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LIGHT RAIL TRANSIT AUTHORITY, Petitioner,


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

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

G.R. No. 163881 March 24, 2006

METRO TRANSIT ORGANIZATION, INC., Petitioner,


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

DECISION

PUNO, J.:

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

Petitioner LRTA is a government-owned and controlled corporation created by Executive Order No. 603, Series of
1980, as amended, to construct and maintain a light rail transit system and provide the commuting public with an
efficient, economical, dependable and safe transportation. Petitioner METRO, formerly Meralco Transit Organization,
Inc., was a qualified transportation corporation duly organized in accordance with the provisions of the Corporation
Code, registered with the Securities and Exchange Commission, and existing under Philippine laws.

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

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

2. The AUTHORITY [LRTA] shall pay METRO the MANAGEMENT FEE as follows x x x [par. 5.01];

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

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

5. METRO shall likewise hold the AUTHORITY [LRTA] free and harmless from any and all fines, penalties,
losses and liabilities and litigation expenses incurred or suffered on account of and by reason of death,
injury, loss or damage to passengers and third persons, including the employees and representatives of the
2

AUTHORITY [LRTA], except where such death, injury, loss or damage is attributable to a defect or
deficiency in the design of the system or its equipment [par. 3.06].

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

Meanwhile, on June 9, 1989, petitioners LRTA and METRO executed a Deed of Sale where petitioner LRTA
purchased the shares of stocks in petitioner METRO.2However, petitioners LRTA and METRO continued with their
distinct and separate juridical personalities. Hence, when the above ten (10)-year Agreement expired on June 8,
1994, they renewed the same, initially on a yearly basis, and subsequently on a monthly basis.

On July 25, 2000, the Union filed a Notice of Strike with the National Conciliation and Mediation Board National
Capital Region against petitioner METRO on account of a deadlock in the collective bargaining negotiation. On the
same day, the Union struck. The power supply switches in the different light rail transit substations were turned off.
The members of the Union picketed the various substations. They completely paralyzed the operations of the entire
light rail transit system. As the strike adversely affected the mobility of the commuting public, then Secretary of Labor
Bienvenido E. Laguesma issued on that same day an assumption of jurisdiction 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

Despite the issuance, posting, and publication of the assumption of jurisdiction and return to work order, the Union
officers and members, including herein private respondent workers, failed to return to work. Thus, effective July 27,
2000, private respondents, Perfecto Venus, Jr., Bienvenido P. Santos, Jr., Rafael C. Roy, Nancy C. Ramos, Salvador
A. Alfon, Noel R. Santos, Manuel A. Ferrer, Salvador G. Alinas, Ramon D. Lofranco, Amador H. Policarpio, Reynaldo
B. Gener, and Bienvenido G. Arpilleda, were considered dismissed from employment.

In the meantime, on July 31, 2000, the Agreement for the Management and Operation of the Metro Manila Light Rail
Transit System between petitioners LRTA and METRO expired. The Board of Directors of petitioner LRTA decided
not to renew the contract with petitioner METRO and directed the LRTA management instead to immediately take
over the management and operation of the light rail transit system to avert the mass transportation crisis.

On October 10, 2000, private respondents Venus, Jr., Santos, Jr., and Roy filed a complaint for illegal dismissal
before the National Labor Relations Commission (NLRC) and impleaded both petitioners LRTA and METRO. Private
respondents Ramos, Alfon, Santos, Ferrer, Alinas, Lofranco, Policarpio, Gener, and Arpilleda follwed suit on
December 1, 2000.

On October 1, 2001, Labor Arbiter Luis D. Flores rendered a consolidated judgment in favor of the private respondent
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


3

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


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

Hence, these twin petitions for review on certiorari of the decision of public respondent appellate court filed by LRTA
and METRO which this Court eventually consolidated.

In the main, petitioner LRTA argues that it has no employer-employee relationship with private respondent workers as
they were hired by petitioner METRO alone pursuant to its ten (10)-year Agreement for the Management and
Operation of the Metro Manila Light Rail Transit System with petitioner METRO. Private respondent workers
recognized that their employer was not petitioner LRTA when their certified exclusive collective bargaining
representative, the Pinag-isang Lakas ng Manggagawa sa METRO, Inc. National Federation of Labor, otherwise
known as 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.
4

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 government-owned and controlled corporation after it was acquired by
petitioner LRTA. Even then, petitioner METRO has no original charter, hence, it is the Department of Labor and
Employment, and not the Civil Service Commission, which has jurisdiction over disputes arising from the employment
of its workers. Consequently, the terms and conditions of such employment are governed by the Labor Code and not
by the Civil Service Rules and Regulations.

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

We believe that METRO employees are not covered by the prohibition against strikes applicable to employees
embraced in the Civil Service. It is not disputed, but in fact conceded, that METRO employees are not covered by the
Civil Service. This being so, METRO employees are not covered by the Civil Service law, rules and regulations but
are covered by the Labor Code and, therefore, the rights and prerogatives granted to private employees thereunder,
including the right to strike, are available to them.

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

Indeed, there was never an intention to consider the employees of petitioner METRO as government employees of
petitioner LRTA as well neither from the beginning, nor until the end. Otherwise, they could have been easily
converted from being employees in the private sector and absorbed as government employees covered by the civil
service when petitioner LRTA acquired petitioner METRO in 1989. The stubborn fact is that they remained private
employees with rights and prerogatives granted to them under the Labor Code, including the right to strike, which
they exercised and from which the instant dispute arose.
5

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
6

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.,21we further held

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

For abandonment to constitute a valid cause for termination of employment, there must be a deliberate, unjustified
refusal of the employee to resume his employment. This refusal must be clearly established. As we stressed in a
recent case, mere absence is not sufficient; it must be accompanied by overt acts unerringly pointing to the fact that
the employee simply does not want to work anymore.

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

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

SO ORDERED.
7

G.R. No. 94372 June 21, 1991

SAMAHANG MANGGAGAWA NG RIZAL PARK and DOMINGO ENRIQUEZ, petitioners,


vs.
NATIONAL LABOR RELATIONS COMMISSION and NATIONAL PARK DEVELOPMENT
COMMITTEE, respondents.

Merito R. Fernandez for petitioners.

CRUZ, J.:

The petitioners were dismissed by the National Park Development Committee, private respondent herein, on the
supercilious ground that their continued employment was "not compatible with the rules of the New Society." That
was in 1972, shortly after the imposition of martial law. When the petitioners complained to the Department of Labor,
their dismissal was sustained by the Labor Arbiter. This was not surprising because the year was 1976 and martial
law was still in force.

What is surprising is this. When his decision was appealed to the NLRC, the public respondent also affirmed the
dismissal albeit on a different ground. This was on June 29, 1990, long after the New Society had been banished and
discredited. The Freedom Constitution had already called for the eradication of "all iniquitous vestiges of the previous
regime."1

The petitioners were employees of the private respondent, then under the chairmanship of Imelda Marcos and the
vice-chairmanship of the late Teodoro F. Valencia. Sometime in August 1972, the petitioner union proposed
negotiations for the adoption of a collective bargaining agreement but the proposal was ignored. The union then filed
a notice of strike with the Bureau of Labor Relations on September 6, 1972, on the grounds of refusal of management
to bargain collectively, refusal to recognize the union, and discrimination of union members. The conference
scheduled by the Bureau for the following day could not even be held because the private respondent did not send a
representative.

On September 16, 1972, petitioner Corazon Alparicio was dismissed. This was followed on October 3, and 4, 1972,
with the unceremonious separation also of the other individual petitioners. The uniform reason given was the
incompatibility of their continued employment with the rules of the New Society. A sample letter read as follows:

Republic of the Philippines


Office of the President
NATIONAL PARKS DEVELOPMENT COMMITTEE
Rizal Park, Manila

October 3, 1972
Date

Mr. Modesto Deunida


Driver Truck In-Charge
Rizal Park

Sir/Madam:

This notice terminates your services, effective immediately. Your continued employment under the
NATIONAL PARKS DEVELOPMENT COMMITTEE or in any of its projects is not compatible with
the rules of the New Society.

For immediate compliance and guidance.


8

(SGD.) JESUS B. ALVAREZ, JR.


Director

The proceedings were delayed when the private respondent submitted that the complaint should be resolved by the
Office of the President, resulting in the elevation of the matter to Malacaang. The case was returned to the public
respondent on the finding that it fell under the jurisdiction of the NLRC pursuant to P.D. No. 21, promulgated on
October 14, 1972.2

The Labor Arbiter dismissed the case, holding that P.D. No. 21 was not applicable, the dismissals having been made
before its effectivity date. His decision was duly appealed to the NLRC, but action on the appeal was also delayed,
and further still when the records of the case were among those burned in the fire at the NLRC building on December
13, 1983. According to the NLRC, it took some time before they could be reconstituted. 3

In its own decision,4 the reorganized NLRC still saw fit to sustain the dismissals made by the private respondent and
declared as follows:

A perusal of the evidence adduced shows that the charge of unfair labor practice allegedly committed by the
respondent has not been sufficiently proven. It is well settled that a charge for unfair labor practice must be
proven by clear and convincing evidence, which is miserably wanting in this case.

The NLRC assumed all the time that it had jurisdiction over the case. So apparently have the petitioners in the
petition now before us as the said decision is challenged only for grave abuse of discretion in upholding the invalid
dismissals. The Solicitor General has moved for dismissal, but not on jurisdictional grounds.

In recent decisions, this Court has held that the National Parks Development Committee is a government agency
whose employees are covered by the civil service rules and not the Labor Code.

In Perlas vs. People of the Philippines,5 we held that the Sandiganbayan had jurisdiction over the acting director of
the Committee who was under prescription for estafa, thus:

The National Parks Development Committee was created originally as an Executive Committee on January
14, 1963, for the development of the Quezon Memorial, Luneta and other national parks (Executive Order
No. 30). It was later designated as the National Parks Development Committee (NPDC) on February 7, 1974
(E.O. No. 69). On January 9, 1966, Imelda R. Marcos and Teodoro F. Valencia were designated Chairman
and Vice-Chairman respectively (E O. No. 3). Despite an attempt to transfer it to the Bureau of Forest
Development, Department of Natural Resources, on December 1, 1975 (Letter of Implementation No. 39,
issued pursuant to PD No. 830, dated November 27, 1975, the NPDC has remained under the Office of the
President (E.O. No. 709 dated July 27, 1981).

