G.R. No. 107660 January 2, 1995
, plus moral
RAMON C. LOZON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Second
Division) and PHILIPPINE AIRLINES, INC., respondents.
VITUG, J.:
Petitioner Ramon C. Lozon, a certified public accountant, was a
Senior
Vice-President-Finance of Private respondent Philippine Airlines,
Inc. ("PAL"), when his services were terminated on 19 December
1990 in the aftermath of the much-publicized "two-billion-peso
PALscam." Lozon started to work for the national carrier on 23
August 1967 and, for twenty-three years, steadily climbed the
corporate ladder until he became one of its vice-presidents.1
His termination from the service was spawned by a letter sent some
time in June 1990 by a member of PAL's board of directors, then
Solicitor General Francisco Chavez, to PAL President Dante Santos.
Chavez demanded an investigation of twenty-three irregularities
allegedly committed by twenty-two high-ranking PAL officials.
Among these officials was petitioner; he had been administratively
charged by Romeo David, Senior Vice-President for Corporate
Services and Logistics Group, for his (Lozon) purported involvement
in four cases, labeled "Goldair," "Autographics," "Big Bang of 1983"
and "Middle
East."2 Pending the investigation of these cases by a
panel3 constituted by then President Corazon C. Aquino, petitioner
was placed under preventive suspension.
In the organizational meeting of the PAL board of directors on 19
October 1990 which occasion Feliciano R. Belmonte, Jr., was elected
chairman of the board while Dante G. Santos was designated
president and chief executive officer,4 the board deferred action on
the election or appointment of some senior officers of the company
who, like petitioner, had been charged with various offenses.
On 18 January 1991, the PAL board of directors issued two
resolutions relative to the investigation conducted by the presidential
investigating panel in the "Autographics" and "Goldair" cases. In
"Autographics," petitioner was charged, along with three other
officials,5 with "gross inefficiency, negligence, imprudence,
mismanagement, dereliction of duty, failure to observe and/or
implement administrative and executive policies" and with the
"concealment, or cover-up and prevention of the seasonal discovery
of the anomalous transactions" had with Autographics, Inc., resulting
in, among other things, an overpayment by PAL to Autographics in
the amount of around P12 million. Petitioner was forthwith
considered "resigned from the service . . . for loss of confidence and
for acts inimical to the interests of the company."6 A similar
conclusion was arrived at by the PAL board of directors with regard
to petitioner in the "Goldair" case where he, together with six other
PAL officials,7 were charged with like "offenses" that had caused
PAL's defraudation by Goldair, PAL's general sales agent in
Australia, of 14.6 million Australian dollars.8
Aggrieved by the action taken by the PAL board of directors,
petitioner, on 26 June 1991 filed with the National Labor Relations
Commission ("NLRC") in Manila a complaint (docketed NLRC-
NCR Case No. 00-06-03684-91) for illegal dismissal and for
reinstatement, with backwages and "fringe benefits such as Vacation
leave, Sick leave, 13th month pay, Christmas Bonus, Medical
1
Expenses, car expenses, trip pass entitlement, etc.
damages of P40 Million, exemplary damages of P10 Million and
reasonable attorney's fees."9
On 09 August 1991, 10 the PAL board of directors also held petitioner
as "resigned from the company" for loss of confidence and for acts
inimical to the interests of the company in the "Big Bang of 1983"
case for his alleged role in the irregularities that had precipitated the
write-down (write-off) of assets amounting to P553 million from the
books and financial statements of PAL. 11 In the "Middle East" case,
the PAL board of directors, on the anomalous administration of
commercial marketing arrangements in which PAL had lost an
estimated P120 million. 12
PAL defended the validity of petitioner's dismissal before the Labor
Arbiter. It questioned at the same time the jurisdiction of the NLRC,
positing the theory that since the investigating panel was constituted
by then President Aquino, said panel, along with the PAL board of
directors, became "a parallel arbitration unit" which, in legal
contemplation, should be deemed to have substituted for the NLRC.
Thus, PAL averred, petitioner's recourse should have been to appeal
his case to the Office of the President. 13 On the other hand, petitioner
questioned the authority of the panel to conduct the investigation,
asseverating that the charges leveled against him were purely
administrative in nature that could have well been ventilated under
the grievance procedure outline in PAL's Code of Discipline.
On 17 March 1992, Labor Arbiter Jose G. de Vera rendered a
decision ruling for petitioner.14 The decretal portion of the decision
read:
WHEREFORE, all the foregoing premises being considered,
judgment is hereby rendered ordering the respondent Philippine
Airlines, Inc., to reinstate the complainant to his former position with
all the rights, privileges, and benefits appertaining thereto plus
backwages, which as of March 15, 1992 already amounted to
P2,632,500.00, exclusive of fringes. Further, the respondent company
is ordered to pay complainant as follows: P5,000.00 as moral
damages; P1,000,000.00 as exemplary damages, and attorney's fees
equivalent to ten percent (10%) of all of the foregoing awards.
SO ORDERED. 15
A day after promulgating the decision, the labor arbiter issued a writ
of execution. PAL filed a motion to quash the writ petitioner
promptly opposed. After the labor arbiter had denied the motion to
quash, PAL filed a petition for injunction with the NLRC (docketed
NLRC IC Case No. 00261-92). No decision was rendered by NLRC
on this petition. 16
Meanwhile, PAL appealed the decision of the labor arbiter by filing a
memorandum on appeal, 17 assailing, once again, the jurisdiction of
the NLRC but this time on the ground that the issue pertaining to the
removal or dismissal of petitioner, a corporate officer, was within the
exclusive and original jurisdiction of the Securities and Exchange
Commission ("SEC"). Petitioner interposed a partial appeal praying
for an increase in the amount of moral and exemplary damages
awarded by the labor arbiter. 18
On 24 July 1992, the NLRC rendered a decision (in NLRC NCR
Case No. 00-06-03684-91) 19 dismissing the case on the strength of
PAL's new argument on the issue of jurisdiction. 20 Petitioner's
motion for reconsideration was denied by the NLRC.
The instant petition for certiorari filed with this Court raises these
issues: (a) Whether or not the NLRC has jurisdiction over the illegal
dismissal case, and (b) on the assumption that the SEC has that
jurisdiction, whether or not private respondent is estopped from
raising NLRC's lack of jurisdiction over the controversy.
We sustain NLRC's dismissal of the case.
Presidential Decree No. 902-A confers on the SEC original and
exclusive jurisdiction to hear and decide controversies and cases
involving —
a. Intra-corporate and partnership relations between or among the
corporation, officers and stockholders and partners, including their
elections or appointments;
b. State and corporate affairs in relation to the legal existence of
corporations, partnerships and associations or to their franchises; and
c. Investors and corporate affairs, particularly in respect of devices
and schemes, such as fraudulent practices, employed by directors,
officers, business associates, and/or other stockholders, partners, or
members of registered firms; as well as
d. Petitions for suspension of payments filed by corporations,
partnerships or associations possessing sufficient property to cover all
their debts but which foresee the impossibility of meeting them when
they respectively fall due, or possessing insufficient assets to cover
their liabilities and said entities are upon petition or motu propio,
placed under the management of a Rehabilitation Receiver or
Management Committee.
Specifically, in intra-corporate matters concerning the election or
appointment of officers of a corporation, the decree provides:
Sec. 5. In addition to the regulatory and adjudicative functions of the
Securities and Exchange Commission overcorporations, partnerships
and other forms of association registered with it as expressly granted
under existing laws and decrees, it shall have original and exclusive
jurisdiction to hear and decide cases involving:
xxx xxx xxx
(c) Controversies in the election or appointments of directors,
trustees, officers or managers of such corporations, partnerships or
association.
Petitioner himself admits that vice presidents are senior members of
management, 21 whose designations are no longer than just by means
of ordinary promotions. In his own case, petitioner has been elected
to the position of Senior Vice-President — Finance Group by PAL's
board of directors at its organizational meeting held on 20 October
1989 pursuant to the By-laws, 22 under which, he would serve for a
term of one year and until his successor shall have been elected and
qualified. 23 Petitioner, for reasons already mentioned, did not get to
be re-elected thereafter. 24
In Fortune Cement Corporation v. NLRC, 25 the Court has quoted
with approval the Solicitor General's contention that "a corporate
officer's dismissal is always a corporate act and/or intra-corporate
controversy and that nature is not altered by the reason or wisdom
which the Board of Directors may have in taking such action." Not
2
the least insignificant in the case at bench is that petitioner's dismissal
is intertwined with still another intra-corporate affair, earlier so
ascribed as the "two-billion-peso PALscam," that inevitably places
the case under the specialized competence of the SEC and well
beyond the ambit of a labor arbiter's normal jurisdiction under the
general provisions of Article 217 of the Labor Code. 26
Petitioner contends that the jurisdiction of the SEC excludes its
cognizance over claims for vacation and sick leaves, 13th month pay,
Christmas bonus, medical expenses, car expenses, and other benefits,
as well as for moral damages and attorney's fees. 27 Dy
v. NLRC28 categorically states that the question of remuneration being
asserted by an officer of a corporation is "not a simple labor problem
but a matter that comes within the area of corporate affairs and
management, and is in fact, a corporate controversy in contemplation
of the Corporation Code." With regard to the matter of damages,
in Andaya v.
Abadia 29 where, in a complaint filed before the Regional Trial Court,
the president and general manager of the Armed Forces and Police
Savings and Loan Association ("AFPSLAI") questioned his ouster
from the stewardship of the association, this Court, in dismissing the
petition assailing the order of the trial court which ruled that SEC, not
the regular courts, had jurisdiction over the case, has said:
The allegations against herein respondents in the amended complaint
unquestionably reveal intra-corporate controversies cleverly conceals,
although unsuccessfully, by use of civil law terms and phrases. The
amended complaint impleads herein respondents who, in their
capacity as directors of AFPSLAI, allegedly convened an illegal
meeting and voted for the reorganization of management resulting in
petitioner's ouster as corporate officer. While it may be said that the
same corporate acts also give rise to civil liability for damages, it
does not follow that the case is necessarily taken out of the
jurisdiction of the SEC as it may award damages which can be
considered consequential in the exercise of its adjudicative
powers. Besides, incidental issues that properly fall within the
authority of a tribunal may also be considered by it to avoid
multiplicity of actions. Consequently, in intra-corporate matters such
as those affecting the corporation, its directors, trustees, officers,
shareholders, the issue of consequential damages may just as well be
resolved and adjudicated by the SEC. (Emphasis supplied.)
We here reiterate the above holdings for, indeed, controversies within
the purview of Section 5 of P.D. No. 902-A must not be so
constricted as to deny to the SEC the sound exercise of its expertise
and competence in resolving all closely related aspects of such
corporate disputes.
Petitioner maintains that PAL is estopped, nevertheless, from
questioning the jurisdiction of the NLRC considering that PAL did
not hold the dispute to be intra-corporate until after the case had
already been brought on appeal to the NLRC.
In the first place, there would not be much basis to indicate that PAL
was "effectively barred by estoppel." 30 As early as the initial stages
of the controversy PAL had already raised the issue of
jurisdiction albeit mistakenly at first on the ground that petitioner's
recourse was an appeal to the Office of the President. The error could
not alter the fact that PAL did question even then the jurisdiction of
both the labor arbiter and the NLRC.
It has long been the established rule, moreover, that jurisdiction over
a subject matter is conferred by law, 31 and the question of lack of
jurisdiction may be raised at anytime even on appeal. 32 In the recent
case of La Naval Drug Corporation vs. Court of Appeals, G.R. No.
103200, 31 August 1994, this Court said:

