANTEE for the monetary award in favor to the
Plaintiff in the Labor Case docketed as LSED Case No.
R0700-2003-09-CI-09, now pending appeal.

47

That Respondent-Appellant do hereby

undertake to guarantee available and sufficient funds
covered by Platinum Savings Deposit (PSD) No. 0108-00038-4 of PEOPLES BROADCASTING SERVICES,
INC. in the amount of PESOS: TWO HUNDRED THREE
THOUSAND SEVEN HUNDRED TWENTY SIX PESOS &
30/100 ONLY (P203,726.30) payable to PlaintiffAppellee/Department of Labor and Employment
Regional Office VII at Queen City Development Bank,
Cebu Branch, Sanciangko St. Cebu City.

It is understood that the said bank has the full

control of Platinum Savings Deposit (PSD) No. 010-800038-4 from and after this date and that said sum
cannot be withdrawn by the Plaintiff-Appellee/
Department of Labor and Employment Regional
Office VII until such time that a Writ of Execution
shall be ordered by the Appellate Office.

FURTHER, this Deed of Assignment is limited

to the principal amount of PESOS: TWO HUNDRED
THREE THOUSAND SEVEN HUNDRED TWENTY SIX
PESOS & 30/100 ONLY (P203,726.30) Phil. Currency,
therefore, any interest to be earned from the said
Deposit will be for the account holder.

IN WITNESS WHEREOF, I have hereunto

affixed my signature this 18th day if June, 2004, in
the City of Cebu, Philippines.

PEOPLES BROADCASTING SERVICES,

INC.
By:

(Signed)
GREMAN B.
SOLANTE
Station
Manager

As priorly mentioned, the Deed of Assignment

was accompanied by a Letter Agreement between
Queen City Development Bank and petitioner
concerning Platinum Savings Deposit (PSD) No. 0108-00038-4,[39] and a Cash Voucher issued by
petitioner showing the amount of P203,726.30
deposited at the said bank.

Casting aside the technical imprecision and

inaptness of words that mark the three documents, a
liberal reading reveals the documents petitioner did
assign, as cash bond for the monetary award in favor
of respondent in LSED Case NO. RO700-2003-CI-09,
the amount of P203,726.30 covered by petitioners
PSD Account No. 010-8-00038-4 with the Queen City
Development Bank at Sanciangko St. Cebu City, with
the depositary bank authorized to remit the amount
to, and upon withdrawal by respondent and or the
Department of Labor and Employment Regional
Office VII, on the basis of the proper writ of
execution. The Court finds that the Deed of
Assignment constitutes substantial compliance with
the bond requirement.

The purpose of an appeal bond is to ensure, during

the period of appeal, against any occurrence that
would defeat or diminish recovery by the aggrieved
employees under the judgment if subsequently
affirmed.[40] The Deed of Assignment in the instant
case, like a cash or surety bond, serves the same
purpose. First, the Deed of Assignment constitutes
not just a partial amount, but rather the entire award
in the appealed Order. Second, it is clear from the
Deed of Assignment that the entire amount is under
the full control of the bank, and not of petitioner, and
is in fact payable to the DOLE Regional Office, to be
withdrawn by the same office after it had issued a
writ of execution. For all intents and purposes, the
Deed of Assignment in tandem with the Letter
Agreement and Cash Voucher is as good as cash.
Third, the Court finds that the execution of the Deed
of Assignment, the Letter Agreement and the Cash
Voucher were made in good faith, and constituted
clear manifestation of petitioners willingness to pay
the judgment amount.

The Deed of Assignment must be

distinguished from the type of bank certification
submitted by appellants in Cordova v. Keysas
Boutique,[41] wherein this Court found that such
bank certification did not come close to the cash or
surety bond required by law. The bank certification in
Cordova merely stated that the employer maintains a
depository account with a balance of P23,008.19,
and that the certification was issued upon the
depositors request for whatever legal purposes it
may serve. There was no indication that the said
deposit was made specifically for the pending
appeal, as in the instant case. Thus, the Court ruled
that the bank certification had not in any way
ensured that the award would be paid should the
appeal fail. Neither was the appellee in the case
prevented from making withdrawals from the savings
account. Finally, the amount deposited was measly
compared to the total monetary award in the
judgment.[42]

48

V.

Another question of technicality was posed

against the instant petition in the hope that it would
not be given due course. Respondent asserts that
petitioner pursued the wrong mode of appeal and
thus the instant petition must be dismissed. Once
more, the Court is not convinced.

A petition for certiorari is the proper remedy when

any tribunal, board or officer exercising judicial or
quasi-judicial functions has acted without or in
excess of its jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction
and there is no appeal, nor any plain speedy, and
adequate remedy at law. There is grave abuse of
discretion when respondent acts in a capricious or
whimsical manner in the exercise of its judgment as
to be equivalent to lack of jurisdiction.[43]

Respondent may have a point in asserting that in this

case a Rule 65 petition is a wrong mode of appeal,
as indeed the writ of certiorari is an extraordinary
remedy, and certiorari jurisdiction is not to be
equated with appellate jurisdiction. Nevertheless, it
is settled, as a general proposition, that the
availability of an appeal does not foreclose recourse
to the extraordinary remedies, such as certiorari and
prohibition, where appeal is not adequate or equally
beneficial, speedy and sufficient, as where the
orders of the trial court were issued in excess of or
without jurisdiction, or there is need to promptly
relieve the aggrieved party from the injurious effects
of the acts of an inferior court or tribunal, e.g., the
court has authorized execution of the judgment.[44]
This Court has even recognized that a recourse to
certiorari is proper not only where there is a clear
deprivation of petitioners fundamental right to due
process, but so also where other special
circumstances warrant immediate and more direct
action.[45]

In one case, it was held that the extraordinary writ

of certiorari will lie if it is satisfactorily established
that the tribunal acted capriciously and whimsically
in total disregard of evidence material to or even
decisive of the controversy,[46] and if it is shown
that the refusal to allow a Rule 65 petition would
result in the infliction of an injustice on a party by a
judgment that evidently was rendered whimsically
and capriciously, ignoring and disregarding
uncontroverted facts and familiar legal principles
without any valid cause whatsoever.[47]

It must be remembered that a wide breadth of

discretion is granted a court of justice in certiorari
proceedings.[48] The Court has not too infrequently
given due course to a petition for certiorari, even
when the proper remedy would have been an appeal,
where valid and compelling considerations would
warrant such a recourse.[49] Moreover, the Court
allowed a Rule 65 petition, despite the availability of
plain, speedy or adequate remedy, in view of the
importance of the issues raised

therein.[50] The rules were also relaxed by the Court

after considering the public interest involved in the
case;[51] when public welfare and the advancement
of public policy dictates; when the broader interest of
justice so requires; when the writs issued are null and
void; or when the questioned order amounts to an
oppressive exercise of judicial authority.[52]

The peculiar circumstances of this case warrant, as

we held in Republic v. Court of Appeals, 107 SCRA
504, 524, the exercise once more of our exclusive
prerogative to suspend our own rules or to exempt a
particular case from its operation as in x x Republic
of the Philippines v. Court of Appeals, et al., (83 SCRA
453, 478-480 [1978]), thus: x x The Rules have
been drafted with the primary objective of
enhancing fair trials and expediting justice. As a
corollary, if their applications and operation tend to
subvert and defeat instead of promote and enhance
it, their suspension is justified.[53]

The Regional Director fully relied on the self-serving

allegations of respondent and misinterpreted the
documents presented as evidence by respondent. To
make matters worse, DOLE denied petitioners
appeal based solely on petitioners alleged failure to
file a cash or surety bond, without any discussion on
the merits of the case. Since the petition for
certiorari before the Court of Appeals sought the
reversal of the two aforesaid orders, the appellate
court necessarily had to examine the evidence anew
to determine whether the conclusions of the DOLE
were supported by the evidence presented. It
appears, however, that the Court of Appeals did not
even review the assailed orders and focused instead
on a general discussion of due process and the
jurisdiction of the Regional Director. Had the
appellate court truly reviewed the records of the
case, it would have seen that there existed valid and
sufficient grounds for finding grave abuse of
discretion on the part of the DOLE Secretary as well

49

the Regional Director. In ruling and acting as it did,

the Court finds that the Court of Appeals may be
properly subjected to its certiorari jurisdiction.
After all, this Court has previously ruled that the
extraordinary writ of certiorari will lie if it is
satisfactorily
established that the tribunal had acted capriciously
and whimsically in total disregard of evidence
material to or even decisive of the controversy.[54]

PEOPLES BROADCASTING SERVICE (BOMBO RADYO

PHILS., INC.),
Petitioner,

The most important consideration for the

allowance of the instant petition is the opportunity
for the Court not only to set the demarcation
between the NLRCs jurisdiction and the DOLEs
prerogative but also the procedure when the case
involves the fundamental challenge on the DOLEs
prerogative based on lack of employer-employee
relationship. As exhaustively discussed here, the
DOLEs prerogative hinges on the existence of
employer-employee relationship, the issue is which is
at the very heart of this case. And the evidence
clearly indicates private respondent has never been
petitioners employee. But the DOLE did not
address, while the Court of Appeals glossed over, the
issue. The peremptory dismissal of the instant
petition on a technicality would deprive the Court of
the opportunity to resolve the novel controversy.

- versus -

THE SECRETARY OF THE DEPARTMENT OF LABOR

AND EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE
REGION VII, and JANDELEON JUEZAN,
Respondents.

WHEREFORE, the petition is GRANTED. The

Decision dated 26 October 2006 and the Resolution
dated 26 June 2007 of the Court of Appeals in C.A.
G.R. CEB-SP No. 00855 are REVERSED and SET
ASIDE. The Order of the then Acting Secretary of the
Department of Labor and Employment dated 27
January 2005 denying petitioners
appeal, and the Orders of the Director, DOLE
Regional Office No. VII, dated 24 May 2004 and 27
February 2004, respectively, are ANNULLED. The
complaint against petitioner is DISMISSED.

SO ORDERED.