Affirming that finding, we said in Republic vs. Court of Appeals 6 as follows:

Since NPDC is a government agency, its employees are covered by civil service rules and regulations (Sec.
2, Article IX, 1987 Constitution). Its employees are civil service employees (Sec. 14, Executive Order No.
180).

While NPDC employees are allowed under the 1987 Constitution to organize and join unions of their choice,
there is as yet no law permitting them to strike. In case of a labor dispute between the employees and the
government. Section 15 of Executive Order No. 180 dated June 1, 1987 provides that the Public Sector
Labor Management Council, not the Department of Labor and Employment, shall hear the dispute. Clearly,
the Court of Appeals and the lower court erred in holding that the labor dispute between the NPDC and the
members of the NPDSA is cognizable by the Department of Labor and Employment.

Nevertheless, considering that this case has been pending since 1972 and all the evidence needed to resolve it is
before us, and more so because the issue presents no special difficulty, the Court feels it should be decided now,
without going through the correct procedural formalities that anyway will result in the same conclusion.

Accordingly, we rule directly as follows.


9

A mere reading of the termination notice will readily show that the dismissals were not for cause and that the reason
given was prima facie invalid. The general statement that the employment of the petitioners was not consonant with
the rules of the New Society was a preposterous justification. There was no indication of the specific rules supposedly
violated nor was there a showing, assuming the said rules had been pinpointed, of how or when they had been
breached by the dismissed employees. Neither was it established that the employees were informed of the charges
against them or that they were given an opportunity to be heard in their defense.

Such cavalier treatment of the employees could have been permitted under the so-called New Society but cannot be
countenanced now under the restored democracy. It is truly amazing that it was sustained by the present NLRC and
no less astonishing that it is now defended by the Office of the Solicitor General. That office suggests that the burden
of proof was on the petitioners, as complainants, to show that their dismissal was illegal. This is incorrect; that office
has it backwards. It is settled that in cases of dismissal, it is the employer who must prove its validity, not the
employee who must prove its invalidity.

It must be borne in mind that the basic principle in termination cases is that the burden of proof rests upon
the employer to show that the dismissal is for just cause and failure to do so would necessarily mean that
the dismissal is not justified and, therefore the employee is entitled to be reinstated in accordance with the
mandate of Article 280 of the New Labor Code.7

By simply saying that the continued employment of the petitioners was not consistent with the rules of the New
Society, the private respondent failed to discharge the burden of proving that the employees deserved to be
dismissed. In sustaining the dismissals despite their undisguised arbitrariness, the NLRC committed grave abuse of
discretion correctable by the extraordinary writ of certiorari under Rule 65 of the Rules of Court.

The insolence of the Marcos government should have been corrected by now, after more than five years since the
people power revolution that banished the deposed President and with him, it was hoped then, all the oppressions of
his discredited regime.1wphi1 It seems, however, that the effects of past arrogance have not yet completely
disappeared and, worse, are still being affirmed and stoutly defended now by the new government. The Court will not
allow this.

WHEREFORE, the petition is GRANTED. The decision of the NLRC dated June 29, 1990, is REVERSED. The
private respondent is ordered to REINSTATE all the individual petitioners without loss of seniority rights and to pay
them five years back salaries.8

SO ORDERED.
10

G.R. No. 80767 April 22, 1991

BOY SCOUTS OF THE PHILIPPINES, petitioner,


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

Julio O. Lopez for petitioner.

FELICIANO, J.:

This Petition for Certiorari is directed at (1) the Decision,1 dated 27 February 1987, and (2) the Resolution2 dated 16
October 1987, both issued by the National Labor Relations Commission ("NLRC") in Case No. 1637-84.

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

The events which led to such termination of services are as follows:

On 19 October 1984, the Secretary-General of petitioner BSP issued Special Orders Nos. 80, 81, 83, 84 and 85
addressed separately to the five (5) private respondents, informing them that on 20 November 1984, they were to be
transferred from the BSP Camp in Makiling to the BSP Land Grant in Asuncion, Davao del Norte. These Orders were
opposed by private respondents who, on 4 November 1984, appealed the matter to the BSP National President.

On 6 November 1984, petitioner BSP conducted a pre-transfer briefing at its National Headquarters in Manila. Private
respondents were in attendance during the briefing and they were there assured that their transfer to Davao del Norte
would not involve any diminution in salary, and that each of them would receive a relocation allowance equivalent to
one (1) month's basic pay. This assurance, however, failed to persuade private respondents to abandon their
opposition to the transfer orders issued by the BSP Secretary-General.

On 13 November 1984, a complaint3

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

On 21 November 1984 (or the day immediately following the date of scheduled transfer), the BSP Camp Manager in
Makiling issued a Memorandum requiring the five (5) private respondents to explain why they should not be charged
administratively for insubordination. The Memorandum was a direct result of the refusal by private respondents, two
(2) days earlier, to accept from petitioner BSP their respective boat tickets to Davao del Norte and their relocation
allowances.

Meanwhile, in a letter of the same date, the BSP National President informed private respondents that their refusal to
comply with the Special Orders was not sufficiently justified and constituted rank disobedience. Memoranda
subsequently issued by the BSP Secretary-General stressed that such refusal as well as the explanations proffered
therefor, were unacceptable and could altogether result in termination of employment with petitioner BSP. These
warnings notwithstanding, private respondents continued pertinaciously to disobey the disputed transfer orders.
11

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

On 22 February 1985, private respondents amended their original complaint to include charges of illegal dismissal
and unfair labor practice against petitioner BSP.4

The Labor Arbiter thereafter proceeded to hear the complaint.

In a decision5 dated 31 July 1985, the Labor Arbiter ordered the dismissal of private respondents' complaint for lack
of merit.

On 27 February 1987, however, the ruling of the Labor Arbiter was reversed by public respondent, NLRC, which held
that private respondents had been illegally dismissed by petitioner BSP. The dispositive portion of the NLRC decision
read:

WHEREFORE, premises considered the Decision appealed from is hereby SET ASIDE and a new one
entered ordering the 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 Paper6 filed by petitioner BSP with the Labor Arbiter, it was alleged
in the second paragraph thereof, that petitioner is a "civic service, non-stock and non-profit organization, relying
mostly [on] government and public support, existing under and by virtue of Commonwealth Act No. 111, as amended,
by Presidential Decree No. 460 . . . " A similar allegation was contained in the Brief for Appellee 7 and in the
Petition8 and Memorandum9 filed by petitioner BSP with public respondent NLRC and this Court, respectively. The
same allegation, moreover, appeared in the Comment10 (also treated as the Memorandum) submitted to this Court by
the Solicitor General on behalf of public respondent NLRC; for their part, private respondents stated in their Appeal
Memorandum11 with the NLRC that petitioner BSP is "by mandate of law a Public Corporation," a statement reiterated
by them in their Memorandum12 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 government-owned 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"
12

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, non-sectarian
and non-governmental organization, with obligations towards nation building and with international
orientation.

The BSP, petitioner stresses, does not receive any monetary or financial subsidy from the Government whether on
the national or local level.13 Petitioner declares that it is a "purely private organization" directed and controlled by its
National Executive Board the members of which are, it is said, all "voluntary scouters," including seven (7) Cabinet
Secretaries.14

Private respondents submitted a supplementary memorandum arguing that while petitioner BSP was created as a
public corporation, it had lost that status when Section 2 of Commonwealth Act No. 111 as amended by P.D. No. 460
conferred upon it the powers which ordinary private corporations organized under the Corporation Code have:

Sec. 2. The said corporation shall have perpetual succession with power to sue and be sued; to hold such
real and personal estate as shall be necessary for corporate purposes, and to receive real and personal
property by gift, devise, or bequest; to adopt a seal, and to alter or destroy the same at pleasure; to have
offices and conduct its business and affairs in the City of Manila and in the several provinces; to make and
adopt by-laws, rules and regulations not inconsistent with the laws of the Philippines, and generally to do all
such acts and things (including the establishment of regulations for the election of associates and
successors: as may be necessary to carry into effect the provisions of the Act and promote the purposes of
said corporation.

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

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

The governing body of the said corporation shall consist of a National Executive Board composed of (a)
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)
13

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

A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing


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

xxx xxx xxx

(Emphasis supplied)

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

Sec. 13. The State recognizes the vital role of the youth in nation-building and shall promote and protect
their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the youth patriotism and
nationalism, and encourage their involvement in public and civic affairs.

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

The second aspect that the Court must take into account relates to the governance of the BSP. The composition of
the National Executive Board of the BSP includes, as noted from Section 5 of its charter quoted earlier, includes
seven (7) Secretaries of Executive Departments. The seven (7) Secretaries (now six [6] in view of the abolition of the
Department of Youth and Sports and merger thereof into the Department of Education, Culture and Sports) by
themselves do not constitute a majority of the members of the National Executive Board. We must note at the same
time that the appointments of members of the National Executive Board, except only the appointments of the
Regional Chairman and Scouts of Senior age from the various Scout Regions, are subject to ratification and
confirmation by the Chief Scout, who is the President of the Philippines. Vacancies to the Board are filled by a
majority vote of the remaining members thereof, but again subject to ratification and confirmation by the Chief
Scout.18 We must assume that such confirmation or ratification involves the exercise of choice or discretion on the
part of ratifying or confirming power. It does appears therefore that there is substantial governmental (i.e.,
Presidential) participation or intervention in the choice of the majority of the members of the National Executive Board
of the BSP.