Lack of jurisdiction over the subject matter of the suit is yet another
matter. Whenever it appears that the court has no jurisdiction over the
subject matter, the action shall be dismissed (Section 2, Rule 9, Rules
of Court). This defense may be interpose at any time, during appeal
(Roxas vs. Rafferty, 37 Phil. 957) or even after final judgment
(Cruzcosa vs. Judge Concepcion, et al., 101 Phil. 146). Such is
understandable, as this kind of jurisdiction is conferred by law and
not within the courts, let alone the parties, to themselves determine or
conveniently set aside. In People vs. Casiano (111 Phil. 73, 93-94),
this Court, on the issue of estoppel, held:

The operation of the principle of estoppel on the question of

jurisdiction seemingly depends upon whether the lower court actually
had jurisdiction or not. If it had no jurisdiction, but the case was tried
and decided upon the theory that it had jurisdiction, the parties are
not barred, on appeal, from assailing such jurisdiction, for the same
"must exist as a matter of law, and may not be conferred by consent
of the parties or by estoppel" (5 C.J.S., 861-863). However, if the
lower court had jurisdiction, and the case was heard and decided
upon a given theory, such, for instance, as that the court had no
jurisdiction, the party who induced it to adopt such theory will not be
permitted, on appeal, to assume a inconsistent position — that the
lower court had jurisdiction. Here, the principle of estoppel applies.
The rule that jurisdiction is conferred by law, and does not depend
upon the will of the parties, has no bearing thereon."

Petitioner points to "PAL's scandalous duplicity" in questioning the

jurisdiction of the NLRC in this particular controversy while
upholding it (NLRC's jurisdiction) in "Robin Dui v. Philippine
Airlines" (Case No. 00-4-20267) pending before the Commission.
We need not delve into whether or not PAL's conduct does indeed
smack of opportunities; suffice it to say that Robin Dui is entirely an
independent and separate case and, more than that, it is not before us
in this instance.

WHEREFORE, the herein petition for certiorari is DISMISSED, and

the decision appealed from is AFFIRMED, without prejudice to
petitioner's seeking, if circumstances permit, a recourse in the proper
forum. No costs.

SO ORDERED.

G.R. No. 144767 March 21, 2002

3
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.1âwphi1.nêt
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
4
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
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 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
5
IBC's Board of Directors is empowered under Section 25 of the
Corporation Code12 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 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. 1âwphi1.nêt

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.

6
G.R. No. 121143 January 21, 1997
PURIFICACION G. TABANG, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
PAMANA GOLDEN CARE MEDICAL CENTER
FOUNDATION, INC., respondents.
REGALADO, J.:
This is a petition for certiorari which seeks to annul the resolution of
the National Labor Relations Commission (NLRC), dated June 26,
1995, affirming in toto the order of the labor arbiter, dated April 26,
1994, which dismissed petitioner's complaint for illegal dismissal
with money claims for lack of jurisdiction.
The records show that petitioner Purificacion Tabang was a founding
member, a member of the Board of Trustees, and the corporate
secretary of private respondent Pamana Golden Care Medical Center
Foundation, Inc., a non-stock corporation engaged in extending
medical and surgical services.
On October 30, 1990, the Board of Trustees issued a memorandum
appointing petitioner as Medical Director and Hospital Administrator
of private respondent's Pamana Golden Care Medical Center in
Calamba, Laguna.
Although the memorandum was silent as to the amount of
remuneration for the position, petitioner claims that she received a
monthly retainer fee of five thousand pesos (P5,000.00) from private
respondent, but the payment thereof was allegedly stopped in
November, 1991.
As medical director and hospital administrator, petitioner was tasked
to run the affairs of the aforesaid medical center and perform all acts
of administration relative to its daily operations.
On May 1, 1993, petitioner was allegedly informed personally by Dr.
Ernesto Naval that in a special meeting held on April 30, 1993, the
Board of Trustees passed a resolution relieving her of her position as
Medical Director and Hospital Administrator, and appointing the
latter and Dr. Benjamin Donasco as acting Medical Director and
acting Hospital Administrator, respectively. Petitioner averred that
she thereafter received a copy of said board resolution.
On June 6, 1993, petitioner filled a complaint for illegal dismissal
and non-payment of wages, allowances and 13th month pay before
the labor arbiter.
Respondent corporation moved for the dismissal of the complaint on
the ground of lack of jurisdiction over the subject matter. It argued
that petitioner's position as Medical Director and Hospital
Administrator was interlinked with her position as member of the
Board of Trustees, hence, her dismissal is an intra-corporate
controversy which falls within the exclusive jurisdiction of the
Securities and Exchange Commission (SEC).
Petitioner opposed the motion to dismiss, contending that her position
as Medical Director and Hospital Administrator was separate and
distinct from her position as member of the Board of Trustees. She
7
claimed that there is no intra-corporate controversy involved since
she filed the complaint in her capacity as Medical Director and
Hospital Administrator, or as an employee of private respondent.
On April 26, 1994, the labor arbiter issued an order dismissing the
complaint for lack of jurisdiction. He ruled that the case falls within
the jurisdiction of the SEC, pursuant to Section 5 of Presidential
Decree No.
902-A. 1
Petitioner's motion for reconsideration was treated as an appeal by
the labor arbiter who consequently ordered the elevation of the entire
records of the case to public respondent NLRC for appellate review. 2
On appeal, respondent NLRC affirmed the dismissal of the case on
the additional ground that "the position of a Medical Director and
Hospital Administrator is akin to that of an executive position in a
corporate ladder structure." hence, petitioner's removal from the said
position was an intra-corporate controversy within the original and
exclusive jurisdiction of the SEC. 3
Aggrieved by the decision, petitioner filed the instant petition which
we find, however, to be without merit.
We agree with the findings of the NLRC that it is the SEC which has
jurisdiction over the case at bar. The charges against herein private
respondent partake of the nature of an intra-corporate controversy.
Similarly, the determination of the rights of petitioner and the
concomitant liability of private respondent arising from her ouster as
a medical director and/or hospital administrator, which are corporate
offices, is an intra-corporate controversy subject to the jurisdiction of
the SEC.
Contrary to the contention of petitioner, a medical director and a
hospital administrator are considered as corporate officers under the
by-laws of respondent corporation. Section 2(i), Article I thereof
states that one of the powers of the Board of Trustees is "(t)o appoint
a Medical Director, Comptroller/Administrator, Chiefs of Services
and such other officers as it may deem necessary and prescribe their
powers and duties."4
The president, vice-president, secretary and treasurer are commonly
regarded as the principal or executive officers of a corporation, and
modern corporation statutes usually designate them as the officers of
the corporation. 5However, other offices are sometimes created by the
charter or by-laws of a corporation, or the board of directors may be
empowered under the by-laws of a corporation to create additional
offices as may be necessary. 6 It has been held that an "office'' is
created by the charter of the corporation and the officer is elected by
the directors or stockholders. 7 On the other hand, an "employee"
usually occupies no office and generally is employed not by action of
the directors or stockholders but by the managing officer of the
corporation who also determines the compensation to be paid to such
employee. 8
In the case at bar, considering that herein petitioner, unlike an
ordinary employee, was appointed by respondent corporation's Board
of Trustees in its memorandum of October 30, 1990, 9 she is deemed
an officer of the corporation. Perforce, Section 5(c) of Presidential
Decree No. 902-A, which provides that the SEC exercises exclusive
jurisdiction over controversies in the election appointment of
directors, trustees, officers or managers of corporations, partnerships
or associations, applies in the present dispute. Accordingly,
jurisdiction over the same is vested in the SEC, and not in the Labor WHEREFORE, the questioned resolution of the NLRC is hereby
Arbiter or the NLRC. AFFIRMED, without prejudice to petitioner's taking recourse to and
seeking relief through the appropriate remedy in the proper forum.
Moreover, the allegation of petitioner that her being a member of the
Board of Trustees was not one of the considerations for her SO ORDERED.
appointment is belied by the tenor of the memorandum itself. It
states: "We hope that you will uphold and promote the mission of our
foundation," 10 and this cannot be construed other than in reference to
her position or capacity as a corporate trustee.