G.R. No. 179652

Present:

CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,*
ABAD,
VILLARAMA, JR.,

50

PEREZ,
MENDOZA,
SERENO,

jurisdictional limitation imposed by Article 129 of the

Labor Code on the power of the DOLE Secretary
under Art. 128(b) of the Code had been repealed by
Republic Act No. (RA) 7730.[3]

REYES, and
PERLAS-BERNABE, JJ.

In the Decision of this Court, the CA Decision

was reversed and set aside, and the complaint
against petitioner was dismissed. The dispositive
portion of the Decision reads as follows:

Promulgated:

March 6, 2012
x----------------------------------------------------------------------------------------x

RESOLUTION

VELASCO, JR., J.:

In a Petition for Certiorari under Rule 65,

petitioner Peoples Broadcasting Service, Inc. (Bombo
Radyo Phils., Inc.) questioned the Decision and
Resolution of the Court of Appeals (CA) dated
October 26, 2006 and June 26, 2007, respectively, in
C.A. G.R. CEB-SP No. 00855.

Private respondent Jandeleon Juezan filed a

complaint against petitioner with the Department of
Labor and Employment (DOLE) Regional Office No.
VII, Cebu City, for illegal deduction, nonpayment of
service incentive leave, 13th month pay, premium
pay for holiday and rest day and illegal diminution of
benefits, delayed payment of wages and
noncoverage of SSS, PAG-IBIG and Philhealth.[1]
After the conduct of summary investigations, and
after the parties submitted their position papers, the
DOLE Regional Director found that private
respondent was an employee of petitioner, and was
entitled to his money claims.[2] Petitioner sought
reconsideration of the Directors Order, but failed.
The Acting DOLE Secretary dismissed petitioners
appeal on the ground that petitioner submitted a
Deed of Assignment of Bank Deposit instead of
posting a cash or surety bond. When the matter was
brought before the CA, where petitioner claimed that
it had been denied due process, it was held that
petitioner was accorded due process as it had been
given the opportunity to be heard, and that the DOLE
Secretary had jurisdiction over the matter, as the

WHEREFORE, the petition is GRANTED. The Decision

dated 26 October 2006 and the Resolution dated 26
June 2007 of the Court of Appeals in C.A. G.R. CEB-SP
No. 00855 are REVERSED and SET ASIDE. The Order
of the then Acting Secretary of the Department of
Labor and Employment dated 27 January 2005
denying petitioners appeal, and the Orders of the
Director, DOLE Regional Office No. VII, dated 24 May
2004 and 27 February 2004, respectively, are
ANNULLED. The complaint against petitioner is
DISMISSED.[4]

The Court found that there was no employeremployee relationship between petitioner and
private respondent. It was held that while the DOLE
may make a determination of the existence of an
employer-employee relationship, this function could
not be co-extensive with the visitorial and
enforcement power provided in Art. 128(b) of the
Labor Code, as amended by RA 7730. The National
Labor Relations Commission (NLRC) was held to be
the primary agency in determining the existence of
an employer-employee relationship. This was the
interpretation of the Court of the clause in cases
where the relationship of employer-employee still
exists in Art. 128(b).[5]

From this Decision, the Public Attorneys Office (PAO)

filed a Motion for Clarification of Decision (with Leave
of Court). The PAO sought to clarify as to when the
visitorial and enforcement power of the DOLE be not
considered as co-extensive with the power to
determine the existence of an employer-employee
relationship.[6] In its Comment,[7] the DOLE sought
clarification as well, as to the extent of its visitorial
and enforcement power under the Labor Code, as
amended.

The Court treated the Motion for Clarification as a

second motion for reconsideration, granting said
motion and reinstating the petition.[8] It is apparent
that there is a need to delineate the jurisdiction of
the DOLE Secretary vis--vis that of the NLRC.

51

Under Art. 129 of the Labor Code, the power of the

DOLE and its duly authorized hearing officers to hear
and decide any matter involving the recovery of
wages and other monetary claims and benefits was
qualified by the proviso that the complaint not
include a claim for reinstatement, or that the
aggregate money claims not exceed PhP 5,000. RA
7730, or an Act Further Strengthening the Visitorial
and Enforcement Powers of the Secretary of Labor,
did away with the PhP 5,000 limitation, allowing the
DOLE Secretary to exercise its visitorial and
enforcement power for claims beyond PhP 5,000.
The only qualification to this expanded power of the
DOLE was only that there still be an existing
employer-employee relationship.

It is conceded that if there is no employer-employee

relationship, whether it has been terminated or it has
not existed from the start, the DOLE has no
jurisdiction. Under Art. 128(b) of the Labor Code, as
amended by RA 7730, the first sentence reads,
Notwithstanding the provisions of Articles 129 and
217 of this Code to the contrary, and in cases where
the relationship of employer-employee still exists, the
Secretary of Labor and Employment or his duly
authorized representatives shall have the power to
issue compliance orders to give effect to the labor
standards provisions of this Code and other labor
legislation based on the findings of labor
employment and enforcement officers or industrial
safety engineers made in the course of inspection.
It is clear and beyond debate that an employeremployee relationship must exist for the exercise of
the visitorial and enforcement power of the DOLE.
The question now arises, may the DOLE make a
determination of whether or not an employeremployee relationship exists, and if so, to what
extent?

The first portion of the question must be answered in

the affirmative.

The prior decision of this Court in the present case

accepts such answer, but places a limitation upon
the power of the DOLE, that is, the determination of
the existence of an employer-employee relationship
cannot be co-extensive with the visitorial and
enforcement power of the DOLE. But even in
conceding the power of the DOLE to determine the
existence of an employer-employee relationship, the
Court held that the determination of the existence of
an employer-employee relationship is still primarily
within the power of the NLRC, that any finding by the
DOLE is merely preliminary.
This conclusion must be revisited.

No limitation in the law was placed upon the power

of the DOLE to determine the existence of an
employer-employee relationship. No procedure was
laid down where the DOLE would only make a
preliminary finding, that the power was primarily
held by the NLRC. The law did not say that the DOLE
would first seek the NLRCs determination of the
existence of an employer-employee relationship, or
that should the existence of the employer-employee
relationship be disputed, the DOLE would refer the
matter to the NLRC. The DOLE must have the power
to determine whether or not an employer-employee
relationship exists, and from there to decide whether
or not to issue compliance orders in accordance with
Art. 128(b) of the Labor Code, as amended by RA
7730.

The DOLE, in determining the existence of an

employer-employee relationship, has a ready set of
guidelines to follow, the same guide the courts
themselves use. The elements to determine the
existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; (4) the
employers power to control the employees conduct.
[9] The use of this test is not solely limited to the
NLRC. The DOLE Secretary, or his or her
representatives, can utilize the same test, even in
the course of inspection, making use of the same
evidence that would have been presented before the
NLRC.

The determination of the existence of an employeremployee relationship by the DOLE must be

respected. The expanded visitorial and enforcement
power of the DOLE granted by RA 7730 would be
rendered nugatory if the alleged employer could, by
the simple expedient of disputing the employeremployee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration
that at least a prima facie showing of the absence of
an employer-employee relationship be made to oust
the DOLE of jurisdiction. But it is precisely the DOLE
that will be faced with that evidence, and it is the
DOLE that will weigh it, to see if the same does
successfully refute the existence of an employeremployee relationship.

If the DOLE makes a finding that there is an existing

employer-employee relationship, it takes cognizance
of the matter, to the exclusion of the NLRC. The
DOLE would have no jurisdiction only if the employeremployee relationship has already been terminated,
or it appears, upon review, that no employeremployee relationship existed in the first place.

52

The Court, in limiting the power of the DOLE, gave

the rationale that such limitation would eliminate the
prospect of competing conclusions between the
DOLE and the NLRC. The prospect of competing
conclusions could just as well have been eliminated
by according respect to the DOLE findings, to the
exclusion of the NLRC, and this We believe is the
more prudent course of action to take.

This is not to say that the determination by the DOLE

is beyond question or review. Suffice it to say, there
are judicial remedies such as a petition for certiorari
under Rule 65 that may be availed of, should a party
wish to dispute the findings of the DOLE.

It must also be remembered that the power of the

DOLE to determine the existence of an employeremployee relationship need not necessarily result in
an affirmative finding. The DOLE may well make the
determination that no employer-employee
relationship exists, thus divesting itself of jurisdiction
over the case. It must not be precluded from being
able to reach its own conclusions, not by the parties,
and certainly not by this Court.

Under Art. 128(b) of the Labor Code, as amended by

RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employeremployee relationship in the exercise of its visitorial
and enforcement power, subject to judicial review,
not review by the NLRC.

There is a view that despite Art. 128(b) of the Labor

Code, as amended by RA 7730, there is still a
threshold amount set by Arts. 129 and 217 of the
Labor Code when money claims are involved, i.e.,
that if it is for PhP 5,000 and below, the jurisdiction is
with the regional director of the DOLE, under Art.
129, and if the amount involved exceeds PhP 5,000,
the jurisdiction is with the labor arbiter, under Art.
217. The view states that despite the wording of Art.
128(b), this would only apply in the course of regular
inspections undertaken by the DOLE, as
differentiated from cases under Arts. 129 and 217,
which originate from complaints. There are several
cases, however, where the Court has ruled that Art.
128(b) has been amended to expand the powers of
the DOLE Secretary and his duly authorized
representatives by RA 7730. In these cases, the
Court resolved that the DOLE had the jurisdiction,
despite the amount of the money claims involved.
Furthermore, in these cases, the inspection held by
the DOLE regional director was prompted specifically
by a complaint. Therefore, the initiation of a case

through a complaint does not divest the DOLE

Secretary or his duly authorized representative of
jurisdiction under Art. 128(b).

To recapitulate, if a complaint is brought before the

DOLE to give effect to the labor standards provisions
of the Labor Code or other labor legislation, and
there is a finding by the DOLE that there is an
existing employer-employee relationship, the DOLE
exercises jurisdiction to the exclusion of the NLRC. If
the DOLE finds that there is no employer-employee
relationship, the jurisdiction is properly with the
NLRC. If a complaint is filed with the DOLE, and it is
accompanied by a claim for reinstatement, the
jurisdiction is properly with the Labor Arbiter, under
Art. 217(3) of the Labor Code, which provides that
the Labor Arbiter has original and exclusive
jurisdiction over those cases involving wages, rates
of pay, hours of work, and other terms and conditions
of employment, if accompanied by a claim for
reinstatement. If a complaint is filed with the NLRC,
and there is still an existing employer-employee
relationship, the jurisdiction is properly with the
DOLE. The findings of the DOLE, however, may still
be questioned through a petition for certiorari under
Rule 65 of the Rules of Court.