The third aspect relates to the character of the assets and funds of the BSP. The original assets of the BSP were
acquired by purchase or gift or other equitable arrangement with the Boy Scouts of America, of which the BSP was
part before the establishment of the Commonwealth of the Philippines. The BSP charter, however, does not indicate
that such assets were public or statal in character or had originated from the Government or the State. According to
petitioner BSP, its operating funds used for carrying out its purposes and programs, are derived principally from
membership dues paid by the Boy Scouts themselves and from property rentals. In this respect, the BSP appears
14

similar to private non-stock, non-profit corporations, although its charter expressly envisages donations and
contributions to it from the Government and any of its agencies and instrumentalities.19 We note only that BSP funds
have not apparently heretofore been regarded as public funds by the Commission on Audit, considering that such
funds have not been audited by the Commission.

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

We are fortified in this conclusion when we note that the Administrative Code of 1987 designates the BSP as one of
the attached agencies of the Department of Education, Culture and Sports ("DECS").20 An "agency of the
Government" is defined as referring to any of the various units of the Government including a department, bureau,
office, instrumentality, government-owned or-controlled corporation, or local government or distinct unit
therein.21"Government instrumentality" is in turn defined in the 1987 Administrative Code in the following manner:

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

The same Code describes a "chartered institution" in the following terms:

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

We believe that the BSP is appropriately regarded as "a government instrumentality" under the 1987 Administrative
Code.

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

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

There should no longer be any question at this time that employees of government-owned or controlled
corporations are governed by the civil service law and civil service rules and regulations.

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

The Civil Service embraces every branch, agency, subdivision and instrumentality of the Government,
including every government-owned or controlled corporation. . . .

The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:

A Civil Service embracing all branches and subdivisions of the Government shall be provided by
law.1wphi1

The inclusion of "government-owned or controlled corporations" within the embrace of the civil service
shows a deliberate effort of the framers to plug an earlier loophole which allowed government-owned or
controlled corporations to avoid the full consequences of the all encompassing coverage of the civil service
15

system. The same explicit intent is shown by the addition of "agency" and "instrumentality" to branches and
subdivisions of the Government. All offices and firms of the government are covered. The amendments
introduced in 1973 are not idle exercises or meaningless gestures. They carry the strong message that civil
service coverage is broad and all-embracing insofar as employment in the government in any of its
governmental or corporate arms is concerned.25

The complaint in NLRC Case No. 1637-84 having been filed on 13 November 1984, when the 1973 Constitution was
still in force, our ruling in Juco applies in the case at bar.26

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

ACCORDINGLY, the Decision of the Labor Arbiter dated 31 July 1985, and the Decision dated 27 February 1987 and
Resolution dated 16 October 1987, issued by public respondent NLRC, in NLRC Case No. 1637-84, are hereby SET
ASIDE. All other orders and resolutions rendered in this case by the Labor Arbiter and the NLRC are likewise SET
ASIDE. No pronouncement as to costs.
16

G.R. No. 78909 June 30, 1989

MATERNITY CHILDREN'S HOSPITAL, represented by ANTERA L. DORADO, President, petitioner,


vs.
THE HONORABLE SECRETARY OF LABOR AND THE REGIONAL DlRECTOR OF LABOR, REGION
X, respondents.

MEDIALDEA, J.:

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

Petitioner is a semi-government hospital, managed by the Board of Directors of the Cagayan de Oro Women's Club
and Puericulture Center, headed by Mrs. Antera Dorado, as holdover President. The hospital derives its finances
from the club itself as well as from paying patients, averaging 130 per month. It is also partly subsidized by the
Philippine Charity Sweepstakes Office and the Cagayan De Oro City government.

Petitioner has forty-one (41) employees. Aside from salary and living allowances, the employees are given food, but
the amount spent therefor is deducted from their respective salaries (pp. 77-78, Rollo).

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

On June 16, 1986, the Regional Director directed two of his Labor Standard and Welfare Officers to inspect the
records of the petitioner to ascertain the truth of the allegations in the complaints (p. 98, Rollo). Payrolls covering the
periods of May, 1974, January, 1985, November, 1985 and May, 1986, were duly submitted for inspection.

On July 17, 1986, the Labor Standard and Welfare Officers submitted their report confirming that there was
underpayment of wages and ECOLAs of all the employees by the petitioner, the dispositive portion of which reads:

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

Based on this inspection report and recommendation, the Regional Director issued an Order dated August 4, 1986,
directing the payment of P723,888.58, representing underpayment of wages and ECOLAs to all the petitioner's
employees, the dispositive portion of which reads:

WHEREFORE, premises considered, respondent Maternity and Children Hospital is hereby


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

SO ORDERED. (p. 34, Rollo)


17

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

WHEREFORE, the August 29, 1986 order is hereby MODIFIED in that the deficiency wages and
ECOLAs should only be computed from May 23, 1983 to May 23, 1986. The case is remanded to
the Regional Director, Region X, for recomputation specifying the amounts due each the
complainants under each of the applicable Presidential Decrees. (p. 40, Rollo)

On October 24, 1986, the petitioner filed a motion for reconsideration which was denied by the Secretary of Labor in
his Order dated May 13, 1987, for lack of merit (p. 43 Rollo).

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

Petitioner likewise maintains that the Order of the respondent Regional Director of Labor, as affirmed with
modifications by respondent Secretary of Labor, does not clearly and distinctly state the facts and the law on which
the award was based. In its "Rejoinder to Comment", petitioner further questions the authority of the Regional
Director to award salary differentials and ECOLAs to private respondents, (relying on the case of Encarnacion vs.
Baltazar, G.R. No. L-16883, March 27, 1961, 1 SCRA 860, as authority for raising the additional issue of lack of
jurisdiction at any stage of the proceedings, p. 52, Rollo), alleging that the original and exclusive jurisdiction over
money claims is properly lodged in the Labor Arbiter, based on Article 217, paragraph 3 of the Labor Code.

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

This is a labor standards case, and is governed by Art. 128-b of the Labor Code, as amended by E.O. No. 111. Labor
standards refer to the minimum requirements prescribed by existing laws, rules, and regulations relating to wages,
hours of work, cost of living allowance and other monetary and welfare benefits, including occupational, safety, and
health standards (Section 7, Rule I, Rules on the Disposition of Labor Standards Cases in the Regional Office, dated
September 16, 1987). 1 Under the present rules, a Regional Director exercises both visitorial and enforcement power
over labor standards cases, and is therefore empowered to adjudicate money claims, provided there 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.
18

To clarify matters, it is necessary to enumerate a series of rules and provisions of law on the disposition of labor
standards cases.

Prior to the promulgation of PD 850, labor standards cases were an exclusive function of labor arbiters, under Article
216 of the then Labor Code (PD No. 442, as amended by PD 570-a), which read in part:

Art. 216. Jurisdiction of the Commission. The Commission shall have exclusive appellate
jurisdiction over all cases decided by the Labor Arbiters and compulsory arbitrators.

The Labor Arbiters shall have exclusive jurisdiction to hear and decide the following cases involving
all workers whether agricultural or non-agricultural.

xxx xxx xxx

(c) All money claims of workers, involving non-payment or underpayment of


wages, overtime compensation, separation pay, maternity leave and other
money claims arising from employee-employer relations, except claims for
workmen's compensation, social security and medicare benefits;

(d) Violations of labor standard laws;

xxx xxx xxx

(Emphasis supplied)

The Regional Director exercised visitorial rights only under then Article 127 of the Code as follows:

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

With the promulgation of PD 850, Regional Directors were given enforcement powers, in addition to visitorial powers.
Article 127, as amended, provided in part:

SEC. 10. Article 127 of the Code is hereby amended to read as follows:

Art. 127. Visitorial and enforcement powers.

xxx xxx xxx

(b) The Secretary of Labor or his duly authorized


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

xxx xxx xxx

Labor Arbiters, on the other hand, lost jurisdiction over labor standards cases. Article 216, as then amended by PD
850, provided in part:
19

SEC. 22. Article 216 of the Code is hereby amended to read as follows:

Art. 216. Jurisdiction of Labor Arbiters and the Commission. (a) The Labor
Arbiters shall have exclusive jurisdiction to hear and decide the following cases
involving all workers, whether agricultural or non-agricultural:

xxx xxx xxx

(3) All money claims of workers involving non-payment or


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

xxx xxx xxx

(Emphasis supplied)

Under the then Labor Code therefore (PD 442 as amended by PD 570-a, as further amended by PD 850), there were
three adjudicatory units: The Regional Director, the Bureau of Labor Relations and the Labor Arbiter. It became
necessary to clarify and consolidate all governing provisions on jurisdiction into one document. 2 On April 23, 1976,
MOLE Policy Instructions No. 6 was issued, and provides in part (on labor standards cases) as follows:

POLICY INSTRUCTIONS NO. 6

TO: All Concerned

SUBJECT: DISTRIBUTION OF JURISDICTION OVER LABOR CASES

xxx xxx xxx

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

a) Labor standards cases arising from violations of labor


standard laws discovered in the course of inspection or
complaints where employer-employee relations still exist;

xxx xxx xxx

2. The following cases are under the exclusive original jurisdiction of


the Conciliation Section of the Regional Office:

a) Labor standards cases where employer-employee


relations no longer exist;

xxx xxx xxx

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

a) Cases not settled by the Conciliation Section of the Regional


Office, namely:
20

1) labor standard cases where employer-employee relations no


longer exist;

xxx xxx xxx

(Emphasis supplied)

MOLE Policy Instructions No. 7 (undated) was likewise subsequently issued, enunciating the rationale for, and the
scope of, the enforcement power of the Regional Director, the first and second paragraphs of which provide as
follows:

POLICY INSTRUCTIONS NO. 7

TO: All Regional Directors

SUBJECT: LABOR STANDARDS CASES

Under PD 850, labor standards cases have been taken from the arbitration system and placed
under the enforcement system, except where a) questions of law are involved as determined by the
Regional Director, b) the amount involved exceeds P100,000.00 or over 40% of the equity of the
employer, whichever is lower, c) the case requires evidentiary matters not disclosed or verified in
the normal course of inspection, or d) there is no more employer-employee relationship.