A corporate officer's dismissal is always a corporate act, or an intra-

corporate controversy, and the nature is not altered by the reason or
wisdom with which the Board of Directors may have in taking such
action. 11 Also, an intra-corporate controversy is one which arises
between a stockholder and the corporation. There is no distinction,
qualification, nor any exemption whatsoever. The provision is broad
and covers all kinds of controversies between stockholders and
corporations. 12

With regard to the amount of P5,000,00 formerly received by herein

petitioner every month, the same cannot be considered as
compensation for her services rendered as Medical Director and
Hospital Administrator. The vouchers 13 submitted by petitioner show
that the said amount was paid to her by PAMANA, Inc., a stock
corporation which is separate and distinct from herein private
respondent. Although the payments were considered advances to
Pamana Golden Care, Calamba branch, there is no evidence to show
that the Pamana Golden Care stated in the vouchers refers to herein
respondent Pamana Golden Care Medical Center Foundation, Inc.

Pamana Golden Care is a division of Pamana, Inc., while respondent

Pamana Golden Care Medical Center Foundation, Inc. is a non-stock,
non-profit corporation. It is stated in the memorandum of petitioner
that Pamana, Inc. is a stock and profit corporation selling pre-need
plan for education, pension and health care. The health care plan is
called Pamana Golden Care Plan and the holders are called Pamana
Golden Care Card Holders or, simply, Pamana Members. 14

It is an admitted fact that herein petitioner is a retained physician of

Pamana, Inc., whose patients are holders of the Pamana Golden Care
Card. In fact, in her complaint 15 filed before the Regional Trial Court
of Calamba, herein petitioner is asking among others, for professional
fees and/or retainer fees earned for her treatment of Pamana Golden
Care card holders. 16 Thus, at most, said vouchers can only be
considered as proof of payment of retainer fees made by Pamana, Inc.
to herein petitioner as a retained physician of Pamana Golden Care.

Moreover, even assuming that the monthly payment of P5,000.00

was a valid claim against respondent corporation, this would not
operate to effectively remove this case from the jurisdiction of the
SEC. In the case of Cagayan de Oro Coliseum, Inc. vs. Office of the
Minister of Labor and Employment, etc., et al., 17 we ruled that
"(a)lthough the reliefs sought by Chavez appear to fall under the
jurisdiction of the labor arbiter as they are claims for unpaid salaries
and other remunerations for services rendered, a close scrutiny
thereof shows that said claims are actually part of the perquisites of
his position in, and therefore interlinked with, his relations with the
corporation. In Dy, et al.,vs. NLRC, et al., the Court said: "(t)he
question of remuneration involving as it does, a person who is not a
mere employee but a stockholder and officer, an integral part, it
might be said, of the corporation, is not a simple labor problem but a
matter that comes within the area of corporate affairs and
management and is in fact a corporate controversy in contemplation
of the Corporation Code."