In the present case, the finding of the DOLE Regional

Director that there was an employer-employee
relationship has been subjected to review by this
Court, with the finding being that there was no
employer-employee relationship between petitioner
and private respondent, based on the evidence
presented. Private respondent presented self-serving
allegations as well as self-defeating evidence.[10]
The findings of the Regional Director were not based
on substantial evidence, and private respondent
failed to prove the existence of an employeremployee relationship. The DOLE had no jurisdiction
over the case, as there was no employer-employee
relationship present. Thus, the dismissal of the
complaint against petitioner is proper.

WHEREFORE, the Decision of this Court in G.R. No.

179652 is hereby AFFIRMED, with the MODIFICATION
that in the exercise of the DOLEs visitorial and
enforcement power, the Labor Secretary or the
latters authorized representative shall have the
power to determine the existence of an employeremployee relationship, to the exclusion of the NLRC.

SO ORDERED.

G.R. No. 124382

August 16, 1999

53

PASTOR DIONISIO V. AUSTRIA, petitioner,

transferred to Bacolod City. He held the position of

district pastor until his services were terminated on
31 October 1991.

vs.
HON. NATIONAL LABOR RELATIONS COMMISSION
(Fourth Division), CEBU CITY, CENTRAL PHILIPPINE
UNION MISSION CORPORATION OF THE SEVENTH-DAY
ADVENTISTS, ELDER HECTOR V. GAYARES, PASTORS
REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U.
DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT,
ISACHAR GARSULA, ELISEO DOBLE, PORFIRIO
BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO
GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE
BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO
LOBITANA, respondents.

KAPUNAN, J.:

Subject of the instant petition for certiorari under

Rule 65 of the Rules of Court is the Resolution1 of
public respondent National Labor Relations
Commission (the "NLRC"), rendered on 23 January
1996, in NLRC Case No. V-0120-93, entitled "Pastor
Dionisio V. Austria vs. Central Philippine Union
Mission Corporation of Seventh Day Adventists, et
al.," which dismissed the case for illegal dismissal
filed by the petitioner against private respondents for
lack of jurisdiction.1wphi1.nt

Private Respondent Central Philippine Union Mission

Corporation of the Seventh-Day Adventists
(hereinafter referred to as the "SDA") is a religious
corporation duly organized and existing under
Philippine law and is represented in this case by the
other private respondents, officers of the SDA.
Petitioner, on the other hand, was a Pastor of the
SDA until 31 October 1991, when his services were
terminated.

The records show that petitioner Pastor Dionisio V.

Austria worked with the SDA for twenty eight (28)
years from 1963 to 1991.2 He began his work with
the SDA on 15 July 1963 as a literature evangelist,
selling literature of the SDA over the island of
Negros. From then on, petitioner worked his way up
the ladder and got promoted several times. In
January, 1968, petitioner became the Assistant
Publishing Director in the West Visayan Mission of the
SDA. In July, 1972, he was elevated to the position of
Pastor in the West Visayan Mission covering the
island of Panay, and the provinces of Romblon and
Guimaras. Petitioner held the same position up to
1988. Finally, in 1989, petitioner was promoted as
District Pastor of the Negros Mission of the SDA and
was assigned at Sagay, Balintawak and Toboso,
Negros Occidental, with twelve (12) churches under
his jurisdiction. In January, 1991, petitioner was

On various occasions from August up to October,

1991, petitioner received several communications3
from Mr. Eufronio Ibesate, the treasurer of the Negros
Mission asking him to admit accountability and
responsibility for the church tithes and offerings
collected by his wife, Mrs. Thelma Austria, in his
district which amounted to P15,078.10, and to remit
the same to the Negros Mission.

In his written explanation dated 11 October 1991,4

petitioner reasoned out that he should not be made
accountable for the unremitted collections since it
was private respondents Pastor Gideon Buhat and Mr.
Eufronio Ibesate who authorized his wife to collect
the tithes and offerings since he was very sick to do
the collecting at that time.

Thereafter, on 16 October 1991, at around 7:30 a.m.,

petitioner went to the office of Pastor Buhat, the
president of the Negros Mission. During said call,
petitioner tried to persuade Pastor Buhat to convene
the Executive Committee for the purpose of settling
the dispute between him and the private respondent,
Pastor David Rodrigo. The dispute between Pastor
Rodrigo and petitioner arose from an incident in
which petitioner assisted his friend, Danny Diamada,
to collect from Pastor Rodrigo the unpaid balance for
the repair of the latter's motor vehicle which he
failed to pay to Diamada.5 Due to the assistance of
petitioner in collecting Pastor Rodrigo's debt, the
latter harbored ill-feelings against petitioner. When
news reached petitioner that Pastor Rodrigo was
about to file a complaint against him with the Negros
Mission, he immediately proceeded to the office of
Pastor Buhat on the date abovementioned and asked
the latter to convene the Executive Committee.
Pastor Buhat denied the request of petitioner since
some committee members were out of town and
there was no quorum. Thereafter, the two exchanged
heated arguments. Petitioner then left the office of
Pastor Buhat. While on his way out, petitioner
overheard Pastor Buhat saying, "Pastor daw inisog na
ina iya (Pador you are talking tough)."6 Irked by such
remark, petitioner returned to the office of Pastor
Buhat, and tried to overturn the latter's table, though
unsuccessfully, since it was heavy. Thereafter,
petitioner banged the attach case of Pastor Buhat
on the table, scattered the books in his office, and
threw the phone.7 Fortunately, private respondents
Pastors Yonilo Leopoldo and Claudio Montao were
around and they pacified both Pastor Buhat and
petitioner.

54

On 17 October 1991, petitioner received a letter8

inviting him and his wife to attend the Executive
Committee meeting at the Negros Mission
Conference Room on 21 October 1991, at nine in the
morning. To be discussed in the meeting were the
non-remittance of church collection and the events
that transpired on 16 October 1991. A fact-finding
committee was created to investigate petitioner. For
two (2) days, from October 21 and 22, the factfinding committee conducted an investigation of
petitioner. Sensing that the result of the investigation
might be one-sided, petitioner immediately wrote
Pastor Rueben Moralde, president of the SDA and
chairman of the fact-finding committee, requesting
that certain members of the fact-finding committee
be excluded in the investigation and resolution of the
case.9 Out of the six (6) members requested to
inhibit themselves from the investigation and
decision-making, only two (2) were actually excluded,
namely: Pastor Buhat and Pastor Rodrigo.
Subsequently, on 29 October 1991, petitioner
received a letter of dismissal10 citing
misappropriation of denominational funds, willful
breach of trust, serious misconduct, gross and
habitual neglect of duties, and commission of an
offense against the person of employer's duly
authorized representative, as grounds for the
termination of his services.

Reacting against the adverse decision of the SDA,

petitioner filed a complaint11 on 14 November 1991,
before the Labor Arbiter for illegal dismissal against
the SDA and its officers and prayed for reinstatement
with backwages and benefits, moral and exemplary
damages and other labor law benefits.

On 15 February 1993, Labor Arbiter Cesar D. Sideo

rendered a decision in favor of petitioner, the
dispositive portion of which reads thus:

WHEREFORE, PREMISES CONSIDERED, respondents

CENTRAL PHILIPPINE UNION MISSION CORPORATION
OF THE SEVENTH-DAY ADVENTISTS (CPUMCSDA) and
its officers, respondents herein, are hereby ordered
to immediately reinstate complainant Pastor Dionisio
Austria to his former position as Pastor of Brgy.
Taculing, Progreso and Banago, Bacolod City, without
loss of seniority and other rights and backwages in
the amount of ONE HUNDRED FIFTEEN THOUSAND
EIGHT HUNDRED THIRTY PESOS (P115,830.00)
without deductions and qualificatioons.

Respondent CPUMCSDA is further ordered to pay

complainant the following:

A.

13th month pay

21,060.00

B.

Allowance

C.

Service Incentive

3,461.85

25,000.00

Leave Pay

D.

Moral Damages
50,000.00

E.

Exemplary

Damages

F.

Attorney's Fee
22,012.27

4,770.83

SO ORDERED.12

The SDA, through its officers, appealed the decision

of the Labor Arbiter to the National Labor Labor
Relations Commission, Fourth Division, Cebu City. In a
decision, dated 26 August 1994, the NLRC vacated
the findings of the Labor Arbiter. The decretal portion
of the NLRC decision states:

WHEREFORE, the Decision appealed from is hereby

VACATED and a new one ENTERED dismissing this
case for want of merit.

SO ORDERED.13

Petitioner filed a motion for reconsideration of the

above-named decision. On 18 July 1995, the NLRC
issued a Resolution reversing its original decision.
The dispositive portion of the resolution reads:

WHEREFORE, premises considered, Our decision

dated August 26, 1994 is VACATED and the decision
of the Labor Arbiter dated February 15, 1993 is
REINSTATED.

55

SO ORDERED.14

In view of the reversal of the original decision of the

NLRC, the SDA filed a motion for reconsideration of
the above resolution. Notable in the motion for
reconsideration filed by private respondents is their
invocation, for the first time on appeal, that the
Labor Arbiter has no jurisdiction over the complaint
filed by petitioner due to the constitutional provision
on the separation of church and state since the case
allegedly involved an ecclesiastical affair to which
the State cannot interfere.

The NLRC, without ruling on the merits of the case,

reversed itself once again, sustained the argument
posed by private respondents and, accordingly,
dismissed the complaint of petitioner. The dispositive
portion of the NLRC resolution dated 23 January
1996, subject of the present petition, is as follows:

WHEREFORE, in view of all the foregoing, the instant

motion for reconsideration is hereby granted.
Accordingly, this case is hereby DISMISSED for lack of
jurisdiction.

SO ORDERED.15

Hence, the recourse to this Court by petitioner.