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

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

After PD 850, Article 216 underwent a series of amendments (aside from being re-numbered as Article 217) and with
it a corresponding change in the jurisdiction of, and supervision over, the Labor Arbiters:

1. PD 1367 (5-1-78) gave Labor Arbiters exclusive jurisdiction


over unresolved issues in collective bargaining, etc., and those cases arising
from employer-employee 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 labor-standards cases
that may be assigned to them for compulsory arbitration by the Director of the
Regional Office. PD 1391 merged conciliation and compulsory arbitration
functions in the person of the Labor Arbiter. The procedure governing the
disposition of cases at the Arbitration Branch paralleled those in the Special Task
Force and Field Services Division, with one major exception: the Labor Arbiter
exercised full and untrammelled authority in the disposition of the case,
particularly in the substantive aspect, his decisions and orders subject to review
only on appeal to the NLRC. 3
21

3. MOLE Policy Instructions No. 37 Because of the seemingly overlapping


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

POLICY INSTRUCTIONS NO. 37

TO: All Concerned

SUBJECT: ASSIGNMENT OF CASES TO LABOR ARBITERS

Pursuant to the provisions of Presidential Decree No. 1391 and to insure speedy
disposition of labor cases, the following guidelines are hereby established for the
information and guidance of all concerned.

1. Conciliable Cases.

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

2. Labor Standards Cases.

Cases involving violation of labor standards laws where employer- employee


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

a) intricate questions of law are involved; or

b) evidentiary matters not disclosed or verified in the normal


course of inspection by labor regulations officers are required
for their proper disposition.

3. Disposition of Cases.

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

xxx xxx xxx

(Emphasis supplied)

4. PD 1691(5-1-80) original and exclusive jurisdiction over unresolved issues


in collective bargaining and money claims, which includes moral or other
damages.

Despite the original and exclusive jurisdiction of labor arbiters over money claims, however, the
Regional Director nonetheless retained his enforcement power, and remained empowered to
adjudicate uncontested money claims.
22

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.

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. TheMinister
of Labor (supra) cases, a Regional Director is precluded from adjudicating money claims on the ground that this is an
exclusive function of the Labor Arbiter under Article 217 of the present Code.

On August 4, 1986, when the order was issued, Article 128(b) 4 read as follows:

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

On the other hand, Article 217 of the Labor Code as amended by P.D. 1691, effective May 1, 1980; Batas Pambansa
Blg. 130, effective August 21, 1981; and Batas Pambansa Blg. 227, effective June 1, 1982, inter alia, provides:

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

1. Unfair labor practice cases;

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

3. All money claims of workers, including those based on non-payment or


underpayment of wages, overtime compensation, separation pay and other
benefits provided by law or appropriate agreement, except claims for employees'
compensation, social security, medicare and maternity benefits;

4. Cases involving household services; and

5. Cases arising from any violation of Article 265 of this Code, including
questions involving the legality of strikes and lock-outs. (Emphasis supplied)

The Ong and Zambales cases involved workers who were still connected with the company. However, in the Ong
case, the employer disputed the adequacy of the evidentiary foundation (employees' affidavits) of the findings of the
labor standards inspectors while in the Zambales case, the money claims which arose from alleged violations of labor
standards provisions were not discovered in the course of normal inspection. Thus, the provisions of MOLE Policy
Instructions Nos. 6, (Distribution of Jurisdiction Over Labor Cases) and 37 (Assignment of Cases to Labor Arbiters)
giving Regional Directors adjudicatory powers over uncontested money claims discovered in the course of normal
inspection, provided an employer-employee relationship still exists, are inapplicable.
23

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

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

(b) THE PROVISIONS OF ARTICLE 217 OF THIS CODE TO THE CONTRARY


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

As seen from the foregoing, EO 111 authorizes a Regional Director to order compliance by an employer with labor
standards provisions of the Labor Code and other legislation. It is Our considered opinion however, that the inclusion
of the phrase, " The provisions of Article 217 of this Code to the contrary notwithstanding and in cases where the
relationship of employer-employee still exists" ... in Article 128(b), as amended, above-cited,
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

Viewed in the light of PD 850 and read in coordination with MOLE Policy Instructions Nos. 6, 7 and 37, it is clear that
it has always been the intention of our labor authorities to provide our workers immediate access (when still feasible,
as where an employer-employee relationship still exists) to their rights and benefits, without being inconvenienced by
arbitration/litigation processes that prove to be not only nerve-wracking, but financially burdensome in the long run.

Note further the second paragraph of Policy Instructions No. 7 indicating that the transfer of labor standards cases
from the arbitration system to the enforcement system is

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

so that

. . the workers would not litigate to get what legally belongs to him. .. ensuring delivery . . free of
charge.

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

This view is in consonance with the present "Rules on the Disposition of Labor Standard Cases in the Regional
Offices " 7 issued by the Secretary of Labor, Franklin M. Drilon on September 16, 1987.

Thus, Sections 2 and 3 of Rule II on "Money Claims Arising from Complaint Routine Inspection", provide as follows:

Section 2. Complaint inspection. All such complaints shall immediately be forwarded to the
Regional Director who shall refer the case to the appropriate unit in the Regional Office for
assignment to a Labor Standards and Welfare Officer (LSWO) for field inspection. When the field
inspection does not produce the desired results, the Regional Director shall summon the parties for
summary investigation to expedite the disposition of the case. . . .
24

Section 3. Complaints where no employer-employee relationship actually exists. Where


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

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

xxx xxx xxx

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

(c) Restitutions in excess of the aforementioned amount shall be effected at the


Regional Office or at the worksite subject to the prior approval of the Regional
Director.

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

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

E.O. No. 111 was issued on December 24, 1986 or three (3) months after the promulgation of the Secretary of
Labor's decision upholding private respondents' salary differentials and ECOLAs on September 24, 1986. The
amendment of the visitorial and enforcement powers of the Regional Director (Article 128-b) by said E.O. 111 reflects
the intention enunciated in Policy Instructions Nos. 6 and 37 to empower the Regional Directors to
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:

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

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

We now come to the question of whether or not the Regional Director erred in extending the award to all hospital
employees. We answer in the affirmative.

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

The justification for the award to this group of employees who were not signatories to the complaint is that the
visitorial and enforcement powers given to the Secretary of Labor is relevant to, and exercisable over establishments,
not over the individual members/employees, because what is sought to be achieved by its exercise is the observance
of, and/or compliance by, such firm/establishment with the labor standards regulations. Necessarily, in case of an
award resulting from a violation of labor legislation by such establishment, the entire members/employees should
benefit therefrom. As aptly stated by then Minister of Labor Augusto S. Sanchez:
25

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

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

This view is further bolstered by the provisions of Sec. 6, Rule II of the "Rules on the Disposition of Labor Standards
cases in the Regional Offices" (supra) presently enforced, viz:

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

However, there is no legal justification for the award in favor of those employees who were no longer connected with
the hospital at the time the complaint was filed, having resigned therefrom in 1984, viz:

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


2. Rosario Paclijan
3. Adela Peralta
4. Mauricio Nagales
5. Consesa Bautista
6. Teresita Agcopra
7. Felix Monleon
8. Teresita Salvador
9. Edgar Cataluna; and

10. Raymond Manija ( p.7, Rollo)

The enforcement power of the Regional Director cannot legally be upheld in cases of separated employees. Article
129 of the Labor Code, cited by petitioner (p. 54, Rollo) is not applicable as said article is in aid of the enforcement
power of the Regional Director; hence, not applicable where the employee seeking to be paid underpayment of
wages is already separated from the service. His claim is purely a money claim that has to be the subject of
arbitration proceedings and therefore within the original and exclusive jurisdiction of the Labor Arbiter.

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

We invite attention to the Minister of Labor's ruling thereon, as follows:

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

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

SO ORDERED.
26

G.R. No. 179652 May 8, 2009

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


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

DECISION

TINGA, J.:

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

I.

The instant petition for certiorari under Rule 65 assails the decision and the resolution of the Court of Appeals dated
26 October 2006 and 26 June 2007, respectively, in C.A. G.R. CEB-SP No. 00855.1

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

Management representative informed that complainant is a drama talent hired on a per drama " participation basis"
hence no employer-employeeship [sic] existed between them. As proof of this, management presented photocopies
of cash vouchers, billing statement, employments of specific undertaking (a contract between the talent director & the
complainant), summary of billing of drama production etc. They (mgt.) has [sic] not control of the talent if he ventures
into another contract w/ other broadcasting industries.

On the other hand, complainant Juezans alleged violation of non-diminution of benefits is computed as follows:

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

(August 1/03 to Sept 15/03)

Note: Recommend for summary investigation or whatever action deem proper. 5

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

In his Order dated 27 February 2004,7 DOLE Regional Director Atty. Rodolfo M. Sabulao (Regional Director) ruled
that respondent is an employee of petitioner, and that the former is entitled to his money claims amounting
to P203,726.30. Petitioner sought reconsideration of the Order, claiming that the Regional Director gave credence to
the documents offered by respondent without examining the originals, but at the same time he missed or failed to
consider petitioners evidence. Petitioners motion for reconsideration was denied. 8 On appeal to the DOLE
Secretary, petitioner denied once more the existence of employer-employee relationship. In its Order dated 27
27

January 2005, the Acting DOLE Secretary dismissed the appeal on the ground that petitioner did not post a cash or
surety bond and instead submitted a Deed of Assignment of Bank Deposit. 9

Petitioner elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE
Secretary disregarded the evidence it presented and failed to give it the opportunity to refute the claims of
respondent. Petitioner maintained that there is no employer-employee relationship had ever existed between it and
respondent because it was the drama directors and producers who paid, supervised and disciplined respondent. It
also added that the case was beyond the jurisdiction of the DOLE and should have been considered by the labor
arbiter because respondents claim exceeded P5,000.00.