8
G.R. No. 141093 February 20, 2001
PRUDENTIAL BANK and TRUST COMPANY, petitioner,
vs.
CLARITA T. REYES, respondent.
GONZAGA-REYES, J.:
Before the Court is a petition for review on certiorari of the
Decision,1 dated October 15, 1999 of the Court of Appeals in C.A.-
G.R. SP No. 30607 and of its Resolution, dated December 6, 1999
denying petitioner's motion for reconsideration of said decision. The
Court of Appeals reversed and set aside the resolution 2 of the
National Labor Relations Commission (NLRC) in NLRC NCR CA
No.009364-95, reversing and setting aside the labor arbiter's decision
and dismissing for lack of merit private respondent's complaint.3
The case stems from NLRC NCR Case No.00-06-03462-92, which is
a complaint for illegal suspension and illegal dismissal with prayer
for moral and exemplary damages, gratuity, fringe benefits and
attorney's fees filed by Clarita Tan Reyes against Prudential Bank
and Trust Company (the Bank) before the labor arbiter. Prior to her
dismissal, private respondent Reyes held the position of Assistant
Vice President in the foreign department of the Bank, tasked with the
duties, among others, to collect checks drawn against overseas banks
payable in foreign currency and to ensure the collection of foreign
bills or checks purchased, including the signing of transmittal letters
covering the same.
After proceedings duly undertaken by the parties, judgment was
rendered by labor Arbiter Cornelio L. Linsangan, the dispositive
portion of which reads:
"WHEREFORE, finding the dismissal of complainant to be
without factual and legal basis, judgment is hereby
rendered ordering the respondent bank to pay her back
wages for three (3) years in the amount of P540,000.00
(P15,000.00 x 36 mos.). In lieu of reinstatement, the
respondent is also ordered to pay complainant separation
pay equivalent to one month salary for every year of
service, in the amount of P420,000.00 (P15,000 x 28 mos.).
In addition, the respondent should. also pay complainant
profit sharing and unpaid fringe benefits. Attorney's fees
equivalent to ten (10%) percent of the total award should
likewise be paid by respondent.
SO ORDERED."4
Not satisfied, the Bank appealed to the NLRC which, as mentioned at
the outset, reversed the Labor Arbiter's decision in its Resolution
dated 24 March 1997. Private respondent sought reconsideration
which, however, was denied by the NLRC in its Resolution of 28
July 1998. Aggrieved, private respondent commenced on October 28,
1998, a petition for certiorari before the Supreme Court. 5 The subject
petition was referred to the Court of Appeals for appropriate action
and disposition per resolution of this Court dated November 25,
1998, in accordance with the ruling in St. Marlin Funeral Homes vs.
NLRC.6
In its assailed decision, the Court of Appeals adopted the following
antecedent facts leading to Reyes's dismissal as summarized by the
NLRC:
9
"The auditors of the Bank discovered that two checks,
No.011728-7232-146, in the amount of US$109,650.00,
and No. 011730-7232-146, in the amount of
US$115,000.00, received by the Bank on April 6, 1989,
drawn ,by the Sanford Trading against Hongkong and
Shanghai Banking Corporation, Jurong Branch, Singapore,
in favor of Filipinas Tyrom, were not sent out for collection
to Hongkong Shanghai Banking Corporation on the alleged
order of the complainant until the said checks became stale.
The Bank created a committee to investigate the findings of
the auditors involving the two checks which were not
collected and became stale.
On March 8, 1991, the president of the Bank issued a
memorandum to the complainant informing her of the
findings of the auditors and asked her to give her side. In
reply, complainant requested for an extension of one week
to submit her explanation. In a "subsequent letter, dated
March 14, 1991, to the president, complainant stated that in
view of the refusal of the Bank that she be furnished copies
of the pertinent documents she is requesting and the refusal
to grant her a reasonable period to prepare her answer, she
was constrained to make a general denial of any
misfeasance or malfeasance on her part and asked that a
formal investigation be made.
As the complainant failed to attend and participate in the
formal investigation conducted by the Committee on May
24, 1991, despite due notice, the Committee proceeded
with its hearings and heard the testimonies of several
witnesses.
The Committee's findings were:
'a) The two (2) HSBC checks were received by the Foreign
Department on 6 April 1989. On the same day, complainant
authorized the crediting of the account of Filipinas Tyrom in the
amount of P4,780,102.70 corresponding to the face value of the
checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the following
day, a transmittal letter was prepared by Ms. Cecilia Joven, a
remittance clerk then assigned in the Foreign Department, for the
purpose of sending out the two (2) HSBC checks for collection. She
then requested complainant to sign the said transmittal letters
(Exhibits 1, 7 and 25; TSN, 11 March 1993, pp. 42-52), as it is
complainant who gives her instructions directly concerning the
transmittal of foreign bills purchased. All other transmittal letters are
in fact signed by complainant.
b) After Ms. Joven delivered the transmittal letters and the checks to
the Accounting Section of the Foreign Department, complainant
instructed her to withdraw the same for the purpose of changing the
addressee thereon from American Express Bank to Bank of Hawaii
(ibid.) under a special collection scheme (Exhibits 4 and 5 to 5-B).
c) After complying with complainant's instruction, Ms. Joven then
returned to complainant for the latter to sign the new transmittal
letters. However, complainant told Ms. Joven to just hold on to the
letters and checks and await further instructions (ibid.). Thus, the new
transmittal letters remained unsigned. (See Exhibits 5 to 5-B).
d) In June 1989, Ms. Joven was transferred to another department.
Hence, her duties, responsibilities and functions, including the
responsibility over the two (2) HSBC checks, were turned over to
another remittance clerk, Ms. Analisa Castillo (Exhibit 14; TSN, 4
June 1993, pp. 27-29).
e) When asked by Ms. Castillo about the two (2) HSBC checks, Ms.
Joven relayed to the latter complainant's instruction (Exhibit 14;
TSN, 4 June 1993, p. 42).
f) About fifteen (15) months after the HSBC checks were received by
the Bank, the said checks were discovered in the course of an audit
conducted by the Bank's auditors. Atty. Pablo Magno, the Bank's
legal counsel, advised complainant to send the checks for collection
despite the lapse of fifteen (15) months.
g) Complainant, however, deliberately withheld Atty. Magno's advice
from her superior, the Senior Vice-President, Mr. Renato Santos and
falsely informed the latter that Atty . Magno advised that a demand
letter be sent instead, thereby further delaying the collection of the
HSBC checks.
h) On 10 July 1990, the HSBC checks were finally sent for
collection, but were returned on 16 July 1990 for the reason 'account
closed' (Exhibits 2-A and 3-A).'
After a review of the Committee's findings, the Board of Directors of
the Bank resolved not to re-elect complainant any longer to the
position of assistant president pursuant to the Bank's By-laws.
On July 19, 1991, complainant was informed of her termination of
employment from the Bank by Senior Vice President Benedicto L.
Santos, in a letter the text of which is quoted in full:
'Dear Mrs. Reyes:
After a thorough investigation and appreciation of the charges against
you as contained in the Memorandum of the President dated March 8,
1991, the Fact Finding Committee which was created to investigate
the commission and/or omission of the acts alluded therein, has found
the following:
1. You have deliberately held the clearing of Checks Nos. 11728 and
11730 of Hongkong and Shanghai Banking Corporation in the total
amount of US$224,650.00 by giving instructions to the collection
clerk not to send the checks for collection. In view thereof, when the
said checks were finally sent to clearing after the lapse of 15 months
from receipt of said checks, they were returned for the reason
'Account closed.' To date, the value of said checks have not been paid
by Filipinas Tyrom, which as payee of the checks, had been credited
with their peso equivalent;
2. You tried to influence the decision of Atty. Pablo P. Magno, Bank
legal counsel, by asking him to do something allegedly upon
instructions of a Senior Vice President of the Bank or else lose his
job when in truth and in fact no such instructions was given; and
3. You deliberately withheld from Mr. Santos, Senior Vice President,
the advice given by the legal counsel of the Bank which Mr. Santos
had asked you to seek. As a matter of fact, you even relayed a false
advice which delayed further the sending of the two checks for
collection. Likewise, you refused to heed the advice of the Bank's
legal counsel to send the checks for collection.
10
These findings have given rise to the Bank's loss of trust and
confidence in you, the same being acts of serious misconduct in the
performance of your duties resulting in monetary loss to the Bank. In
view thereof, the Board has resolved not to re-elect you to the
position of Assistant Vice President of the Bank. Accordingly, your
services are terminated effective immediately. In relation thereto,
your monetary and retirement benefits are forfeited except those that
have vested in you.'