After the filing of the petition, the Court ordered the

Office of the Solicitor General (the "OSG") to file its
comment on behalf of public respondent NLRC.
Interestingly, the OSG filed a manifestation and
motion in lieu of comment16 setting forth its stand
that it cannot sustain the resolution of the NLRC. In
its manifestation, the OSG submits that the
termination of petitioner from his employment may
be questioned before the NLRC as the same is
secular in nature, not ecclesiastical. After the
submission of memoranda of all the parties, the case
was submitted for decision.

The issues to be resolved in this petition are:

1)
Whether or not the Labor Arbiter/NLRC has
jurisdiction to try and decide the complaint filed by
petitioner against the SDA;

2)
Whether or not the termination of the
services of petitioner is an ecclesiastical affair, and,
as such, involves the separation of church and state;
and

3)

Whether or not such termination is valid.

The first two issues shall be resolved jointly, since

they are related.

Private respondents contend that by virtue of the

doctrine of separation of church and state, the Labor
Arbiter and the NLRC have no jurisdiction to entertain
the complaint filed by petitioner. Since the matter at
bar allegedly involves the discipline of a religious
minister, it is to be considered a purely ecclesiastical
affair to which the State has no right to interfere.

The contention of private respondents deserves

scant consideration. The principle of separation of
church and state finds no application in this case.

The rationale of the principle of the separation of

church and state is summed up in the familiar
saying, "Strong fences make good-neighbors."17 The
idea advocated by this principle is to delineate the
boundaries between the two institutions and thus
avoid encroachments by one against the other
because of a misunderstanding of the limits of their
respective exclusive jurisdictions.18 The demarcation
line calls on the entities to "render therefore unto
Ceasar the things that are Ceasar's and unto God the
things that are God's."19 While the state is
prohibited from interfering in purely ecclesiastical
affairs, the Church is likewise barred from meddling
in purely secular matters.20

The case at bar does not concern an ecclesiastical or

purely religious affair as to bar the State from taking
cognizance of the same. An ecclesiastical affair is
"one that concerns doctrine, creed, or form of
worship of the church, or the adoption and
enforcement within a religious association of needful
laws and regulations for the government of the
membership, and the power of excluding from such
associations those deemed unworthy of
membership.21 Based on this definition, an
ecclesiastical affair involves the relationship between
the church and its members and relate to matters of
faith, religious doctrines, worship and governance of
the congregation. To be concrete, examples of this
so-called ecclesiastical affairs to which the State
cannot meddle are proceedings for
excommunication, ordinations of religious ministers,
administration of sacraments and other activities

56

with attached religious significance. The case at bar

does not even remotely concern any of the
abovecited examples. While the matter at hand
relates to the church and its religious minister it does
not ipso facto give the case a religious significance.
Simply stated, what is involved here is the
relationship of the church as an employer and the
minister as an employee. It is purely secular and has
no relation whatsoever with the practice of faith,
worship or doctrines of the church. In this case,
petitioner was not ex-communicated or expelled from
the membership of the SDA but was terminated from
employment. Indeed, the matter of terminating an
employee, which is purely secular in nature, is
different from the ecclesiastical act of expelling a
member from the religious congregation.

As pointed out by the OSG in its memorandum, the

grounds invoked for petitioner's dismissal, namely:
misappropriation of denominational funds, willful
breach of trust, serious misconduct, gross and
habitual neglect of duties and commission of an
offense against the person of his employer's duly
authorized representative, are all based on Article
282 of the Labor Code which enumerates the just
causes for termination of employment.22 By this
alone, it is palpable that the reason for petitioner's
dismissal from the service is not religious in nature.
Coupled with this is the act of the SDA in furnishing
NLRC with a copy of petitioner's letter of termination.
As aptly stated by the OSG, this again is an eloquent
admission by private respondents that NLRC has
jurisdiction over the case. Aside from these, SDA
admitted in a certification23 issued by its officer, Mr.
Ibesate, that petitioner has been its employee for
twenty-eight (28) years. SDA even registered
petitioner with the Social Security System (SSS) as its
employee. As a matter of fact, the worker's records
of petitioner have been submitted by private
respondents as part of their exhibits. From all of
these it is clear that when the SDA terminated the
services of petitioner, it was merely exercising its
management prerogative to fire an employee which
it believes to be unfit for the job. As such, the State,
through the Labor Arbiter and the NLRC, has the right
to take cognizance of the case and to determine
whether the SDA, as employer, rightfully exercised its
management prerogative to dismiss an employee.
This is in consonance with the mandate of the
Constitution to afford full protection to labor.

Under the Labor Code, the provision which governs

the dismissal of employees, is comprehensive
enough to include religious corporations, such as the
SDA, in its coverage. Article 278 of the Labor Code on
post-employment states that "the provisions of this
Title shall apply to all establishments or
undertakings, whether for profit or not." Obviously,
the cited article does not make any exception in
favor of a religious corporation. This is made more
evident by the fact that the Rules Implementing the

Labor Code, particularly, Section 1, Rule 1, Book VI

on the Termination of Employment and Retirement,
categorically includes religious institutions in the
coverage of the law, to wit:

Sec. 1. Coverage. This Rule shall apply to all

establishments and undertakings, whether operated
for profit or not, including educational, medical,
charitable and religious institutions and
organizations, in cases of regular employment with
the exception of the Government and its political
subdivisions including government-owned or
controlled corporations.24

With this clear mandate, the SDA cannot hide behind

the mantle of protection of the doctrine of separation
of church and state to avoid its responsibilities as an
employer under the Labor Code.

Finally, as correctly pointed out by petitioner, private

respondents are estopped from raising the issue of
lack of jurisdiction for the first time on appeal. It is
already too late in the day for private respondents to
question the jurisdiction of the NLRC and the Labor
Arbiter since the SDA had fully participated in the
trials and hearings of the case from start to finish.
The Court has already ruled that the active
participation of a party against whom the action war
brought, coupled with his failure to object to the
jurisdiction of the court or quasi-judicial body where
the action is pending, is tantamount to an invocation
of that jurisdiction and a willingness to abide by the
resolution of the case and will bar said party from
later on impugning the court or body's jurisdiction.25
Thus, the active participation of private respondents
in the proceedings before the Labor Arbiter and the
NLRC mooted the question on jurisdiction.

The jurisdictional question now settled, we shall now

proceed to determine whether the dismissal of
petitioner was valid.

At the outset, we note that as a general rule, findings

of fact of administrative bodies like the NLRC are
binding upon this Court. A review of such findings is
justified, however, in instances when the findings of
the NLRC differ from those of the labor arbiter, as in
this case.26 When the findings of NLRC do not agree
with those of the Labor Arbiter, this Court must of
necessity review the records to determine which
findings should be preferred as more comfortable to
the evidentiary facts.27

We turn now to the crux of the matter. In termination

cases, the settled rule is that the burden of proving

57

that the termination was for a valid or authorized

cause rests on the employer.28 Thus, private
respondents must not merely rely on the weaknesses
of petitioner's evidence but must stand on the merits
of their own defense.

The issue being the legality of petitioner's dismissal,

the same must be measured against the requisites
for a valid dismissal, namely: (a) the employee must
be afforded due process, i.e., he must be given an
opportunity to be heard and to defend himself, and;
(b) the dismissal must be for a valid cause as
provided in Article 282 of the Labor Code.29 Without
the concurrence of this twin requirements, the
termination would, in the eyes of the law, be
illegal.30

Before the services of an employee can be validly

terminated, Article 277 (b) of the Labor Code and
Section 2, Rule XXIII, Book V of the Rules
Implementing the Labor Code further require the
employer to furnish the employee with two (2)
written notices, to wit: (a) a written notice served on
the employee specifying the ground or grounds for
termination, and giving to said employee reasonable
opportunity within which to explain his side; and, (b)
a written notice of termination served on the
employee indicating that upon due consideration of
all the circumstances, grounds have been established
to justify his termination.

The first notice, which may be considered as the

proper charge, serves to apprise the employee of the
particular acts or omissions for which his dismissal is
sought.31 The second notice on the other hand seeks
to inform the employee of the employer's decision to
dismiss him.32 This decision, however, must come
only after the employee is given a reasonable period
from receipt of the first notice within which to answer
the charge and ample opportunity to be heard and
defend himself with the assistance of a
representative, if he so desires.33 This is in
consonance with the express provision of the law on
the protection to labor and the broader dictates of
procedural due process.34 Non-compliance therewith
is fatal because these requirements are conditions
sine qua non before dismissal may be validly
effected.35

Private respondent failed to substantially comply with

the above requirements. With regard to the first
notice, the letter,36 dated 17 October 1991, which
notified petitioner and his wife to attend the meeting
on 21 October 1991, cannot be construed as the
written charge required by law. A perusal of the said
letter reveals that it never categorically stated the
particular acts or omissions on which petitioner's
impending termination was grounded. In fact, the

letter never even mentioned that petitioner would be

subject to investigation. The letter merely mentioned
that petitioner and his wife were invited to a meeting
wherein what would be discussed were the alleged
unremitted church tithes and the events that
transpired on 16 October 1991. Thus, petitioner was
surprised to find out that the alleged meeting turned
out to be an investigation. From the tenor of the
letter, it cannot be presumed that petitioner was
actually on the verge of dismissal. The alleged
grounds for the dismissal of petitioner from the
service were only revealed to him when the actual
letter of dismissal was finally issued. For this reason,
it cannot be said that petitioner was given enough
opportunity to properly prepare for his defense.
While admittedly, private respondents complied with
the second requirement, the notice of termination,
this does not cure the initial defect of lack of the
proper written charge required by law.

In the letter of termination,37 dated 29 October

1991, private respondents enumerated the following
as grounds for the dismissal of petitioner, namely:
misappropriation of denominational funds, willful
breach of trust, serious misconduct, gross and
habitual neglect of duties, and commission of an
offense against the person of employer's duly
authorized representative. Breach of trust and
misappropriation of denominational funds refer to the
alleged failure of petitioner to remit to the treasurer
of the Negros Mission tithes, collections and offerings
amounting to P15,078.10 which were collected by his
wife, Mrs. Thelma Austria, in the churches under his
jurisdiction. On the other hand, serious misconduct
and commission of an offense against the person of
the employer's duly authorized representative
pertain to the 16 October 1991 incident wherein
petitioner allegedly committed an act of violence in
the office of Pastor Gideon Buhat. The final ground
invoked by private respondents is gross and habitual
neglect of duties allegedly committed by petitioner.