The Court of Appeals held that petitioner was not deprived of due process as the essence thereof is only an
opportunity to be heard, which petitioner had when it filed a motion for reconsideration with the DOLE Secretary. It
further ruled that the latter had the power to order and enforce compliance with labor standard laws irrespective of the
amount of individual claims because the limitation imposed by Article 29 of the Labor Code had been repealed by
Republic Act No. 7730.10 Petitioner sought reconsideration of the decision but its motion was denied. 11

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

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

II.

The significance of this case may be reduced to one simple questiondoes the Secretary of Labor have the power to
determine the existence of an employer-employee relationship?

To resolve this pivotal issue, one must look into the extent of the visitorial and enforcement power of the DOLE found
in Article 128 (b) of the Labor Code, as amended by Republic Act 7730. It reads:

Article 128 (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases
where the relationship of 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. The Secretary or his duly authorized
representative shall issue writs of execution to the appropriate authority for the enforcement of their orders, except in
cases where the employer contests the findings of the labor employment and enforcement officer and raises issues
supported by documentary proofs which were not considered in the course of inspection. (emphasis supplied)

xxx

The provision is quite explicit that the visitorial and enforcement power of the DOLE comes into play only "in cases
when the relationship of employer-employee still exists." It also underscores the avowed objective underlying the
grant of power to the DOLE which is "to give effect to the labor standard provision of this Code and other labor
legislation." Of course, a persons entitlement to labor standard benefits under the labor laws presupposes the
existence of employer-employee relationship in the first place.
28

The clause "in cases where the relationship of employer-employee still exists" signifies that the employer-employee
relationship must have existed even before the emergence of the controversy. Necessarily, the DOLEs power does
not apply in two instances, namely: (a) where the employer-employee relationship has ceased; and (b) where no
such relationship has ever existed.

The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards
Cases15 issued by the DOLE Secretary. It reads:

Rule II MONEY CLAIMS ARISING FROM COMPLAINT/ROUTINE INSPECTION

Sec. 3. Complaints where no employer-employee relationship actually exists. Where employer-employee relationship
no longer exists by reason of the fact that it has already been severed, claims for payment of monetary benefits fall
within the exclusive and original jurisdiction of the labor arbiters. Accordingly, if on the face of the complaint, it can be
ascertained that employer-employee relationship no longer exists, the case, whether accompanied by an allegation of
illegal dismissal, shall immediately be endorsed by the Regional Director to the appropriate branch of the National
Labor Relations Commission (NLRC).

In the recent case of Bay Haven, Inc. v. Abuan,16 this Court recognized the first situation and accordingly ruled that a
complainants allegation of his illegal dismissal had deprived the DOLE of jurisdiction as per Article 217 of the Labor
Code.17

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

Clearly the law accords a prerogative to the NLRC over the claim when the employer-employee relationship has
terminated or such relationship has not arisen at all. The reason is obvious. In the second situation especially, the
existence of an employer-employee relationship is a matter which is not easily determinable from an ordinary
inspection, necessarily so, because the elements of such a relationship are not verifiable from a mere ocular
examination. The intricacies and implications of an employer-employee relationship demand that the level of scrutiny
should be far above the cursory and the mechanical. While documents, particularly documents found in the
employers

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

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

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

The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the
Secretary of Labor, one which the legislative branch is entitled to impose. The rationale underlying this limitation is to
eliminate the prospect of competing conclusions of the Secretary of Labor and the NLRC, on a matter fraught with
questions of fact and law, which is best resolved by the quasi-judicial body, which is the NRLC, rather than an
administrative official of the executive branch of the government. If the Secretary of Labor proceeds to exercise his
visitorial and enforcement powers absent the first requisite, as the dissent proposes, his office confers jurisdiction on
itself which it cannot otherwise acquire.
29

The approach suggested by the dissent is frowned upon by common law. To wit:

[I]t is a general rule, that no court of limited jurisdiction can give itself jurisdiction by a wrong decision on a point
collateral to the merits of the case upon which the limit to its jurisdiction depends; and however its decision may be
final on all particulars, making up together that subject matter which, if true, is within its jurisdiction, and however
necessary in many cases it may be for it to make a preliminary inquiry, whether some collateral matter be or be not
within the limits, yet, upon this preliminary question, its decision must always be open to inquiry in the superior
court.18

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

A reading of Art. 128 of the Labor Code reveals that the Secretary of Labor or his authorized representatives was
granted visitorial and enforcement powers for the purpose of determining violations of, and enforcing, the Labor Code
and any labor law, wage order, or rules and regulations issued pursuant thereto. Necessarily, the actual existence of
an employer-employee relationship affects the complexion of the putative findings that the Secretary of Labor may
determine, since employees are entitled to a different set of rights under the Labor Code from the employer as
opposed to non-employees. Among these differentiated rights are those accorded by the "labor standards" provisions
of the Labor Code, which the Secretary of Labor is mandated to enforce. If there is no employer-employee
relationship in the first place, the duty of the employer to adhere to those labor standards with respect to the non-
employees is questionable.

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

Without a doubt, petitioner, since the inception of this case had been consistent in maintaining that respondent is not
its employee. Certainly, a preliminary determination, based on the evidence offered, and noted by the Labor Inspector
during the inspection as well as submitted during the proceedings before the Regional Director puts in genuine doubt
the existence of employer-employee relationship. From that point on, the prudent recourse on the part of the DOLE
should have been to refer respondent to the NLRC for the proper dispensation of his claims. Furthermore, as
discussed earlier, even the evidence relied on by the Regional Director in his order are mere self-serving declarations
of respondent, and hence cannot be relied upon as proof of employer-employee relationship.

III.

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

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

As a general rule, the Supreme Court is not a trier of facts. This applies with greater force in cases before quasi-
judicial agencies whose findings of fact are accorded great respect and even finality. To be sure, the same findings
30

should be supported by substantial evidence from which the said tribunals can make its own independent evaluation
of the facts. Likewise, it must not be rendered with grave abuse of discretion; otherwise, this Court will not uphold the
tribunals conclusion.20 In the same manner, this Court will not hesitate to set aside the labor tribunals findings of fact
when it is clearly shown that they were arrived at arbitrarily or in disregard of the evidence on record or when there is
showing of fraud or error of law.21

At the onset, it is the Courts considered view that the existence of employer- employee relationship could have been
easily resolved, or at least prima facie determined by the labor inspector, during the inspection by looking at the
records of petitioner which can be found in the work premises. Nevertheless, even if the labor inspector had noted
petitioners manifestation and documents in the Notice of Inspection Results, it is clear that he did not give much
credence to said evidence, as he did not find the need to investigate the matter further. Considering that the
documents shown by petitioner, namely: cash vouchers, checks and statements of account, summary billings
evidencing payment to the alleged real employer of respondent, letter-contracts denominated as "Employment for a
Specific Undertaking," prima facie negate the existence of employer-employee relationship, the labor inspector could
have exerted a bit more effort and looked into petitioners payroll, for example, or its roll of employees, or interviewed
other employees in the premises. After all, the labor inspector, as a labor regulation officer is given "access to
employers records and premises at any time of day or night whenever work is being undertaken therein, and the right
to copy therefrom, to question any employee and investigate any fact, condition or matter which may be necessary to
determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and
regulations pursuant thereto."22 Despite these far-reaching powers of labor regulation officers, records reveal that no
additional efforts were exerted in the course of the inspection.

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

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

This is to certify that MR. JANDELEON JUEZAN is a program employee of PEOPLES BROADCASTING
SERVICES, INC. (DYMF- Bombo Radyo Cebu) since 1990 up to the present.

Furtherly certifies that Mr. Juezan is receiving a monthly salary of FIFTEEN THOUSAND (P15,000.00) PESOS.

This certification is issued upon the request of the above stated name to substantiate loan requirement.

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

(signed)
GREMAN B. SOLANTE
Station Manager

On the other hand, petitioner maintained in its position paper that respondent had never been its employee. Attached
as annexes to its position paper are photocopies of cash vouchers it issued to drama producers, as well as letters of
employment captioned "Employment for a Specific Undertaking", wherein respondent was appointed by different
drama directors as spinner/narrator for specific radio programs.25
31

In his Order, the Regional Director merely made a passing remark on petitioners claim of lack of employer-employee
relationshipa token paragraphand proceeded to a detailed recitation of respondents allegations. The documents
introduced by petitioner in its position paper and even those presented during the inspection were not given an iota of
credibility. Instead, full recognition and acceptance was accorded to the claims of respondentfrom the hours of
work to his monthly salary, to his alleged actual duties, as well as to his alleged "evidence." In fact, the findings are
anchored almost verbatim on the self-serving allegations of respondent.

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

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

1. This is to certify that the person whose picture and signature appear hereon is an employee of Bombo
Radio Philippines.

2. This ID must be worn at all times within Bombo Radyo Philippines premises for proper identification and
security. Furthermore, this is the property of Bombo Radyo Philippines and must be surrendered upon
separation from the company.

HUMAN RESOURCE DEPARMENT

(Signed)
JENALIN D. PALER
HRD HEAD

Respondent tried to address the discrepancy between his identification card and the standard identification cards
issued by petitioner to its employees by arguing that what he annexed to his position paper was the old identification
card issued to him by petitioner. He then presented a photocopy of another "old" identification card, this time
purportedly issued to one of the employees who was issued the new identification card presented by
petitioner.29Respondents 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
32

made by these tribunals. Even the dissent skirted away from the issue of the existence of employer-employee
relationship and conveniently ignored the dearth of evidence presented by respondent.

Although substantial evidence is not a function of quantity but rather of quality, the peculiar environmental
circumstances of the instant case demand that something more should have been proffered.33 Had there been other
proofs of employment, such as respondents inclusion in petitioners payroll, or a clear exercise of control, the Court
would have affirmed the finding of employer-employee relationship. The Regional Director, therefore, committed
grievous error in ordering petitioner to answer for respondents claims. Moreover, with the conclusion that no
employer-employee relationship has ever existed between petitioner and respondent, it is crystal-clear that the DOLE
Regional Director had no jurisdiction over respondents complaint. Thus, the improvident exercise of power by the
Secretary of Labor and the Regional Director behooves the court to subject their actions for review and to invalidate
all the subsequent orders they issued.