In her position paper, complainant alleged that the real reason for her
dismissal was her filing of the criminal cases against the bank
president, the vice president and the auditors of the Bank, such filing
not being a valid ground for her dismissal. Furthermore, she alleged
that it would be self-serving for the respondent to state that she was
found guilty of gross misconduct in deliberately withholding the
clearing of the two dollar checks. She further alleged that she was not
afforded due process as she was not given the chance to refute the
charges mentioned in the letter of dismissal. Hence, she was illegally
dismissed.
On the other hand, respondent argues that there were substantial
bases for the bank to lose its trust and confidence on the complainant
and, accordingly, had just cause for terminating her services.
Moreover, for filing the clearly unfounded suit against the
respondent's officers, complainant is liable to pay moral and
exemplary damages and attorney's fees."7
The Court of Appeals found that the NLRC committed grave abuse
of discretion in ruling that the dismissal of Reyes is valid. In effect,
the Court of Appeals reinstated the judgment of the labor arbiter with
modification as follows:
"WHEREFORE, in the light of the foregoing, the decision appealed
from is hereby REVERSED and SET ASIDE. In lieu thereof,
judgment is hereby rendered ordering respondent Bank as follows:
1. To pay petitioner full backwages and other benefits from July 19,
1991 up to the finality of this judgment;
2. To pay petitioner separation pay equivalent to one (1) month salary
for every year of service in lieu of reinstatement; and
3. To pay attorney's fee equivalent to ten (10%) percent of the total
award.
SO ORDERED."8
Hence, the Bank's recourse to this Court contending in its
memorandum that:
"IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997
AND THE RESOLUTION DATED 28 JULY 1998 OF THE NLRC
AND REINSTATING WITH MODIFICATION THE DECISION
DATED 20 JULY 1995 OF LABOR ARBITER CORNELIO L.
LINSANGAN, THE HONORABLE COURT OF APPEALS
SERIOUSLY ERRED, IN VIEW OF THE FOLLOWING:
I.
IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND
NOT THE NLRC WHICH HAS ORIGINAL AND EXCLUSIVE
JURISDICTION OVER CASES INVOLVING THE REMOVAL
FROM OFFICE OF CORPORATE OFFICERS.
II.
EVEN ASSUMING ARGUENDO THAT THE NLRC HAS
JURISDICTION, THERE WAS SUBSTANTIAL EVIDENCE OF
RESPONDENT'S MISCONDUCT JUSTIFYING THE BANK'S
LOSS OF TRUST AND CONFIDENCE ON (sic) HER.
III.
EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS
ENTITLED TO BACKWAGES, THE HONORABLE COURT OF
APPEALS ERRED IN AWARDING UNLIMITED AND
UNQUALIFIED BACKWAGES THEREBY GOING FAR
BEYOND THE LABOR ARBITER'S DECISION LIMITING THE
SAME TO THREE YEARS, WHICH DECISION RESPONDENT
HERSELF SOUGHT TO EXECUTE."9
In sum, the resolution of this petition hinges on (1) whether the
NLRC has jurisdiction over the complaint for illegal dismissal; (2)
whether complainant Reyes was illegally dismissed; and (3) whether
the amount of back wages awarded was proper.
On the first issue, petitioner seeks refuge behind the argument that
the dispute is an intra-corporate controversy concerning as it does the
non-election of private respondent to the position of Assistant Vice-
President of the Bank which falls under the exclusive and original,
jurisdiction of the Securities and Exchange Commission (now the
Regional Trial Court) under Section 5 of Presidential Decree No.
902-A. More specifically, petitioner contends that complainant is a
corporate officer, an elective position under the corporate by-laws
and her non-election is an intra-corporate controversy cognizable by
the SEC invoking lengthily a number of this Court's decisions.10
Petitioner Bank can no longer raise the issue of jurisdiction under the
principle of estoppel. The Bank participated in the proceedings from
start to finish. It filed its position paper with the Labor Arbiter. When
the decision of the Labor Arbiter was adverse to it, the Bank appealed
to the NLRC. When the NLRC decided in its favor, the bank said
nothing about jurisdiction. Even before the Court of Appeals, it never
questioned the proceedings on the ground of lack of jurisdiction. It
was only when the Court of Appeals ruled in favor of private
respondent did it raise the issue of jurisdiction. The Bank actively
participated in the proceedings before the Labor Arbiter, the NLRC
and the Court of Appeals. While it is true that jurisdiction over the
subject matter of a case may be raised at any time of the proceedings,
this rule presupposes that laches or estoppel has not supervened. In
this regard, Bañaga vs. Commission on the Settlement of Land
Problems,11 is most enlightening. The Court therein stated:
"This Court has time and again frowned upon the
undesirable practice of a party submitting his case for
decision and then accepting the judgment, only if favorable,
and attacking it for lack of jurisdiction when adverse. Here,
the principle of estoppel lies. Hence, a party may be
estopped or barred from raising the question of jurisdiction
for the first time in a petition before the Supreme Court
when it failed to do so in the early stages of the
proceedings."
11
Undeterred, the Bank also contends that estoppel cannot lie
considering that "from the beginning, petitioner Bank has
consistently asserted in all its pleadings at all stages of the
proceedings that respondent held the position of Assistant Vice
President, an elective position which she held by virtue of her having
been elected as such by the Board of Directors." As far as the records
before this Court reveal however, such an assertion was made only in
the appeal to the NLRC and raised again before the Court of Appeals,
not for purposes of questioning jurisdiction but to establish that
private respondent's tenure was subject to the discretion of the Board
of Directors and that her non-reelection was a mere expiration of her
term. The Bank insists that private respondent was elected Assistant
Vice President sometime in 1990 to serve as such for only one year.
This argument will not do either and must be rejected.
It appears that private respondent was appointed Accounting Clerk by
the Bank on July 14, 1963. From that position she rose to become
supervisor. Then in 1982, she was appointed Assistant Vice-President
which she occupied until her illegal dismissal on July 19, 1991. The
bank's contention that she merely holds an elective position and that
in effect she is not a regular employee is belied by the nature of her
work and her length of service with the Bank. As earlier stated, she
rose from the ranks and has been employed with the Bank since 1963
until the termination of her employment in 1991. As Assistant Vice
President of the foreign department of the Bank, she is tasked, among
others, to collect checks drawn against overseas banks payable in
foreign currency and to ensure the collection of foreign bills or
checks purchased, including the signing of transmittal letters
covering the same. It has been stated that "the primary standard of
determining regular employment is the reasonable connection
between the particular activity performed by the employee in relation
to the usual trade or business of the employer.12 Additionally, "an
employee is regular because of the nature of work and the length of
service, not because of the mode or even the reason for hiring
them."13 As Assistant Vice-President of the Foreign Department of
the Bank she performs tasks integral to the operations of the bank and
her length of service with the bank totaling 28 years speaks volumes
of her status as a regular employee of the bank. In fine, as a regular
employee, she is entitled to security of tenure; that is, her services
may be terminated only for a just or authorized cause.14 This being in
truth a case of illegal dismissal, it is no wonder then that the Bank
endeavored to the very end to establish loss of trust and confidence
and serious misconduct on the part of private respondent but, as will
be discussed later, to no avail.
This brings us to the second issue wherein the Bank insists that it has
presented substantial evidence to prove the breach of trust on the part
of private respondent warranting her dismissal. On this point, the
Court of Appeals disagreed and set aside the findings of the NLRC
that Reyes deliberately withheld the release of the two dollar checks;
that she is guilty of conflict of interest that she waived her right to
due process for not attending the hearing; and that she was dismissed
based on loss of trust and confidence. We quote pertinent portions of
the decision, to wit:
"FIRST: Respondent Bank heavily relied on the testimony
and affidavit of Remittance Clerk Joven' in trying to
establish loss of confidence. However, Joven's allegation
that petitioner instructed her to hold the subject two dollar
checks amounting to $224,650.00 falls short of the requisite
proof to warrant petitioner's dismissal. Except for Joven's
bare assertion to withhold the dollar checks per petitioner's
instruction, respondent Bank failed to adduce convincing
evidence to prove bad faith and malice. It bears
 emphasizing that respondent Bank's witnesses merely
corroborate Joven's testimony.
Upon this point, the rule that proof beyond reasonable
doubt is not required to terminate an employee on the
charge of loss of confidence and that it is sufficient that
there is some basis for such loss of confidence, is not
absolute. The right of an employer to dismiss employees on
the ground that it has lost its trust and confidence in him