We cannot sustain the validity of dismissal based on

the ground of breach of trust. Private respondents
allege that they have lost their confidence in
petitioner for his failure, despite demands, to remit
the tithes and offerings amounting to P15,078.10,
which were collected in his district. A careful study of
the voluminous records of the case reveals that there
is simply no basis for the alleged loss of confidence
and breach of trust. Settled is the rule that under
Article 282 (c) of the Labor Code, the breach of trust
must be willful. A breach is willful if it is done
intentionally, knowingly and purposely, without
justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or
inadvertently.38 It must rest on substantial grounds
and not on the employer's arbitrariness, whims,
caprices or suspicion; otherwise the employee would
eternally remain at the mercy of the employer.39 It
should be genuine and not simulated.40 This ground

58

has never been intended to afford an occasion for

abuse, because of its subjective nature. The records
show that there were only six (6) instances when
petitioner personally collected and received from the
church treasurers the tithes, collections, and
donations for the church.41 The stenographic notes
on the testimony of Naomi Geniebla, the Negros
Mission Church Auditor and a witness for private
respondents, show that Pastor Austria was able to
remit all his collections to the treasurer of the Negros
Mission.42

Though private respondents were able to establish

that petitioner collected and received tithes and
donations several times, they were notable to
establish that petitioner failed to remit the same to
the Negros Mission, and that he pocketed the amount
and used it for his personal purpose. In fact, as
admitted by their own witness, Naomi Geniebla,
petitioner remitted the amounts which he collected
to the Negros Mission for which corresponding
receipts were issued to him. Thus, the allegations of
private respondents that petitioner breached their
trust have no leg to stand on.

In a vain attempt to support their claim of breach of

trust, private respondents try to pin on petitioner the
alleged non-remittance of the tithes collected by his
wife. This argument deserves little consideration.
First of all, as proven by convincing and substantial
evidence consisting of the testimonies of the
witnesses for private respondents who are church
treasurers, it was Mrs. Thelma Austria who actually
collected the tithes and donations from them, and,
who failed to remit the same to the treasurer of the
Negros Mission. The testimony of these church
treasurers were corroborated and confirmed by Ms.
Geniebla and Mr. Ibesate, officers of the SDA. Hence,
in the absence of conspiracy and collusion, which
private respondents failed to demonstrate, between
petitioner and his wife, petitioner cannot be made
accountable for the alleged infraction committed by
his wife. After all, they still have separate and distinct
personalities. For this reason, the Labor Arbiter found
it difficult to see the basis for the alleged loss of
confidence and breach of trust. The Court does not
find any cogent reason, therefore, to digress from the
findings of the Labor Arbiter which is fully supported
by the evidence on record.

With respect to the grounds of serious misconduct

and commission of an offense against the person of
the employer's duly authorized representative, we
find the same unmeritorious and, as such, do not
warrant petitioner's dismissal from the service.

Misconduct has been defined as improper or wrong

conduct. It is the transgression of some established

and definite rule of action, a forbidden act, a

dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment.43
For misconduct to be considered serious it must be of
such grave and aggravated character and not merely
trivial or unimportant.44 Based on this standard, we
believe that the act of petitioner in banging the
attach case on the table, throwing the telephone
and scattering the books in the office of Pastor
Buhat, although improper, cannot be considered as
grave enough to be considered as serious
misconduct. After all, as correctly observed by the
Labor Arbiter, though petitioner committed damage
to property, he did not physically assault Pastor
Buhat or any other pastor present during the incident
of 16 October 1991. In fact, the alleged offense
committed upon the person of the employer's
representatives was never really established or
proven by private respondents. Hence, there is no
basis for the allegation that petitioner's act
constituted serious misconduct or that the same was
an offense against the person of the employer's duly
authorized representative. As such, the cited
actuation of petitioner does not justify the ultimate
penalty of dismissal from employment. While the
Constitution does condone wrongdoing by the
employee, it nevertheless urges a moderation of the
sanctions that may be applied to him in light of the
many disadvantages that weigh heavily on him like
an albatross on his neck.45 Where a penalty less
punitive would suffice, whatever missteps may have
been committed by the worker ought not be visited
with a consequence so severe such as dismissal from
employment.46 For the foregoing reasons, we
believe that the minor infraction committed by
petitioner does not merit the ultimate penalty of
dismissal.

The final ground alleged by private respondents in

terminating petitioner, gross and habitual neglect of
duties, does not require an exhaustive discussion.
Suffice it to say that all private respondents had were
allegations but not proof. Aside from merely citing
the said ground, private respondents failed to prove
culpability on the part of petitioner. In fact, the
evidence on record shows otherwise. Petitioner's rise
from the ranks disclose that he was actually a hardworker. Private respondents' evidence,47 which
consisted of petitioner's Worker's Reports, revealed
how petitioner travelled to different churches to
attend to the faithful under his care. Indeed, he
labored hard for the SDA, but, in return, he was
rewarded with a dismissal from the service for a nonexistent cause.

In view of the foregoing, we sustain the finding of the

Labor Arbiter that petitioner was terminated from
service without just or lawful cause. Having been
illegally dismissed, petitioner is entitled to
reinstatement to his former position without loss of
seniority right48 and the payment of full backwages

59

without any deduction corresponding to the period

from his illegal dismissal up to actual
reinstatement.46

WHEREFORE, the petition for certiorari is GRANTED.

The challenged Resolution of public respondent
National Labor Relations Commission, rendered on 23
January 1996, is NULLIFIED and SET ASIDE. The
Decision of the Labor Arbiter, dated 15 February
1993, is REINSTATED and hereby
AFFIRMED.1wphi1.nt

SO ORDERED.

Davide, Jr., C.J., Puno, Pardo and Ynares-Santiago, JJ.,

concur.

G.R. No. 112940 November 21, 199

DAI-CHI ELECTRONICS MANUFACTURING

CORPORATION, petitioner,
vs.
HON. MARTIN S. VILLARAMA, JR., Presiding Judge,
Regional Trial Court, Branch 156, Pasig, Metro Manila
and ADONIS C. LIMJUCO, respondents.

Sebastian, Liganor & Galinato for petitioner.

Jara, Baarde & Associates for private respondent.

QUIASON, J.:

This is a petition for review on certiorari under Rule

45 of the Revised Rules of Court in relation to R.A.
No. 5440 and Circular No. 2-90 of the following
orders of the Regional Trial Court, Branch 156, Pasig,
Metro Manila, in Civil Case No. 63448: 1) Order dated
September 20, 1993, dismissing the complaint of
petitioner on the ground of lack of jurisdiction over
the subject matter of the controversy; and 2) Order
dated November 29, 1993, denying petitioner's
motion for reconsideration.

60

On July 29, 1993, petitioner filed a complaint for

damages with the Regional Trial Court, Branch 156,
Pasig, Metro Manila, against private respondent, a
former employee.

Petitioner alleged that private respondent violated

paragraph five of their Contract of Employment
dated August 27, 1990, which provides:

That for a period of two (2) years after termination of

service from EMPLOYER, EMPLOYEE shall not in any
manner be connected, and/or employed, be a
consultant and/or be an informative body directly or
indirectly, with any business firm, entity or
undertaking engaged in a business similar to or in
competition with that of the EMPLOYER (Rollo, p. 24).

Petitioner claimed that private respondent became

an employee of Angel Sound Philippines Corporation,
a corporation engaged in the same line of business
as that of petitioner, within two years from January
30, 1992, the date of private respondent's
resignation from petitioner's employ. Petitioner
further alleged that private respondent is holding the
position of Head of the Material Management Control
Department, the same position he held while in the
employ of petitioner.

Petitioner sought to recover liquidated damages in

the amount of One Hundred Thousand Pesos
(P100,000.00), as provided for in paragraph seven of
the contract, which provides:

That a violation of the conditions set forth in

provisions Nos. (2) and (5) of this contract shall
entitle the EMPLOYER to collect from the EMPLOYEE
the sum of ONE HUNDRED THOUSAND PESOS
(P100,000.00) by way of liquidated damages and
likewise to adopt appropriate legal measures to
prevent the EMPLOYEE from accepting employment
and/or engaging, directly or indirectly, in a business
similar to or in competition with that of the
EMPLOYER, before the lapse of the aforesaid period
of TWO (2) YEARS from date of termination of service
from EMPLOYER (Rollo, p. 25).

Respondent court, in its Order dated September 20,

1993, ruled that it had no jurisdiction over the
subject matter of the controversy because the
complaint was for damages arising from employeremployee relations. Citing Article 217(4) of the Labor
Code of the Philippines, as amended by R.A.

No. 6715, respondent court stated that it is the Labor

Arbiter which had original and exclusive jurisdiction
over the subject matter of the case (Rollo, pp. 28-32).

In this petition, petitioner asks for the reversal of

respondent court's dismissal of the civil case,
contending that the case is cognizable by the regular
courts. It argues that the cause of action did not arise
from employer-employee relations, even though the
claim is based on a provision in the employment
contract.

II

This issue is: Is petitioner's claim for damages one

arising from employer-employee relations?

We answer in the negative.

Article 217, as amended by Section 9 of R.A. No.

6715, provides as follows:

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 nonagricultural:

xxx

xxx

xxx

4.
Claims for actual, moral, exemplary and
other forms of damages arising from the employeremployee relations; (Emphasis supplied)

xxx

xxx

xxx

Petitioner does not ask for any relief under the Labor
Code of the Philippines. It seeks to recover damages
agreed upon in the contract as redress for private
respondent's breach of his contractual obligation to
its "damage and prejudice" (Rollo, p. 57). Such cause
of action is within the realm of Civil Law, and
jurisdiction over the controversy belongs to the
regular courts. More so when we consider that the

61

stipulation refers to the post-employment relations of

the parties.