IV.

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

The Court does not agree.

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

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

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

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

The Deed of Assignment reads:

DEED OF ASSIGNMENT OF BANK DEPOSIT


WITH SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That I, GREMAN B. SOLANTE in my capacity as Station Manager of DYMF Cebu City, PEOPLES BROADCASTING
SERVICES, INC., a corporation duly authorized and existing under and by virtue of the laws of the Philippines, for
and in consideration of the sum of PESOS: TWO HUNDRED THREE THOUSAND SEVEN HUNDRED TWENTY SIX
PESOS & 30/100 ONLY (P203,726.30) Phil. Currency, as CASH BOND GUARANTEE for the monetary award in
favor to the Plaintiff in the Labor Case docketed as LSED Case No. R0700-2003-09-CI-09, now pending appeal.
33

That Respondent-Appellant do hereby undertake to guarantee available and sufficient funds covered by Platinum
Savings Deposit (PSD) No. 010-8-00038-4 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 Plaintiff-Appellee/Department of Labor and Employment Regional Office VII at Queen City
Development Bank, Cebu Branch, Sanciangko St. Cebu City.

It is understood that the said bank has the full control of Platinum Savings Deposit (PSD) No. 010-8-00038-4 from
and after this date and that said sum cannot be withdrawn by the Plaintiff-Appellee/ Department of Labor and
Employment Regional Office VII until such time that a Writ of Execution shall be ordered by the Appellate Office.

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

IN WITNESS WHEREOF, I have hereunto affixed my signature this 18th day if June, 2004, in the City of Cebu,
Philippines.

PEOPLES BROADCASTING SERVICES, INC.

By:

(Signed)
GREMAN B. SOLANTE
Station Manager

As priorly mentioned, the Deed of Assignment was accompanied by a Letter Agreement between Queen City
Development Bank and petitioner concerning Platinum Savings Deposit (PSD) No. 010-8-00038-4,39 and a Cash
Voucher issued by petitioner showing the amount of P203,726.30 deposited at the said bank.

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

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

The Deed of Assignment must be distinguished from the type of bank certification submitted by appellants in Cordova
v. Keysas Boutique,41 wherein this Court found that such bank certification did not come close to the cash or surety
bond required by law. The bank certification in Cordova merely stated that the employer maintains a depository
account with a balance of P23,008.19, and that the certification was issued upon the depositors request for whatever
legal purposes it may serve. There was no indication that the said deposit was made specifically for the pending
appeal, as in the instant case. Thus, the Court ruled that the bank certification had not in any way ensured that the
award would be paid should the appeal fail. Neither was the appellee in the case prevented from making withdrawals
from the savings account. Finally, the amount deposited was measly compared to the total monetary award in the
judgment.42
34

V.

Another question of technicality was posed against the instant petition in the hope that it would not be given due
course. Respondent asserts that petitioner pursued the wrong mode of appeal and thus the instant petition must be
dismissed.1avvphi1.zw+ Once more, the Court is not convinced.

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

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

In one case, it was held that the extraordinary writ of certiorari will lie if it is satisfactorily established that the tribunal
acted capriciously and whimsically in total disregard of evidence material to or even decisive of the controversy, 46and
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 the Regional Director. In
ruling and acting as it did, the Court finds that the Court of Appeals may be properly subjected to its certiorari
jurisdiction. After all, this Court has previously ruled that the extraordinary writ of certiorari will lie if it is
satisfactorily1avvphi1
35

established that the tribunal had acted capriciously and whimsically in total disregard of evidence material to or even
decisive of the controversy.54

The most important consideration for the allowance of the instant petition is the opportunity for the Court not only to
set the demarcation between the NLRCs jurisdiction and the DOLEs prerogative but also the procedure when the
case involves the fundamental challenge on the DOLEs prerogative based on lack of employer-employee
relationship. As exhaustively discussed here, the DOLEs prerogative hinges on the existence of employer-employee
relationship, the issue is which is at the very heart of this case. And the evidence clearly indicates private respondent
has never been petitioners employee. But the DOLE did not address, while the Court of Appeals glossed over, the
issue. The peremptory dismissal of the instant petition on a technicality would deprive the Court of the opportunity to
resolve the novel controversy.1avvphi1

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

SO ORDERED.

G.R. No. 179652 March 6, 2012

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


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

RESOLUTION

VELASCO, JR., J.:

In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service, Inc. (Bombo Radyo Phils., Inc.)
questioned the Decision and Resolution of the Court of Appeals (CA) dated October 26, 2006 and June 26, 2007,
respectively, in C.A. G.R. CEB-SP No. 00855.

Private respondent Jandeleon Juezan filed a complaint against petitioner with the Department of Labor and
Employment (DOLE) Regional Office No. VII, Cebu City, for illegal deduction, nonpayment of service incentive leave,
13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of wages
and noncoverage of SSS, PAG-IBIG and Philhealth.1 After the conduct of summary investigations, and after the
parties submitted their position papers, the DOLE Regional Director found that private respondent was an employee
of petitioner, and was entitled to his money claims.2 Petitioner sought reconsideration of the Directors Order, but
failed. The Acting DOLE Secretary dismissed petitioners appeal on the ground that petitioner submitted a Deed of
Assignment of Bank Deposit instead of posting a cash or surety bond. When the matter was brought before the CA,
where petitioner claimed that it had been denied due process, it was held that petitioner was accorded due process
as it had been given the opportunity to be heard, and that the DOLE Secretary had jurisdiction over the matter, as the
jurisdictional limitation imposed by Article 129 of the Labor Code on the power of the DOLE Secretary under Art.
128(b) of the Code had been repealed by Republic Act No. (RA) 7730. 3

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

WHEREFORE, the petition is GRANTED. The Decision dated 26 October 2006 and the Resolution dated 26 June
2007 of the Court of Appeals in C.A. G.R. CEB-SP No. 00855 are REVERSED and SET ASIDE. The Order of the
then Acting Secretary of the Department of Labor and Employment dated 27 January 2005 denying petitioners
appeal, and the Orders of the Director, DOLE Regional Office No. VII, dated 24 May 2004 and 27 February 2004,
respectively, are ANNULLED. The complaint against petitioner is DISMISSED.4
36

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

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

The Court treated the Motion for Clarification as a second motion for reconsideration, granting said motion and
reinstating the petition.8 It is apparent that there is a need to delineate the jurisdiction of the DOLE Secretary vis--vis
that of the NLRC.

Under Art. 129 of the Labor Code, the power of the DOLE and its duly authorized hearing officers to hear and decide
any matter involving the recovery of wages and other monetary claims and benefits was qualified by the proviso that
the complaint not include a claim for reinstatement, or that the aggregate money claims not exceed PhP 5,000. RA
7730, or an Act Further Strengthening the Visitorial and Enforcement Powers of the Secretary of Labor, did away with
the PhP 5,000 limitation, allowing the DOLE Secretary to exercise its visitorial and enforcement power for claims
beyond PhP 5,000. The only qualification to this expanded power of the DOLE was only that there still be an existing
employer-employee relationship.

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

The first portion of the question must be answered in the affirmative.

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

This conclusion must be revisited.

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

The DOLE, in determining the existence of an employer-employee relationship, has a ready set of guidelines to
follow, the same guide the courts themselves use. The elements to determine the existence of an employment
relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of
dismissal; (4) the employers power to control the employees conduct. 9 The use of this test is not solely limited to the
37

NLRC. The DOLE Secretary, or his or her representatives, can utilize the same test, even in the course of inspection,
making use of the same evidence that would have been presented before the NLRC.

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

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

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

This is not to say that the determination by the DOLE is beyond question or review.1avvphi1 Suffice it to say, there
are judicial remedies such as a petition for certiorari under Rule 65 that may be availed of, should a party wish to
dispute the findings of the DOLE.

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

Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to make a
determination as to the existence of an employer-employee relationship in the exercise of its visitorial and
enforcement power, subject to judicial review, not review by the NLRC.

There is a view that despite Art. 128(b) of the Labor Code, as amended by RA 7730, there is still a threshold amount
set by Arts. 129 and 217 of the Labor Code when money claims are involved, i.e., that if it is for PhP 5,000 and
below, the jurisdiction is with the regional director of the DOLE, under Art. 129, and if the amount involved exceeds
PhP 5,000, the jurisdiction is with the labor arbiter, under Art. 217. The view states that despite the wording of Art.
128(b), this would only apply in the course of regular inspections undertaken by the DOLE, as differentiated from
cases under Arts. 129 and 217, which originate from complaints. There are several cases, however, where the Court
has ruled that Art. 128(b) has been amended to expand the powers of the DOLE Secretary and his duly authorized
representatives by RA 7730. In these cases, the Court resolved that the DOLE had the jurisdiction, despite the
amount of the money claims involved. Furthermore, in these cases, the inspection held by the DOLE regional director
was prompted specifically by a complaint. Therefore, the initiation of a case through a complaint does not divest the
DOLE Secretary or his duly authorized representative of jurisdiction under Art. 128(b).

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

In the present case, the finding of the DOLE Regional Director that there was an employer-employee relationship has
been subjected to review by this Court, with the finding being that there was no employer-employee relationship
38

between petitioner and private respondent, based on the evidence presented. Private respondent presented self-
serving allegations as well as self-defeating evidence.10 The findings of the Regional Director were not based on
substantial evidence, and private respondent failed to prove the existence of an employer-employee relationship. The
DOLE had no jurisdiction over the case, as there was no employer-employee relationship present. Thus, the
dismissal of the complaint against petitioner is proper.

WHEREFORE, the Decision of this Court in G.R. No. 179652 is hereby AFFIRMED, with the MODIFICATION that in
the exercise of the DOLEs visitorial and enforcement power, the Labor Secretary or the latters authorized
representative shall have the power to determine the existence of an employer-employee relationship, to the
exclusion of the NLRC.