must not be exercised arbitrarily and without just cause. For
loss of trust and confidence to be valid ground for an
employee's dismissal, it must be substantial and not
arbitrary, and must be founded on clearly established facts
sufficient to warrant the employee's separation from work
(Labor vs. NLRC, 248 SCRA 183).
SECOND. Respondent Bank's charge of deliberate
withholding of the two dollar checks finds no support in the
testimony of Atty. Jocson, Chairman of the Investigating
Committee. On cross examination, Atty. Jocson testified
that the documents themselves do not show any direct
withholding (pp. 186-187, Rollo). There being conflict in
the statement of witnesses, the court must adopt the
testimony which it believes to be true (U.S. vs. Losada, 18
Phil. 90).
THIRD. Settled is the rule that when the conclusions of the
Labor Arbiter are sufficiently substantiated by the evidence
on record, the same should be respected by appellate
tribunals since he is in a better position to assess and
evaluate the credibility of the contending parties (Ala Mode
Garments, Inc. vs. NLRC, 268 SCRA 497). In this regard,
the Court quotes with approval the following disquisition of
Labor Arbiter Linsangan, thus:
This Office has repeatedly gone over the records of the case and
painstakingly examined the testimonies of respondent bank's
witnesses. One thing was clearly established: that the legality of
complainant's dismissal based on the first ground stated in
respondent's letter of termination (exh. 25-J, supra) will rise or fall on
the credibility of Miss Joven who undisputedly is the star witness for
the bank. It will be observed that the testimonies of the bank's other
witnesses, Analiza Castillo, Dante Castor and Antonio Ragasa
pertaining to the non-release of the dollar checks and their
corresponding transmittal letters were all anchored on what was told
them by Ms. Joven, that is: she was instructed by complainant to hold
the release of subject checks. In a nutshell, therefore, the issue boils
down to who between complainant and Ms. Joven is more credible.
After painstakingly examining the testimonies of Ms. Joven and
respondent's other witnesses' this Office finds the evidence still
wanting in proof of complainant's guilt. This Office had closely
observed the demeanor of Ms. Joven while testifying on the witness
stand and was not impressed by her assertions. The allegation of Ms.
Joven in that her non-release of the dollar checks was upon the
instruction of complainant Reyes is extremely doubtful. In the first
place, the said instruction constitutes a gross violation of the bank's
standard operating procedure. Moreover, Ms. Joven was fully aware
that the instruction, if carried out, will greatly prejudice her employer
bank. It was incumbent upon Ms. Joven not only to disobey the
instruction but even to report the matter to management, if same was
really given to her by complainant.
12
Our doubt on the veracity of Ms. Joven's allegation even deepens as
we consider the fact that when the non-release of the checks was
discovered by Ms. Castillo the former contented herself by
continuously not taking any action on the two dollar checks. Worse,
Ms. Joven even impliedly told by Ms. Castillo (sic) to ignore the two
checks and just withhold their release. In her affidavit Ms. Castillo
said:
'4. When I asked Cecille Joven what I was supposed to do with those
checks, she said the same should be held as per instruction of Mrs.
Reyes.' (Exh. "14", supra).
The evidence shows that it was only on 16 May 1990 that Ms. Joven
broke her silence on the matter despite the fact that on 15 November
1989, at about 8:00 p.m. the complainant, accompanied by driver
Celestino Banito, went to her residence and confronted her regarding
the non-release of the dollar checks. It took Ms. Joven eighteen (18)
months before she explained her side on the controversy. As to what
prompted her to make her letter of explanation was not even
mentioned.
On the other hand, the actions taken by the complainant were
spontaneous. When complainant was informed by Mr. Castor and
Ms. Castillo regarding the non-release of the checks sometime in
November, 1989 she immediately reported the matter to Vice
President Santos, Head of the Foreign Department. And as earlier
mentioned, complainant went to the residence of Ms. Joven to
confront her. In this regard, Celestino Bonito, complainant's driver,
stated in his affidavit, thus:
'1. Sometime on November 15, 1989 at about 7:00 o'clock in the
evening, Mrs. Clarita Tan Reyes and I were in the residence of one
Ms. Cecille Joven, then a Processing Clerk in the Foreign Department
of Prudential Bank;
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan Reyes
were seated in the sala when the latter asked the former, Ms. Cecille
Joven, how it came about that the two dollar checks which she was
then holding with the transmittal letters, were found in a plastic
envelope kept day-to-day by the former;
3. Hesitatingly, Cecille Joven said: "Eh, Mother (Mrs. Tan Reyes had
been intimately called Mother in the Bank) akala ko bouncing checks
yon mga yon.
4. Mrs. Clarita Tan Reyes, upon hearing those words, was surprised
and she said: "Ano, papaano mong alam na bouncing na hindi mo pa
pinadadala:
5. Mrs. Cecille Joven turned pale and was not able to answer.'
There are other factors that constrain this Office
to doubt even more the legality of complainant's
dismissal based on the first ground stated in the
letter of dismissal. The non-release of the dollar
checks was reported to top management
sometime on 15 November 1989 when
complainant, accompanied by Supervisor Dante
Castor and Analiza Castillo, reported the matter
to Vice President Santos. And yet, it was only on
08 March 1991, after a lapse of sixteen (16)
months from the time the non-release of the
checks was reported to the Vice President, that
 complainant was issued a memorandum directing
her to submit an explanation. And it took the
bank another four (4) months before it dismissed
complainant.
The delayed action taken by respondent against
complainant lends credence to the assertion of the
latter that her dismissal was a mere retaliation to
the criminal complaints she filed against the
bank's top officials.
It clearly appears from the foregoing that the
complainant herein has no knowledge of, much
less participation in, the non-release of the dollar
checks under discussion. Ms. Joven is solely
responsible for the same. Incidentally, she was
not even reprimanded by the bank.
FOURTH. Respondent Bank having failed to furnish
petitioner necessary documents imputing loss of
confidence, petitioner was not amply afforded opportunity
to prepare an intelligent answer. The Court finds nothing
confidential in the auditor's report and the affidavit of
Transmittal Clerk Joven. Due process dictates that
management accord the employees every kind of assistance
to enable him to prepare adequately for his defense,
including legal representation.
The issue of conflict of interest not having been covered by
the investigation, the Court finds it irrelevant to the
charge."15
We uphold the findings of the Court of Appeals that the dismissal of
private respondent on the ground of loss of trust and confidence was
without basis. The charge was predicated on the testimony of Ms.
Joven and we defer to the findings of the Labor Arbiter as confirmed
and adopted by the Court of Appeals on the credibility of said
witness. This Court is not a trier of facts and will not weigh anew the
evidence already passed upon by the Court of Appeals.16
Indeed, jurisprudence is clear on the amount of backwages
recoverable in cases of illegal dismissal. Employees illegally
dismissed prior to the effectivity of Republic Act No. 6715 on March
21, 1989 are entitled to backwages up to three (3) years without
deduction or qualification, while those illegally dismissed after are
granted full backwages inclusive of allowances and other benefits or
their monetary equivalent from the time their actual compensation
was withheld from them up to the time of their actual
reinstatement.20 Considering that private respondent was terminated
on July 19, 1991, she is entitled to full backwages from the time her
actual compensation was withheld from her (which, as a rule, is from
the time of her illegal dismissal) up to the finality of this judgment
(instead of reinstatement) considering that reinstatement is no longer
feasible as correctly pointed out by the Court of Appeals on account
of the strained relations brought about by the litigation in this case.
Since reinstatement is no longer viable, she is also entitled to
separation pay equivalent to one (1) month salary for every year of
service.21 Lastly, since private respondent was compelled to file an
action for illegal dismissal with the labor arbiter, she is likewise
entitled to attorney's fees22 at the rate above-mentioned. There is no
room to argue, as the Bank does here, that its liability should be
mitigated on account of its good faith and that private respondent is
not entirely blameless. There is no showing that private respondent is
partly at fault or that the Bank acted in good faith in terminating an
employee of twenty-eight years. In any event, Article 279 of
Republic Act No. 671523 clearly and plainly provides for "full
backwages" to illegally dismissed employees.1âwphi1.nêt
WHEREFORE, the instant petition for review on certiorari
is DENIED, and the assailed Decision of the Court of Appeals, dated
October 15, 1999, is AFFIRMED.
SO ORDERED.