A case in point is Singapore Airlines Limited v. Pao,

122 SCRA 671 (1983), which also dealt with the
employee's breach of an obligation embodied in a
written employment agreement. Singapore Airlines
filed a complaint in the trial court for damages
against its employee for "wanton failure and refusal"
without just cause to report to duty and for having
"maliciously and with bad faith" violated the terms
and conditions of its "Agreement for a Course of
Conversion Training at the Expense of Singapore
Airlines Limited." This agreement provided that the
employee shall agree to remain in the service of the
employer for a period of five years from the date of
the commencement of the training program. The trial
court dismissed the complaint on the grounds that it
did not have jurisdiction over the subject matter of
the controversy.

On appeal to this court, we held that jurisdiction over

the controversy belongs to the civil courts. We stated
that the action was for breach of a contractual
obligation, which is intrinsically a civil dispute. We
further stated that while seemingly the cause of
action arose from employer-employee relations, the
employer's claim for damages is grounded on
"wanton failure and refusal" without just cause to
report to duty coupled with the averment that the
employee "maliciously and with bad faith" violated
the terms and conditions of the contract to the
damage of the employer. Such averments removed
the controversy from the coverage of the Labor Code
of the Philippines and brought it within the purview of
Civil Law.

Jurisprudence has evolved the rule that claims for

damages under paragraph 4 of Article 217, to be
cognizable by the Labor Arbiter, must have a
reasonable causal connection with any of the claims
provided for in that article. Only if there is such a
connection with the other claims can the claim for
damages be considered as arising from employeremployee relations.

In San Miguel Corporation v. National Labor Relations

Commission, 161 SCRA 719 (1988), we had occasion
to construe Article 217, as amended by B.P. Blg. 227.
Article 217 then provided that the Labor Arbiter had
jurisdiction over all money claims of workers, but the
phrase "arising from employer-employee relation"
was deleted. We ruled thus:

While paragraph 3 above refers to "all money claims

of workers," it is not necessary to suppose that the

entire universe of money claims that might be

asserted by workers against their employers has
been absorbed into the original and exclusive
jurisdiction of Labor Arbiters. In the first place,
paragraph 3 should be read not in isolation from but
rather within the context formed by paragraph 1
(relating to unfair labor practices), paragraph 2
(relating to claims concerning terms and conditions
of employment), paragraph 4 (claims relating to
household services, a particular species of employeremployee relations), and paragraph 5 (relating to
certain activities prohibited to employees or to
employers). It is evident that there is a unifying
element which runs through paragraphs 1 to 5 and
that is, that they all refer to cases or disputes arising
out of or in connection with an employer-employee
relationship. This is, in other words, a situation where
the rule of noscitur a sociis may be usefully invoked
in clarifying the scope of paragraph 3, and any other
paragraph of Article 217 of the Labor Code, as
amended. We reach the above conclusion from an
examination of the terms themselves of Article 217,
as last amended by B.P Blg. 227, and even though
earlier versions of Article 217 of the Labor Code
expressly brought within the jurisdiction of the Labor
Arbiters and the NLRC "cases arising from employeremployee relations," which clause was not expressly
carried over, in printer's ink, in Article 217 as it exists
today. For it cannot be presumed that money claims
of workers which do not arise out of or in connection
with their employer-employee relationship, and which
would therefore fall within the general jurisdiction of
regular courts of justice, were intended by the
legislative authority to be taken away from the
jurisdiction of the courts and lodged with Labor
Arbiters on an exclusive basis. The Court, therefore,
believes and so holds that the "money claims of
workers" referred to in paragraph 3 of Article 217
embraces money claims which arise out of or in
connection with the employer-employee relationship
or some aspect or incident of some relationship. Put
a little differently, that money claims of workers
which now fall within the original and exclusive
jurisdiction of Labor Arbiters are those money claims
which have some reasonable causal connection with
the employer-employee relationship (Emphasis
supplied).

San Miguel was cited in Ocheda v. Court of Appeals,

214 SCRA 629 (1992), where we held that when the
cause of action is based on a quasi-delict or tort,
which has no reasonable causal connection with any
of the claims provided for in Article 217, jurisdiction
over the action is with the regular courts.

We also applied the "reasonable causal connection

rule" in Pepsi-Cola Distributors of the Philippines, Inc.
v. Gallang, 201 SCRA 695 (1991), where we held that
an action filed by employees against an employer for
damages for the latter's malicious filing of a criminal
complaint for falsification of private documents

62

against them came under the jurisdiction of the

regular courts (See also Honiron Philippines, Inc. v.
Intermediate Appellate Court, G.R. No. 66929, August
13, 1990 and Abejaron v. Court of Appeals, 208 SCRA
899 [1992]).

The rationale behind the holdings in these cases is

that the complaint for damages was anchored not on
the termination of the employee's services per se,
but rather on the manner and consequent effects of
such termination.

Cases decided under earlier versions of Article 217

were consistent also in that intrinsically civil
disputes, even if these involve an employer and his
employee, are cognizable by the regular courts. In
Medina vs. Castro-Bartolome, 116 SCRA 597 (1982),
a civil complaint for damages against the employer
for slanderous remarks made against them, we
upheld the regular court's jurisdiction after finding
that the plaintiffs did not allege any unfair labor
practice, their complaint being a simple action for
damages for tortious acts allegedly committed by the
defendants. In Molave Sales, Inc. v. Laron, 129 SCRA
485 (1984), we held that the claim of the plaintiff
against its sales manager for payment of certain
accounts and cash advances was properly cognizable
by the regular courts because "although a
controversy is between an employer and an
employee, the Labor Arbiters have no jurisdiction if
the Labor Code is not involved."

submitted a false certification warranting summary

dismissal of the petition (Par. 3[a] of Circular No. 2891).

Petitioner did not commit forum shopping. It set up

its counterclaim for liquidated damages merely as a
defense against private respondent's complaint
before the Labor Arbiter.

ACCORDINGLY, the Orders of the Regional Trial Court

dated September 20, 1993 and November 29, 1993
are SET ASIDE. The trial court is ORDERED to
continue with the proceedings in Civil Case No.
63448.

SO ORDERED.

Private respondent also raises the issue of forum

shopping. He asserts that the petition should be
dismissed pursuant to Circular No. 28-91 because
petitioner merely "mentioned in passing a labor case
between petitioner and private respondent which is
being handled by petitioner's other counsel" (Rollo, p.
42). Private respondent is referring to NLRC NCR
Case No. 00-11-0689493 filed by him on November
8, 1993.

Petitioner asserts that the case before the Labor

Arbiter was filed by private respondent against
petitioner for alleged illegal dismissal, underpayment
of wages and non-payment of overtime and premium
pay with prayer for moral and exemplary damages,
to which petitioner, through its other counsel,
"logically raised as one of its several counterclaims
against private respondent the liquidated damages
mentioned in the contract of employment between
the parties" (Rollo, p. 69).

[G.R. No. 51289. September 2, 1992.]

Petitioner did not fail to disclose the pending labor

case in the certification required under Circular No.
28-91. Thus, petitioner cannot be considered to have

RODOLFO ENCARNACION, Petitioner, v. DYNASTY

AMUSEMENT CENTER CORPORATION, LORENZO CO
and LUCISNO TAN, Respondents.

63

Ricardo C. Valmonte for Petitioner.

Raul M. Gonzalez & Associates for Respondent.

SYLLABUS

1.
LABOR AND SOCIAL LEGISLATION; LABOR
ARBITER; EXCLUSIVE JURISDICTION THEREOF UNDER
P.D. NO. 1367; SCOPE. Section 1 of Presidential
Decree No. 1367, which provided as follows: "Section
1. Paragraph (a) of Article 217 of the Labor Code, as
amended, is hereby further amended to read as
follows: a) The Labor Arbiter shall have exclusive
jurisdiction to hear and decide the following cases
involving all workers, whether agricultural or non
agricultural: 1) Unfair labor practice cases; 2)
Unresolved cases in collective bargaining, including
those which involve wages, hours of work and other
terms and conditions of employment; and 3) All other
cases arising from employer-employee relations duly
indorsed by the Regional Directors in accordance
with the provisions of this code; Provided, that the
Regional Directors shall not indorse and Labor
Arbiters shall not entertain claims for moral or other
forms of damages."cralaw virtua1aw library

2.
ID.; ID.; ID.; ID.; BEING A CURATIVE STATUTE
SHOULD BE GIVEN RETROSPECTIVE APPLICATION TO
PENDING PROCEEDINGS. The question now is
whether or not Presidential Decree No. 1691 has a
retroactive effect was resolved in the case of Atlas
Fertilizer Corp. v. Navarro, (149 SCRA 432) wherein
We ruled: "In conflicts of jurisdiction between the
courts and the labor agencies arising from the
amendments effected by P.D. 1691 on P.D. 1367, this
Court held in various cases that P.D. 1691 is a
curative statute which corrected the lack of
jurisdiction of the Labor Arbiter at the start of the
proceedings and, therefore, should be given a
restrospective application to the pending
proceedings. P.D. 1691 merely restored a jurisdiction
earlier vested in Labor Arbiters before the enactment
of P.D. 1367. It was intended to correct a situation
where two tribunals would have jurisdiction over
separate issues arising from the same labor
conflict . . . This construction of law is not new. It
must be noted that the amendatory provision of P.D.
1367 itself was given retroactive application, for also
being curative in nature. P.D. 1691 should, therefore,
be given a retroactive application to this pending
case as the precise purpose of the amendment was
to hopefully settle once and for all the conflict of

jurisdiction between regular courts and labor

agencies.

3.
ID.; ID.; ID.; CLAIM FOR DAMAGES ARISING
FROM EMPLOYER-EMPLOYEE RELATIONSHIP; DOES
NOT MAKE IT A CIVIL DISPUTE FOR THE REASON
THAT EMPLOYEE DOES NOT SEEK REINSTATEMENT.
The petition is, therefore, unmeritorious for the
complaint clearly shows that the petitioners claim
for damages arose from the acts attributed to his
employer, while he was still an employee thereof.
Thus, the action for damages arose from an
employer-employee relationship. We do not agree
with petitioner that the case is a civil dispute simply
because he did not ask for reinstatement, for an
employee need not seek reinstatement in order to
file a complaint before the labor arbiter (A. Consteel
Construction Co., Inc. v. Intermediate Appellate
Court, G.R. No. 64673, Oct. 21, 1988). More so,
estoppel cannot attach by virtue of Section 2, Rule 9
of the Revised Rules of Court, inasmuch as the
question of compentencia maybe raised even for the
first time on appeal, apart from the fact that
jurisdiction issues can never be waived. Besides, the
issue of jurisdiction was raised even before the
answer was filed.