SO ORDERED.
39

G.R. No. 124382 August 16, 1999

PASTOR DIONISIO V. AUSTRIA, petitioner,


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

KAPUNAN, J.:

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

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

The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight (28) years from
1963 to 1991.2 He began his work with the SDA on 15 July 1963 as a literature evangelist, selling literature of the
SDA over the island of Negros. From then on, petitioner worked his way up the ladder and got promoted several
times. In January, 1968, petitioner became the Assistant Publishing Director in the West Visayan Mission of the SDA.
In July, 1972, he was elevated to the position of Pastor in the West Visayan Mission covering the island of Panay,
and the provinces of Romblon and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989, petitioner
was promoted as District Pastor of the Negros Mission of the SDA and was assigned at Sagay, Balintawak and
Toboso, Negros Occidental, with twelve (12) churches under his jurisdiction. In January, 1991, petitioner was
transferred to Bacolod City. He held the position of district pastor until his services were terminated on 31 October
1991.

On various occasions from August up to October, 1991, petitioner received several 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,
40

private respondents Pastors Yonilo Leopoldo and Claudio Montao were around and they pacified both Pastor Buhat
and petitioner.

On 17 October 1991, petitioner received a letter8 inviting him and his wife to attend the Executive Committee meeting
at the Negros Mission Conference Room on 21 October 1991, at nine in the morning. To be discussed in the meeting
were the non-remittance of church collection and the events that transpired on 16 October 1991. A fact-finding
committee was created to investigate petitioner. For two (2) days, from October 21 and 22, the fact-finding committee
conducted an investigation of petitioner. Sensing that the result of the investigation might be one-sided, petitioner
immediately wrote Pastor Rueben Moralde, president of the SDA and chairman of the fact-finding committee,
requesting that certain members of the fact-finding committee be excluded in the investigation and resolution of the
case.9 Out of the six (6) members requested to inhibit themselves from the investigation and decision-making, only
two (2) were actually excluded, namely: Pastor Buhat and Pastor Rodrigo. Subsequently, on 29 October 1991,
petitioner received a letter of dismissal10 citing misappropriation of denominational funds, willful breach of trust,
serious misconduct, gross and habitual neglect of duties, and commission of an offense against the person of
employer's duly authorized representative, as grounds for the termination of his services.

Reacting against the adverse decision of the SDA, petitioner filed a complaint 11 on 14 November 1991, before the
Labor Arbiter for illegal dismissal against the SDA and its officers and prayed for reinstatement with backwages and
benefits, moral and exemplary damages and other labor law benefits.

On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of petitioner, the dispositive portion
of which reads thus:

WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION MISSION


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

Respondent CPUMCSDA is further ordered to pay complainant the following:

A. 13th month pay P 21,060.00

B. Allowance P 4,770.83

C. Service Incentive

Leave Pay P 3,461.85

D. Moral Damages P 50,000.00

E. Exemplary

Damages P 25,000.00

F. Attorney's Fee P 22,012.27

SO ORDERED.12

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

WHEREFORE, the Decision appealed from is hereby VACATED and a new one ENTERED dismissing this
case for want of merit.
41

SO ORDERED.13

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

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

SO ORDERED.14

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

The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the argument posed by
private respondents and, accordingly, dismissed the complaint of petitioner. The dispositive portion of the NLRC
resolution dated 23 January 1996, subject of the present petition, is as follows:

WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby granted.
Accordingly, this case is hereby DISMISSED for lack of jurisdiction.

SO ORDERED.15

Hence, the recourse to this Court by petitioner.

After the filing of the petition, the Court ordered the Office of the Solicitor General (the "OSG") to file its comment on
behalf of public respondent NLRC. Interestingly, the OSG filed a manifestation and motion in lieu of comment 16setting
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
42

their respective exclusive jurisdictions.18 The demarcation line calls on the entities to "render therefore unto Ceasar
the things that are Ceasar's and unto God the things that are God's." 19 While the state is prohibited from interfering in
purely ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters. 20

The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from taking
cognizance of the same. An ecclesiastical affair is "one that concerns doctrine, creed, or form of worship of the
church, or the adoption and enforcement within a religious association of needful laws and regulations for the
government of the membership, and the power of excluding from such associations those deemed unworthy of
membership.21 Based on this definition, an ecclesiastical affair involves the relationship between the church and its
members and relate to matters of faith, religious doctrines, worship and governance of the congregation. To be
concrete, examples of this so-called ecclesiastical affairs to which the State cannot meddle are proceedings for
excommunication, ordinations of religious ministers, administration of sacraments and other activities with attached
religious significance. The case at bar does not even remotely concern any of the abovecited examples. While the
matter at hand relates to the church and its religious minister it does not ipso facto give the case a religious
significance. Simply stated, what is involved here is the relationship of the church as an employer and the minister as
an employee. It is purely secular and has no relation whatsoever with the practice of faith, worship or doctrines of the
church. In this case, petitioner was not ex-communicated or expelled from the membership of the SDA but was
terminated from employment. Indeed, the matter of terminating an employee, which is purely secular in nature, is
different from the ecclesiastical act of expelling a member from the religious congregation.

As pointed out by the OSG in its memorandum, the grounds invoked for petitioner's dismissal, namely:
misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of
duties and commission of an offense against the person of his employer's duly authorized representative, are all
based on Article 282 of the Labor Code which enumerates the just causes for termination of employment. 22 By this
alone, it is palpable that the reason for petitioner's dismissal from the service is not religious in nature. Coupled with
this is the act of the SDA in furnishing NLRC with a copy of petitioner's letter of termination. As aptly stated by the
OSG, this again is an eloquent admission by private respondents that NLRC has jurisdiction over the case. Aside
from these, SDA admitted in a 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.
43

The jurisdictional question now settled, we shall now proceed to determine whether the dismissal of petitioner was
valid.

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

We turn now to the crux of the matter. In termination cases, the settled rule is that the burden of proving that the
termination was for a valid or authorized cause rests on the employer.28 Thus, private respondents must not merely
rely on the weaknesses of petitioner's evidence but must stand on the merits of their own defense.

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

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

The first notice, which may be considered as the proper charge, serves to apprise the employee of the particular acts
or omissions for which his dismissal is sought.31 The second notice on the other hand seeks to inform the employee
of the employer's decision to dismiss him.32 This decision, however, must come only after the employee is given a
reasonable period from receipt of the first notice within which to answer the charge and ample opportunity to be heard
and defend himself with the assistance of a representative, if he so desires.33 This is in consonance with the express
provision of the law on the protection to labor and the broader dictates of procedural due process. 34 Non-compliance
therewith is fatal because these requirements are conditions sine 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.
44

We cannot sustain the validity of dismissal based on the ground of breach of trust. Private respondents allege that
they have lost their confidence in petitioner for his failure, despite demands, to remit the tithes and offerings
amounting to P15,078.10, which were collected in his district. A careful study of the voluminous records of the case
reveals that there is simply no basis for the alleged loss of confidence and breach of trust. Settled is the rule that
under Article 282 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally,
knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly,
heedlessly or inadvertently.38 It must rest on substantial grounds and not on the employer's arbitrariness, whims,
caprices or suspicion; otherwise the employee would eternally remain at the mercy of the employer. 39 It should be
genuine and not simulated.40 This ground has never been intended to afford an occasion for abuse, because of its
subjective nature. The records show that there were only six (6) instances when petitioner personally collected and
received from the church treasurers the tithes, collections, and donations for the church. 41The stenographic notes on
the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a witness for private respondents, show
that Pastor Austria was able to remit all his collections to the treasurer of the Negros Mission. 42

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

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

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

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

The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect of duties, does
not require an exhaustive discussion. Suffice it to say that all private respondents had were allegations but not proof.
Aside from merely citing the said ground, private respondents failed to prove culpability on the part of petitioner. In
fact, the evidence on record shows otherwise. Petitioner's rise from the ranks disclose that he was actually a hard-
worker. Private respondents' evidence,47 which consisted of petitioner's Worker's Reports, revealed how petitioner
45

travelled to different churches to attend to the faithful under his care. Indeed, he labored hard for the SDA, but, in
return, he was rewarded with a dismissal from the service for a non-existent cause.

In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated from service without
just or lawful cause. Having been illegally dismissed, petitioner is entitled to reinstatement to his former position
without loss of seniority right48 and the payment of full backwages without any deduction corresponding to the period
from his illegal dismissal up to actual reinstatement.46

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

SO ORDERED.
46

G.R. No. 144767 March 21, 2002

DILY DANY NACPIL, petitioner,


vs.
INTERNATIONAL BROADCASTING CORPORATION, respondent.

KAPUNAN, J.:

This is a petition for review on certiorari under Rule 45, assailing the Decision of the Court of Appeals dated
November 23, 1999 in CA-G.R. SP No. 527551 and the Resolution dated August 31, 2000 denying petitioner Dily
Dany Nacpil's motion for reconsideration. The Court of Appeals reversed the decisions promulgated by the Labor
Arbiter and the National Labor Relations Commission (NLRC), which consistently ruled in favor of petitioner.