On the third issue, the Bank questions the award of full backwages
and other benefits from July 19, 1991 up to the finality of this
judgment; separation pay equivalent to one (1) month salary for every
year of service in lieu of reinstatement; and attorney's fees equivalent
to ten (10%) percent of the total award. The Bank argues, in the main,
that private respondent is not entitled to full backwages in view of the
fact that she did not bother to appeal that portion of the labor arbiter's
judgment awarding back wages limited to three years. It must be
stressed that private respondent filed a special civil action for
certiorari to review the decision of the NLRC17 and not an ordinary
appeal. An ordinary appeal is distinguished from the remedy of
certiorari under Rule 65 of the Revised Rules of Court in that in
ordinary appeals it is settled that a party who did not appeal cannot
seek affirmative relief other than the ones granted in the decision of
the court below.18 On the other hand, resort to a judicial review of the
decisions of the National Labor Relations Commission in a petition
for certiorari under Rule 65 of Rules of Court is confined to issues of
want or excess of jurisdiction and grave abuse of discretion.19 In the
instant case, the Court of Appeals found that the NLRC gravely
abused its discretion in finding that the private respondent's dismissal
was valid and so reversed the same. Corollary to the foregoing, the
appellate court awarded backwages in accordance with current
jurisprudence.

13
G.R. No. 164888 December 6, 2006
RURAL BANK OF CORON (PALAWAN), INC., EMPIRE
COLD STORAGE AND DEVELOPMENT CORPORATION,
CITIZENS DEVELOPMENT INCOPRORATED, CARIDAD B.
GARCIA, SANDRA G. ESCAT, LORNA GARCIA, and OLGA
G. ESCAT, petitioners,
vs.
ANNALISA CORTES, respondent.
DECISION
CARPIO MORALES, J.:
In 1987, Virgilio Garcia, "founder" of petitioner corporations (the
corporations), hired the then still single Annalisa Cortes (respondent)
as clerk of the Rural Bank of Coron (Manila Office).
After Virgilio died, his son Victor took over the management of the
corporations.
Anita Cortes (Anita), the wife of Victor Garcia, was also involved in
the management of the corporations. Respondent later married
Anita’s brother Eduardo Cortes.
Anita soon assumed the position of Vice President of petitioner
Citizens Development Incorporated (CDI) and practically controlled
the financial operations of almost all of the other corporations in the
course of which she allowed some of her relatives and in-laws,
including respondent, to hold several key sensitive positions thereat.
Respondent later became the Financial Assistant, Personnel Officer
and Corporate Secretary of The Rural Bank of Coron, Personnel
Officer of CDI, and also Personnel Officer and Disbursing Officer of
The Empire Cold Storage Development Corporation (ECSDC). She
simultaneously received salaries from these corporations.
On examination of the financial books of the corporations by
petitioner Sandra Garcia Escat, a daughter of Virgilio Garcia who
was previously residing in Spain, she found out that respondent was
involved in several anomalies,1drawing petitioners to terminate
respondent’s services on November 23, 1998 in petitioner
corporations.2
By letter of November 25, 19983 addressed to individual petitioners
Caridad B. Garcia (widow of Virgilio Garcia), Sandra G. Escat, and
Olga G. Escat (another daughter of Virgilio Garcia), respondent’s
counsel conveyed respondent’s willingness to abide by the decision
to terminate her but reminded them that she was entitled to separation
pay equivalent to 11 months salary as well as to the other benefits
provided by law in her favor.
Respondent’s counsel thus demanded the payment of respondent’s
unpaid salary for the months of October and November 1998,
separation pay equivalent to 12 months salary,4 13th month pay and
other benefits.
14
As the demand remained unheeded, respondent filed a complaint5 for
illegal dismissal and non-payment of salaries and other benefits,
docketed as NLRC-NCR Case No. 00-05-05738-99.
Petitioners moved for the dismissal of the complaint on the ground of
lack of jurisdiction, contending that the case was an intra-corporate
controversy involving the removal of a corporate officer, respondent
being the Corporate Secretary of the Rural Bank of Coron, Inc.,
hence, cognizable by the Securities and Exchange Commission
(SEC) pursuant to Section 5 of PD 902-A.6
In resolving the issue of jurisdiction, the Labor Arbiter noted as
follows:
It is to be noted that complainant, aside from her being
Corporate Secretary of Rural Bank of Coron, complainant
was likewise appointed as Financial Assistant &
Personnel Officer of all respondents herein, whose
services w[ere] terminated on 23 November 1998, hence,
the instant complaint.
Verily, a Financial Assistant & Personnel Officer is not
a Corporate Officer of the [petitioners’] corporation,
thus, pursuant to Article 217 of the Labor Code, as
amended, the instant case falls within the ambit of original
and exclusive jurisdiction of this Office.7 (Emphasis and
underscoring supplied).
Eventually, the Labor Arbiter found for respondent, computing the
monetary award due her as follows:
Backwages P658,000.00
13th Month Pay for 1998, 1999 & 2000 63,000.00
P721,000.00
Separation Pay 315,000.00
Unpaid Salary 25,900.00
Attorney’s fees 106,190.00
P1,168,090.00
Thus, the Labor Arbiter, by Decision of July 18, 2001, disposed:
WHEREFORE, in view of all the foregoing, respondents
are hereby ordered to jointly and severally pay complainant
the total amount of ONE MILLION ONE HUNDRED
SIXTY-EIGHT THOUSAND NINETY (P1,168,090.00)
PESOS as discussed above.8
On August 13, 2001, the tenth or last day of the period of
appeal,9 petitioners filed a Notice of Appeal and Motion for
Reduction of Bond10 to which they attached a Memorandum on
Appeal.11 In their Motion for Reduction of Bond, petitioners alleged
that the corporations were under financial distress and the Rural Bank
of Coron was under receivership. They thus prayed that the amount
of bond be substantially reduced, preferably to one half thereof or
even lower.12
By Resolution of October 16, 200113, the National Labor Relations
Commission (NLRC), while noting that petitioners timely filed the
appeal, held that the same was not accompanied by an appeal bond, a
mandatory requirement under Article 22314 of the Labor Code and
Section 6, Rule VI of the NLRC New Rules of Procedure. It also
noted that the Motion for Reduction of Bond was "premised on self-
serving allegations." It accordingly dismissed the appeal.
Petitioners’ Motion for Reconsideration15 was denied by the NLRC
by November 26, 2001 Resolution,16 hence, they filed a Petition for
Certiorari17 before the Court of Appeals.
By Decision dated May 26, 200418, the appellate court dismissed the
petition for lack of merit. Petitioners’ motion for reconsideration was
also denied by Resolution of August 13, 2004.19
Hence, this petition,20 petitioners faulting the appellate court for:
I NLRC[25] and Taberrah v. NLRC[26] in support of their contention
. . . FAIL[URE] TO RULE THAT THE NLRC’S RULE
OF PROCEDURE WHICH PROVIDES FOR THE
POSTING OF A BOND AS A CONDITION
PRECEDENT FOR PERFECTING AN APPEAL AS A
CONDITION PRECEDENT FOR PERFECTING AN
APPEAL IS CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.
II
. . . DISMISS[ING] PETITIONERS[’] PETITION FOR
[CERTIORARI] BASED ON TECHNICALITY AND
FAIL[URE] TO DECIDE THE SAME BASED ON ITS
MERIT.
III
. . . DISMISSING PETITIONERS’ PETITION FOR
CERTIORARI FROM THE DECISION OF THE NLRC
FOR NON-PERFECTION THEREOF.
IV
. . . DISMISSING PETITIONERS’ PETITION FOR
[CERTIORARI] FROM THE DECISION OF THE NLRC
WITHOUT RESOLVING THE CASE BASED ON ITS
MERITS.
V the motion for reduction of appeal bond, which was
. . . FAIL[URE] TO DECLARE THAT INDIVIDUAL
PETITIONERS ARE NOT SOLIDARY LIABLE TO PAY
THE RESPONDENT FOR HER MONETARY CLAIM IN
VIEW OF THE ABSENCE OF ANY EVIDENCE
SHOWING THAT THEY WERE MOTIVATED BY ILL-
WILL OR MALICE IN SEVERING HER
EMPLOYMENT.
VI
. . . FAIL[URE] TO RESOLVE THE ISSUE OF
JURISDICTION.21
15
While, indeed, respondent was the Corporate Secretary of the Rural
Bank of Coron, she was also its Financial Assistant and the Personnel
Officer of the two other petitioner corporations.22
Mainland Construction Co., Inc. v. Movilla23 instructs that a
corporation can engage its corporate officers to perform services
under a circumstance which would make them employees.24
The Labor Arbiter has thus jurisdiction over respondent’s complaint.
On the first three assigned errors which bear on whether petitioners’
appeal before the NLRC was perfected:
As before the Court of Appeals, petitioners cite Cosico, Jr. v.
that their appeal before the NLRC was perfected. As correctly ruled
by the Court of Appeals, however, the cited cases are not in point.
… The appellant in Taberrah filed a motion to fix appeal
bond instead of posting an appeal bond; and the Supreme
Court relaxed the requirement considering that the labor
arbiter’s decision did not contain a computation of the
monetary award. In Cosico, the appeal bond posted was
of insufficient amount but the Supreme Court ruled that
provisions of the Labor Code on requiring a bond on appeal
involving monetary awards must be given liberal
interpretation in line with the desired objective of resolving
controversies on their merits. Herein, no appeal bond,
whether sufficient or not, was ever filed by the
petitioners.27 (Italics in the original; emphasis and
underscoring supplied)
Petitioners additionally cite Star Angel Handicraft v. NLRC[28] to
support their position that there is a distinction between the filing of
an appeal within the reglementary period and its perfection. In the
parallel case of Computer Innovations Center v. National Labor
Relations Commission,29 this Court hesitated to reiterate the doctrine
in Star Angel in this wise:
Petitioners invoke the aforementioned holding
in Star Angel that there is a distinction between the filing of
an appeal within the reglementary period and its perfection,
and that the appeal may be perfected after the said
reglementary period. Indeed, Star Angel held that the filing
of a motion for reduction of appeal bond necessarily stays
the reglementary period for appeal. However, in this case,
incorporated in the appeal memorandum, was filed only on
the tenth or final day of the reglementary period. Under
such circumstance, the motion for reduction of appeal
bond can no longer be deemed to have stayed the
appeal, and the petitioner faces the risk, as had
happened in this case, of summary dismissal of the
appeal for non-perfection.
Moreover, the reference in Star Angel to the distinction
between the period to file the appeal and to perfect the
appeal has been pointedly made only once by this Court
in Gensoli v. NLRC thus, it has not acquired the sheen of
venerability reserved for repeatedly-cited cases. The
distinction, if any, is not particularly evident or material in
the Labor Code; hence, the reluctance of the Court to adopt
such doctrine. Moreover, the present provision in the
NLRC Rules of Procedure, that "the filing of a motion to
 reduce bond shall not stop the running of the period to As the decision of the Labor Arbiter had become final and executory,
perfect appeal" flatly contradicts the notion expressed a discussion of the fourth and fifth assigned errors is no longer
in Star Angel that there is a distinction between the necessary.
filing an appeal and perfecting an appeal.
WHEREFORE, the petition is DENIED.
Ultimately, the disposition of Star Angel was premised on
the ruling that a motion for reduction of the appeal bond SO ORDERED.
necessarily stays the period for perfecting the appeal, and
that the employer cannot be expected to perfect the appeal
by posting the proper bond until such time the said motion
for reduction is resolved. The unduly stretched-out
distinction between the period to file an appeal and to
perfect an appeal was not material to the resolution
of Star Angel, and this could be properly considered
as obiter dictum.30(Italics in the original; emphasis and
underscoring supplied)