DECISION

MELO, J.:

This refers to the appeal from the October 24 and

November 20, 1978 Orders of the then Court of First
Instance of Manila, Branch XI, at that time presided
over by the Honorable Elias B. Asuncion, dismissing
the complaint on the ground that the case is
principally a labor case.

In 1975, petitioner was employed as a projectionist

by respondent Dynasty Amusement Center of which
the other respondents are officers. On September 29,
1978, petitioner filed a complaint for damages with
the then Court of First Instance of Manila, alleging
among others, that he was suspended or had been
disallowed to work and that was made the subject of
harassment and slanderous accusations.
Respondents filed a motion to dismiss the complaint
on the ground that respondent court has no
jurisdiction over the nature of the case as it involves
a labor dispute which pertains exclusively to the
jurisdiction of the National Labor Relations

64

Commission.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph

Without waiting for respondent court to resolve their

motion to dismiss, respondents filed their answer
dated October 16, 1978, wherein they averred that
the suspension of petitioner from work is a
prerogative of management so as to impose
discipline among employees, said right being
recognized under the New Labor Code of the
Philippines.

On October 24, 1978, the trial court issued its Order

dismissing the case on the ground that it has no
jurisdiction over the nature of the case (p. 44, Rollo).
The subsequent motion for reconsideration was
denied by the court a quo on November 20, 1978 (p.
54, id.).

Hence, the instant petition.

Petitioner maintains that the case is more of one for

damages and thus is a civil dispute. Besides, he
claims, reinstatement is not prayed for. Petitioner
further contends that respondents had already
waived and are estopped from questioning the trial
courts jurisdiction when they filed their answer
seeking affirmative reliefs.

When this case was filed, the applicable law was

Section 1 of the Presidential Decree No. 1367, which
provided as follows:jgc:chanrobles.com.ph

"Section 1.
Paragraph (a) of Article 217 of the
Labor Code, as amended, is hereby further amended
to read as follows:chanrob1es virtual 1aw library

a)
The Labor Arbiter shall have exclusive
jurisdiction to hear and decide the following cases
involving all workers, whether agricultural or non
agricultural:chanrobles virtual lawlibrary

1)

3)
All other cases arising from employeremployee relations duly indorsed by the Regional
Directors in accordance with the provisions of this
code; Provided, that the Regional Directors shall not
indorse and Labor Arbiters shall not entertain claims
for moral or other forms of damages."cralaw
virtua1aw library

However, the amendatory provisions of Presidential

Decree No. 1691, which took effect during the
pendency of this case, ousted respondent court of
the jurisdiction it initially had under Presidential
Decree No. 1367. Jurisdiction over all money claims,
including claims for damages arising from or in
connection with employer-employee relations, is now
vested exclusively in the labor Arbiters of the
National Labor Relations Commission.

The question now is whether or not Presidential

Decree No. 1691 has a retroactive effect to cover the
instant case.

This query was resolved in the case of Atlas Fertilizer

Corp. v. Navarro, (149 SCRA 432) wherein We
ruled:jgc:chanrobles.com.ph

"In conflicts of jurisdiction between the courts and

the labor agencies arising from the amendments
effected by P.D. 1691 on P.D. 1367, this Court held in
the cases of Ebon v. De Guzman (113 SCRA 52),
Aguda v. Vallejos (113 SCRA 69), and Sentinel
Insurance Co., Inc. v. Bautista, (supra), that P.D. 1691
is a curative statute which corrected the lack of
jurisdiction of the Labor Arbiter at the start of the
proceedings and, therefore, should be given a
restrospective application to the pending
proceedings. P.D. 1691 merely restored a jurisdiction
earlier vested in Labor Arbiters before the enactment
of P.D. 1367. It was intended to correct a situation
where two tribunals would have jurisdiction over
separate issues arising from the same labor
conflict.chanrobles virtual lawlibrary

Unfair labor practice cases;

2)
Unresolved cases in collective bargaining,
including those which involve wages, hours of work
and other terms and conditions of employment; and

This construction of law is not new. It must be noted

that the amendatory provision of P.D. 1367 itself was
given retroactive application, for also being curative
in nature.

65

P.D. 1691 should, therefore, be given a retroactive

application to this pending case as the precise
purpose of the amendment was to hopefully settle
once and for all the conflict of jurisdiction between
regular courts and labor agencies (Sentinel Ins., Co.
v. Bautista, supra)."cralaw virtua1aw library

SO ORDERED.

In the cases of Getz Corporation Phils. v. Court of

Appeals (116 SCRA 86), PLDT v. Dulay (172 SCRA 33)
and Polotan-Tuvera v. Dayrit (160 SCRA 423), the
Court also declared that Presidential Decree No. 1691
is a curative statute with retrospective application to
pending proceedings.

In the case of Abad v. RTC of Manila (154 SCRA 664,

671), the Court held:jgc:chanrobles.com.ph

"However, whereas before jurisdiction over money

claims of laborers and employees appertained to
Courts of First Instance, the same are now to be
taken cognizance of by proper authorities in the
Department of Labor and Employment.

"The rule of adherence of jurisdiction until a cause is

finally resolved or adjudicated does not apply when
the change in jurisdiction is curative in character.
Thus in the instant case, there is nothing wrong in
holding that Courts of First Instance/Regional Trial
Courts no longer have jurisdiction over aforesaid
monetary claims of labor." chanrobles.com:cralaw:red

The petition is, therefore, unmeritorious for the

complaint clearly shows that the petitioners claim
for damages arose from the acts attributed to his
employer, while he was still an employee thereof.
Thus, the action for damages arose from an
employer-employee relationship. We do not agree
with petitioner that the case is a civil dispute simply
because he did not ask for reinstatement, for an
employee need not seek reinstatement in order to
file a complaint before the labor arbiter (A. Consteel
Construction Co., Inc. v. Intermediate Appellate
Court, G.R. No. 64673, Oct. 21, 1988). More so,
estoppel cannot attach by virtue of Section 2, Rule 9
of the Revised Rules of Court, inasmuch as the
question of compentencia maybe raised even for the
first time on appeal, apart from the fact that
jurisdiction issues can never be waived. Besides, the
issue of jurisdiction was raised even before the
answer was filed.

WHEREFORE, the petition is hereby DISMISSED and

the order appealed from AFFIRMED.chanrobles law
library : red

66

Statement of the Case

The foregoing Summarizes this Court's grant of the

Petition for Certiorari under Rule 65 of the Rules of
Court, assailing the April 26, 1996 Resolution[2]
promulgate by the NLRC[3] which upheld the labor
arbiter's refusal to suspend proceedings involving,
monetary claims of the petitioner's employees.

Petitioner likewise assails the June 20, 1996 NLRC

Resolution[4] which denied its Motion for
Reconsideration.

[G.R. No. 126773. April 14, 1999]

RUBBERWORLD (PHILS.), INC., or JULIE YAP ONG,

petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, MARILYN F. ARELLANO, EMILY S.
LEGASPI, MYRNA S. GALGANA, MERCEDITA R.
SONGCO, WILFREDO V. SANTOS, JOSEPHINE S.
RAMOS, REDENTOR G. HONA, LUZ B. HONA,
ROLANDO B. CRUZ, GUILLERMA R. MUZONES,
CARMELITA V. HALILI, SUSAN A. REYES, EMILY A.
ROBILLOS, PLACIDO REYES, MANOLITO DELA CRUZ,
VICTORINO C. FRANCISCO, ROGER B. MARIAS,
VIOLETA ALEJO, RICARDO T. TORRES, EMMA DELA
TORRE, PERLA N. MANZANERO, FRANCISCO D.
SERDONCILLO, LUISITO P. HERNANDEZ, RAYMOND
PEREA, EDITHA A. SERDONCILLO, FRANCISCO
GENER, MARIO B. REYES, VALERIANO A. HERRERA,
JORGE S. SEERES, ELENA S. IGNACIO, EMERITA S.
CACHERO, NERIZA G. ENRIQUEZ, LOLITA M. FABULAR,
NORMITA M. HERNANDEZ, DOMINADOR P. ENRIQUEZ,
respondents.
DECISION
PANGANIBAN, J.:

Presidential Decree 902-A, as amended, provides

that "upon the appointment of a management
committee, rehabilitation receiver board or body
pursuant to this Decree, all actions for claims against
corporations, partnerships, or associations under
management or receivership pending, before any
court, tribunal, board or body shall be suspended
accordingly."[1] Such suspension is intended to give
enough breathing space for the management
committee or rehabilitation receiver to make the
business viable again, without having to divert
attention and resources to litigations in various fora.
Among, the actions suspended are those for money
claims before labor tribunals, like the National Labor
Relation Commission (NLRC) and the Labor arbiters.

On November 20, 1996, this Court issued a

temporary restraining order signed by then Chief
Justice Andres R. Narvasa, "restraining the public
respondents from further conducting proceedings in
the aforesaid cases effective immediately xxx."

The Facts

The facts are undisputed. They are narrated by the

Office of the Solicitor General as follows:

"Petitioner xxx is a domestic corporation which used

to be in the business of manufacturing footwear,
bags and garments. It filed with the Securities and
Exchange Commission on November 24, 1994 a
petition for suspension of payments praying that it
be declared in a state of suspension of payments and
that the SEC accordingly issue an order restraining
its creditors from enforcing their claims against
petitioner corporation. It further prayed for the
creation of a management committee as well as for
the approval of the proposed rehabilitation plan and
memorandum of agreement between petitioner
corporation and its creditors.

"In an order dated December 28, 1994, the SEC

favorably ruled on the petition for suspension of
payments thusly:

'Accordingly, with the creation of the Management

Committee, all actions for claims against
Rubberworld Philippines, Inc. pending before any
court, tribunal, office, board, body Commission of
Sheriff are hereby deemed SUSPENDED.

67

'Consequently, all pending incidents for preliminary

injunctions, writ of attachments (sic), foreclosures'
and the like are hereby rendered moot and
academic.'