Petitioner states that he was Assistant General Manager for Finance/Administration and Comptroller of private
respondent Intercontinental Broadcasting Corporation (IBC) from 1996 until April 1997. According to petitioner, when
Emiliano Templo was appointed to replace IBC President Tomas Gomez III sometime in March 1997, the former told
the Board of Directors that as soon as he assumes the IBC presidency, he would terminate the services of petitioner.
Apparently, Templo blamed petitioner, along with a certain Mr. Basilio and Mr. Gomez, for the prior mismanagement
of IBC. Upon his assumption of the IBC presidency, Templo allegedly harassed, insulted, humiliated and pressured
petitioner into resigning until the latter was forced to retire. However, Templo refused to pay him his retirement
benefits, allegedly because he had not yet secured the clearances from the Presidential Commission on Good
Government and the Commission on Audit. Furthermore, Templo allegedly refused to recognize petitioner's
employment, claiming that petitioner was not the Assistant General Manager/Comptroller of IBC but merely usurped
the powers of the Comptroller. Hence, in 1997, petitioner filed with the Labor Arbiter a complaint for illegal dismissal
and non-payment of benefits.1wphi1.nt

Instead of filing its position paper, IBC filed a motion to dismiss alleging that the Labor Arbiter had no jurisdiction over
the case. IBC contended that petitioner was a corporate officer who was duly elected by the Board of Directors of
IBC; hence, the case qualifies as an intra-corporate dispute falling within the jurisdiction of the Securities and
Exchange Commission (SEC). However, the motion was denied by the Labor Arbiter in an Order dated April 22,
1998.2

On August 21, 1998, the Labor Arbiter rendered a Decision stating that petitioner had been illegally dismissed. The
dispositive portion thereof reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the complainant and
against all the respondents, jointly and severally, ordering the latter:

1. To reinstate complainant to his former position without diminution of salary or loss of seniority
rights, and with full backwages computed from the time of his illegal dismissal on May 16, 1997 up
to the time of his actual reinstatement which is tentatively computed as of the date of this decision
on August 21, 1998 in the amount of P1,231,750.00 (i.e., P75,000.00 a month x 15.16 months =
P1,137,000.00 plus 13th month pay equivalent to 1/12 of P 1,137,000.00 = P94,750.00 or the total
amount of P 1,231,750.00). Should complainant be not reinstated within ten (10) days from receipt
of this decision, he shall be entitled to additional backwages until actually reinstated.

2. Likewise, to pay complainant the following:

a) P 2 Million as and for moral damages;

b) P500,000.00 as and for exemplary damages; plus and (sic)

c) Ten (10%) percent thereof as and for attorney's fees.

SO ORDERED.3
47

IBC appealed to the NLRC, but the same was dismissed in a Resolution dated March 2, 1999, for its failure to file the
required appeal bond in accordance with Article 223 of the Labor Code. 4 IBC then filed a motion for reconsideration
that was likewise denied in a Resolution dated April 26, 1999. 5

IBC then filed with the Court of Appeals a petition for certiorari under Rule 65, which petition was granted by the
appellate court in its Decision dated November 23, 1999. The dispositive portion of said decision states:

WHEREFORE, premises considered, the petition for Certiorari is GRANTED. The assailed decisions of the
Labor Arbiter and the NLRC are REVERSED and SET ASIDE and the complaint is DISMISSED without
prejudice.

SO ORDERED.6

Petitioner then filed a motion for reconsideration, which was denied by the appellate court in a Resolution dated
August 31, 2000.

Hence, this petition.

Petitioner Nacpil submits that:

I.

THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONER WAS APPOINTED BY


RESPONDENT'S BOARD OF DIRECTORS AS COMPTROLLER. THIS FINDING IS CONTRARY TO THE
COMMON, CONSISTENT POSITION AND ADMISSION OF BOTH PARTIES. FURTHER, RESPONDENT'S
BY-LAWS DOES NOT INCLUDE COMPTROLLER AS ONE OF ITS CORPORATE OFFICERS.

II.

THE COURT OF APPEALS WENT BEYOND THE ISSUE OF THE CASE WHEN IT SUBSTITUTED THE
NATIONAL LABOR RELATIONS COMMISSION'S DECISION TO APPLY THE APPEAL BOND
REQUIREMENT STRICTLY IN THE INSTANT CASE. THE ONLY ISSUE FOR ITS DETERMINATION IS
WHETHER NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN DOING THE SAME.7

The issue to be resolved is whether the Labor Arbiter had jurisdiction over the case for illegal dismissal and non-
payment of benefits filed by petitioner. The Court finds that the Labor Arbiter had no jurisdiction over the same.

Under Presidential Decree No. 902-A (the Revised Securities Act), the law in force when the complaint for illegal
dismissal was instituted by petitioner in 1997, the following cases fall under the exclusive of the SEC:

a) Devices or schemes employed by or any acts of the board of directors, business associates, its officers or
partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, members of associations or organizations registered with the
Commission;

b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders,
members or associates; between any or all of them and the corporation, partnership or association of which
they are stockholders, members or associates, respectively; and between such corporation, partnership or
association and the State insofar as it concerns their individual franchise or right to exist as such entity;

c) Controversies in the election or appointment of directors, trustees, officers, or managers of such


corporations, partnerships or associations;

d) Petitions of corporations, partnerships, or associations to be declared in the state of suspension of


payments in cases where the corporation, partnership or association possesses property to cover all of its
debts but foresees the impossibility of meeting them when they respectively fall due or in cases where the
48

corporation, partnership or association has no sufficient assets to cover its liabilities, but is under the
Management Committee created pursuant to this decree. (Emphasis supplied.)

The Court has consistently held that there are two elements to be considered in determining whether the SEC has
jurisdiction over the controversy, to wit: (1) the status or relationship of the parties; and (2) the nature of the question
that is the subject of their controversy.8

Petitioner argues that he is not a corporate officer of the IBC but an employee thereof since he had not been elected
nor appointed as Comptroller and Assistant Manager by the IBC's Board of Directors. He points out that he had
actually been appointed as such on January 11, 1995 by the IBC's General Manager, Ceferino Basilio. In support of
his argument, petitioner underscores the fact that the IBC's By-Laws does not even include the position of comptroller
in its roster of corporate officers.9 He therefore contends that his dismissal is a controversy falling within the
jurisdiction of the labor courts.10

Petitioner's argument is untenable. Even assuming that he was in fact appointed by the General Manager, such
appointment was subsequently approved by the Board of Directors of the IBC.11 That the position of Comptroller is
not expressly mentioned among the officers of the IBC in the By-Laws is of no moment, because the IBC's Board of
Directors is empowered under Section 25 of the Corporation Code 12 and under the corporation's By-Laws to appoint
such other officers as it may deem necessary. The By-Laws of the IBC categorically provides:

XII. OFFICERS

The officers of the corporation shall consist of a President, a Vice-President, a Secretary-Treasurer, a


General Manager, and such other officers as the Board of Directors may from time to time does fit to
provide for. Said officers shall be elected by majority vote of the Board of Directors and shall have
such powers and duties as shall hereinafter provide (Emphasis supplied).13

The Court has held that in most cases the "by-laws may and usually do provide for such other officers," 14 and that
where a corporate office is not specifically indicated in the roster of corporate offices in the by-laws of a corporation,
the board of directors may also be empowered under the by-laws to create additional officers as may be necessary.15

An "office" has been defined as a creation of the charter of a corporation, while an "officer" as a person elected by the
directors or stockholders. On the other hand, an "employee" occupies no office and is generally employed not by
action of the directors and stockholders but by the managing officer of the corporation who also determines the
compensation to be paid to such employee.16

As petitioner's appointment as comptroller required the approval and formal action of the IBC's Board of Directors to
become valid,17 it is clear therefore holds that petitioner is a corporate officer whose dismissal may be the subject of a
controversy cognizable by the SEC under Section 5(c) of P.D. 902-A which includes controversies involving both
election and appointment of corporate directors, trustees, officers, and managers. 18 Had petitioner been an ordinary
employee, such board action would not have been required.

Thus, the Court of Appeals correctly held that:

Since complainant's appointment was approved unanimously by the Board of Directors of the corporation,
he is therefore considered a corporate officer and his claim of illegal dismissal is a controversy that falls
under the jurisdiction of the SEC as contemplated by Section 5 of P.D. 902-A. The rule is that dismissal or
non-appointment of a corporate officer is clearly an intra-corporate matter and jurisdiction over the case
properly belongs to the SEC, not to the NLRC.19

As to petitioner's argument that the nature of his functions is recommendatory thereby making him a mere managerial
officer, the Court has previously held that the relationship of a person to a corporation, whether as officer or agent or
employee is not determined by the nature of the services performed, but instead by the incidents of the relationship
as they actually exist.20

It is likewise of no consequence that petitioner's complaint for illegal dismissal includes money claims, for such claims
are actually part of the perquisites of his position in, and therefore linked with his relations with, the corporation. The
inclusion of such money claims does not convert the issue into a simple labor problem. Clearly, the issues raised by
49

petitioner against the IBC are matters that come within the area of corporate affairs and management, and constitute
a corporate controversy in contemplation of the Corporation Code. 21

Petitioner further argues that the IBC failed to perfect its appeal from the Labor Arbiter's Decision for its non-payment
of the appeal bond as required under Article 223 of the Labor Code, since compliance with the requirement of posting
of a cash or surety bond in an amount equivalent to the monetary award in the judgment appealed from has been
held to be both mandatory and jurisdictional.22 Hence, the Decision of the Labor Arbiter had long become final and
executory and thus, the Court of Appeals acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in giving due course to the IBC's petition for certiorari, and in deciding the case on the merits.

The IBC's failure to post an appeal bond within the period mandated under Article 223 of the Labor Code has been
rendered immaterial by the fact that the Labor Arbiter did not have jurisdiction over the case since as stated earlier,
the same is in the nature of an intra-corporate controversy. The Court has consistently held that where there is a
finding that any decision was rendered without jurisdiction, the action shall be dismissed. Such defense can be
interposed at any time, during appeal or even after final judgment.23 It is a well-settled rule that jurisdiction is
conferred only by the Constitution or by law. It cannot be fixed by the will of the parties; it cannot be acquired through,
enlarged or diminished by, any act or omission of the parties.24

Considering the foregoing, the Court holds that no error was committed by the Court of Appeals in dismissing the
case filed before the Labor Arbiter, without prejudice to the filing of an appropriate action in the proper
court. 1wphi1.nt

It must be noted that under Section 5.2 of the Securities Regulation Code (Republic Act No. 8799) which was signed
into law by then President Joseph Ejercito Estrada on July 19, 2000, the SEC's jurisdiction over all cases enumerated
in Section 5 of P.D. 902-A has been transferred to the Regional Trial Courts.25

WHEREFORE, the petition is hereby DISMISSED and the Decision of the Court of Appeals in CA-G.R. SP No. 52755
is AFFIRMED.

SO ORDERED.