"Private respondents, who claim to be employees of

petitioner corporation, filed against petitioners [from]
April to July 1995 their respective complaints for
illegal dismissal, unfair labor practice, damages and
payment of separation pay, retirement benefits, 13th
month pay and service incentive pay.

"Petitioners moved to suspend the proceedings in the

above labor cases on the strength of the SEC Order
dated December 28, 1994. Likewise, petitioners
cited the rulings of BF Homes vs. Court of Appeals
(190 SCRA 262), Alemar's Sibal & Sons, Inc. vs.
Elbinias (186 SCRA 94) and Bank of Philippine Islands
vs. Court of Appeals (229 SCRA 223) to support their
motion to suspend the proceedings in the labor
cases.

"In an Order dated September 25, 1995, the Labor

Arbiter denied the aforesaid motion holding that the
injunction contained in the SEC Order applied only to
the enforcement of established rights and did not
include the suspension of proceedings involving
claims against petitioner which have yet to be
ascertained. The Labor Arbiter further held that the
order of the SEC suspending all actions for claims
against petitioners does not cover the claims of
private respondents in the labor cases because said
claims and the concomitant liability of petitioners still
had to be determined, thus carrying no dissipation of
the assets of petitioners.

"Petitioners appealed the adverse order of the Labor

Arbiter to public respondent which, in a Resolution
dated April 26, 1996, dismissed the appeal for lack of
merit and, instead, sustained the rulings of the Labor
Arbiter.

"The motion for reconsideration of petitioners fared

no better and was denied by public respondent in a
Resolution dated June 20, 1996."[5]

Hence, this petition.[6]

The Issue

Petitioner raises only one issue:

"Whether or not the Respondent NLRC acted without

or in excess of Jurisdiction or with grave abuse of
discretion amounting to lack of jurisdiction in
affirming the order of Labor Arbiter Voltaire A.
Balitaan denying petitioners' motion to suspend
proceedings despite the Order of the Securities and
Exchange Commission under Sec. 6 (c) of P.D. 902-A
directing the suspension of all actions against a
company under the first stages of insolvency
proceedings."[7]

This Court's Ruling

The petition is meritorious.

Sole Issue:
Suspension Proceedings

Jurisprudence teaches us:

"xxx where the petition filed is one for declaration of

a state of suspension of payments due to a
recognition of the inability to pay one's debts and
liabilities, and where the petitioning corporation
either: (a) has sufficient property to cover all its
debts but foresees the impossibility of meeting them
when they fall due (solvent but illiquid) or (b) has no
sufficient property (insolvent) but is under the
management of a rehabilitation receiver or a
management committee, the applicable law is P.D.
902-A pursuant to Sec. 5 par. (d) thereof. However, if
the petitioning corporation has no sufficient assets to
cover its liabilities and is not under a rehabilitation
receiver or a management committee created under
P.D. 902-A and does not seek merely to have the
payments of its debts suspended, but seeks a
declaration of insolvency xxx the applicable law is
Act 1956 [The Insolvency Law] on voluntary
insolvency, xxx."[8]

In the case at bar, Petitioner Rubberworld filed before

the SEC a Petition for Declaration of Suspension of
Payments, as well as a propose rehabilitation plan.
On December 28, 1994, the SEC ordered the creation
of a management committee and the suspension of
all actions for claim against Rubberworld. Clearly,
the applicable law is PD 902-A, as amended, the
relevant provision of which read:

"SECTION 5. In addition to the regulatory adjudicative

functions of the Securities and Exchange Commission

68

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

xxx

xx

d) Petitions of corporations, partnerships or

associations to be declared in the state of suspension
of payments in cases where the corporation,
partnership or association possesses sufficient
property to cover all its debts but foresees the
impossibility of meeting them when they respectively
fall due or in cases where the corporation,
partnership or association has no sufficient assets to
cover its liabilities, but is under the management of a
rehabilitation receiver or management committee
created pursuant to this Decree.

SECTION 6. In order to effectively exercise such

jurisdiction, the Commission shall possess the
following powers:

xxx

xxx

continue would only add to the burden of the

management committee or rehabilitation receiver,
whose time, effort and resources would be wasted in
defending claims against the corporation instead of
being directed toward its restructuring and
rehabilitation."[10]

xx

c) To appoint one or more receivers of the property,

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

It is plain from the foregoing provisions of law that

"upon the appointment [by, the SEC] of a
management committee or a rehabilitation receiver,"
all actions for claims against the corporation pending
before any court, tribunal or board shall ipso jure be
suspended.[9] The justification for the automatic stay
of all pending actions for claims "is to enable the
management committee or the rehabilitation
receiver to effectively exercise its/his powers free
from any judicial or extra-judicial interference that
might unduly hinder or prevent the 'rescue' of the
debtor company. To allow such other actions to

Parenthetically, the rehabilitation of a financially

distressed corporation benefits its employees,
creditors, stockholders and, in a larger sense, the
general public. And in considering whether to
rehabilitate or not, the SEC gives preference to the
interest of creditors, including employees. The
reason that shareholders can recover their
investments only upon liquidation of' the corporation,
and only if there are assets remaining after all
corporate creditors ire paid.[11]

Labor Claims Included in Suspension Order

The solicitor general, representing Public Respondent

NLRC, argues that the rationale for an automatic stay
will not be frustrated even if the NLRC proceeds with
the disposition of these labor cases, because any
favorable judgment obtained by the private
respondents would only establish their rights as
creditors. The solicitor general also contends that
the assailed Resolutions of the NLRC will not result in
an undue preference for the assets of Rubberworld,
as the private respondents will still present their
claims before the management committee.[12]

We disagree. The law is clear: upon the creation of a

management committee or the appointment of
rehabilitation receiver, all claims for actions "shall be
suspended accordingly." No exception in favor of
labor claims is mentioned in the law. Since the law
makes no distinction or exemptions, neither should
this Court. Ubi lex non distinguit nec nos distinguere
debemos.[13] Allowing labor cases to proceed clearly
defeats the purpose of the automatic stay and
severely encumbers the management committee's
time and resources. The said committee would need
to defend against these suits, to the detriment of its
primary and urgent duty to work towards
rehabilitating the corporation and making it viable
again. To rule otherwise would open the floodgates
to other similarly situated claimants and forestall if
not defeat the rescue efforts. Besides, even if the
NLRC awards the claims of private respondents, as it
did, its ruling could not be enforced as long as the
petitioner is under the management committee.[14]

In Chua v. National Labor Relation Commission,[15]

we ruled that labor claims cannot proceed
independently of a bankruptcy liquidation

69

proceeding, since these claims "would spawn

needless controversy, delays, and confusion."[16]
With more reason, allowing labor claims to continue
in spite of a SEC suspension order in rehabilitation
case would merely lead to such results.

The solicitor general insists that since Article 217 of

the Labor Code[17] vested public respondent with
jurisdiction to hear and decide these labor cases, the
NLRC did not exceed its jurisdiction when it refused
to suspend the proceedings therein.[18] The Court is
not persuaded.

Article 217 of the Labor Code should be construed

not in isolation but in harmony with PD 902-A,
according to the basic rule in statutory construction
that implied repeals are not favored.[19] Indeed, it is
axiomatic that each and every statute must be
construed in a way that would avoid conflict with
existing laws.[20] True, the NLRC has the power to
hear and decide labor disputes, but such authority is
deemed suspended when PD 902-A is put into effect
by the Securities and Exchange Commission.

Preference in Favor of Workers in Case of Bankruptcy

or Liquidation

The private respondents contend that automatic stay

under PD 902-A is not applicable to the instant case;
otherwise, the preference granted to workers by
Article 110 of the Labor Code would be rendered
ineffective.[21] This contention is misleading.

The preferential right of workers and employees

under Article 110 of the Labor Code may be invoked
only upon the institution of insolvency or judicial
liquidation proceeding.[22] Indeed, it is well-settled
that "a declaration of bankruptcy or a judicial
liquidation must be present before preferences over
various money claims may be enforced."[23] But
debtors resort to preference of credit -- giving
preferred creditors the right to have their claims paid
ahead of those of other claimants -- only when their
assets are insufficient to pay their debts fully.[24]
The purpose of rehabilitation proceedings is precisely
to enable the company to gain a new lease on life
and thereby allow creditors to be paid their claims
from its earnings. In insolvency proceedings, on the
other hand, the company stops operating, and the
claims of creditors are satisfied from the assets of
the insolvent corporation. The present case involves
the rehabilitation, not the liquidation, of petitionercorporation. Hence, the preference of credit granted
to workers or employees under Article 110 of the
Labor Code is not applicable.

Duration of Automatic Stay Under PD 902-A

Finally, private respondents posit that under Section

6 of the Insolvency Law, the December 28, 1994
Order of the SEC suspending all actions for claims
against Rubberworld should have expired after three
months, in the absence of an agreement between
the company and the corporate creditors.[25] Private
respondents also accuse the SEC of abusing its
power by "allowing said suspension order to remain
pending for many years without resolving and
approving any rehabilitation plan."[26] They contend
that "[t]his is fatal to the instant petition for it had
been a party to the abuse by the SEC of its
suspension order."[27]

This Court notes that PD 902-A itself does not provide

for the duration of the automatic stay. Neither does
the Order[28] of the SEC. Hence, the suspensive
effect has no time limit and remains in force as long
as reasonably necessary to accomplish the purpose
of the Order.[29] On the other hand, the attack
against the SEC's alleged "abuse of power" is
misplaced. Under review in this Petition for Certiorari
are Resolutions of the NLRC, not of the SEC. The
scope of this review is thus limited to whether the
NLRC gravely abused or exceeded its jurisdiction in
refusing to heed the SEC Order of Suspension and in
issuing its challenged Resolutions. In any event, the
bare allegation of inaction is insufficient to condemn
the Securities and Exchange Commission and the
management committee where, it should be noted,
all affected parties, including, the labor union in the
company, are represented.

WHEREFORE, the petition is hereby GRANTED. The

assailed Resolutions of the NLRC dated April 26,
1996, and June 20, 1996, are REVERSED and SET
ASIDE. No costs.

SO ORDERED.

70

71