The appellate court did not thus err in dismissing the petition before
it. And contrary to petitioners’ assertion, the appellate court
dismissed its petition not "on a mere technicality." For the non-
posting of an appeal bond within the reglementary period divests the
NLRC of its jurisdiction to entertain the appeal. Thus, in the same
case of Computer Innovations Center, this Court held:

Petitioners also characterize the appeal bond requirement as

a technical rule, and that the dismissal of an appeal on
purely technical grounds is frowned upon.
However, Article 223, which prescribes the appeal bond
requirement, is a rule of jurisdiction and not of
procedure. There is a little leeway for condoning a liberal
interpretation thereof, and certainly none premised on the
ground that its requirements are mere technicalities. It must
be emphasized that there is no inherent right to an appeal in
a labor case, as it arises solely from grant of statute, namely
the Labor Code.

We have indeed held that the requirement for posting the

surety bond is not merely procedural
but jurisdictional and cannot be trifled with. Non-
compliance with such legal requirements is fatal and has
the effect of rendering the judgment final and executory.
The petitioners cannot be allowed to seek refuge in a liberal
application of rules for their act of negligence.31 (Emphasis
and underscoring supplied)

It bears emphasis that all that is required to perfect the appeal is the
posting of a bond to ensure that the award is eventually paid should
the appeal be dismissed. Petitioners should thus have posted a bond,
even if it were only partial, but they did not. No relaxation of the
Rule may thus be considered.32

In the case at bar, petitioner did not post a full or partial appeal bond
within the prescribed period, thus, no appeal was perfected from the
decision of the Labor Arbiter. For this reason, the decision sought to
be appealed to the NLRC had become final and executory and
therefore immutable. Clearly then, the NLRC has no authority to
entertain the appeal, much less to reverse the decision of the Labor
Arbiter. Any amendment or alteration made which substantially
affects the final and executory judgment is null and void for lack of
jurisdiction, including the entire proceeding held for that
purpose.33 (Emphasis and underscoring supplied)

16
G.R. No. 157802 October 13, 2010
MATLING INDUSTRIAL AND COMMERCIAL
CORPORATION, RICHARD K. SPENCER, CATHERINE
SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
DECISION
BERSAMIN, J.:
This case reprises the jurisdictional conundrum of whether a
complaint for illegal dismissal is cognizable by the Labor Arbiter
(LA) or by the Regional Trial Court (RTC). The determination of
whether the dismissed officer was a regular employee or a corporate
officer unravels the conundrum. In the case of the regular employee,
the LA has jurisdiction; otherwise, the RTC exercises the legal
authority to adjudicate.
In this appeal via petition for review on certiorari, the petitioners
challenge the decision dated September 13, 2002 1and the resolution
dated April 2, 2003,2 both promulgated in C.A.-G.R. SP No. 65714
entitled Matling Industrial and Commercial Corporation, et al. v.
Ricardo R. Coros and National Labor Relations Commission,
whereby by the Court of Appeals (CA) sustained the ruling of the
National Labor Relations Commission (NLRC) to the effect that the
LA had jurisdiction because the respondent was not a corporate
officer of petitioner Matling Industrial and Commercial Corporation
(Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and
Administration, the respondent filed on August 10, 2000 a complaint
for illegal suspension and illegal dismissal against Matling and some
of its corporate officers (petitioners) in the NLRC, Sub-Regional
Arbitration Branch XII, Iligan City.3
The petitioners moved to dismiss the complaint,4 raising the ground,
among others, that the complaint pertained to the jurisdiction of the
Securities and Exchange Commission (SEC) due to the controversy
being intra-corporate inasmuch as the respondent was a member of
Matling’s Board of Directors aside from being its Vice-President for
Finance and Administration prior to his termination.
The respondent opposed the petitioners’ motion to dismiss,5 insisting
that his status as a member of Matling’s Board of Directors was
doubtful, considering that he had not been formally elected as such;
that he did not own a single share of stock in Matling, considering
that he had been made to sign in blank an undated indorsement of the
certificate of stock he had been given in 1992; that Matling had taken
back and retained the certificate of stock in its custody; and that even
assuming that he had been a Director of Matling, he had been
removed as the Vice President for Finance and Administration, not as
a Director, a fact that the notice of his termination dated April 10,
2000 showed.
On October 16, 2000, the LA granted the petitioners’ motion to
dismiss,6 ruling that the respondent was a corporate officer because
he was occupying the position of Vice President for Finance and
Administration and at the same time was a Member of the Board of
Directors of Matling; and that, consequently, his removal was a
17
corporate act of Matling and the controversy resulting from such
removal was under the jurisdiction of the SEC, pursuant to Section 5,
paragraph (c) of Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,7 urging that:
I
THE HONORABLE LABOR ARBITER COMMITTED GRAVE
ABUSE OF DISCRETION GRANTING APPELLEE’S MOTION
TO DISMISS WITHOUT GIVING THE APPELLANT AN
OPPORTUNITY TO FILE HIS OPPOSITION THERETO
THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE
PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN
ERROR IN DISMISSING THE CASE FOR LACK OF
JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding
that the respondent’s complaint for illegal dismissal was properly
cognizable by the LA, not by the SEC, because he was not a
corporate officer by virtue of his position in Matling, albeit high
ranking and managerial, not being among the positions listed in
Matling’s Constitution and By-Laws.8 The NLRC disposed thuswise:
WHEREFORE, the Order appealed from is SET ASIDE. A new one
is entered declaring and holding that the case at bench does not
involve any intracorporate matter. Hence, jurisdiction to hear and act
on said case is vested with the Labor Arbiter, not the SEC,
considering that the position of Vice-President for Finance and
Administration being held by complainant-appellant is not listed as
among respondent's corporate officers.
Accordingly, let the records of this case be REMANDED to the
Arbitration Branch of origin in order that the Labor Arbiter below
could act on the case at bench, hear both parties, receive their
respective evidence and position papers fully observing the
requirements of due process, and resolve the same with reasonable
dispatch.
SO ORDERED.
The petitioners sought reconsideration,9 reiterating that the
respondent, being a member of the Board of Directors, was a
corporate officer whose removal was not within the LA’s jurisdiction.
The petitioners later submitted to the NLRC in support of the motion
for reconsideration the certified machine copies of Matling’s
Amended Articles of Incorporation and By Laws to prove that the
President of Matling was thereby granted "full power to create new
offices and appoint the officers thereto, and the minutes of special
meeting held on June 7, 1999 by Matling’s Board of Directors to
prove that the respondent was, indeed, a Member of the Board of
Directors.10
Nonetheless, on April 30, 2001, the NLRC denied the petitioners’
motion for reconsideration.11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari,
docketed as C.A.-G.R. No. SP 65714, contending that the NLRC
committed grave abuse of discretion amounting to lack of jurisdiction
in reversing the correct decision of the LA.
In its assailed decision promulgated on September 13, 2002, 12 the CA
dismissed the petition for certiorari, explaining:
For a position to be considered as a corporate office, or, for that
matter, for one to be considered as a corporate officer, the position
must, if not listed in the by-laws, have been created by the
corporation's board of directors, and the occupant thereof appointed
or elected by the same board of directors or stockholders. This is the
implication of the ruling in Tabang v. National Labor Relations
Commission, which reads:
"The president, vice president, secretary and treasurer are commonly
regarded as the principal or executive officers of a corporation, and
modern corporation statutes usually designate them as the officers of
the corporation. However, other offices are sometimes created by the
charter or by-laws of a corporation, or the board of directors may be
empowered under the by-laws of a corporation to create additional
offices as may be necessary.
It has been held that an 'office' is created by the charter of the
corporation and the officer is elected by the directors or
stockholders. On the other hand, an 'employee' usually occupies no
office and generally is employed not by action of the directors or
stockholders but by the managing officer of the corporation who also
determines the compensation to be paid to such employee."
This ruling was reiterated in the subsequent cases of Ongkingco v.
National Labor Relations Commission and De Rossi v. National
Labor Relations Commission.
The position of vice-president for administration and finance, which
Coros used to hold in the corporation, was not created by the
corporation’s board of directors but only by its president or executive
vice-president pursuant to the by-laws of the corporation. Moreover,
Coros’ appointment to said position was not made through any act of
the board of directors or stockholders of the corporation.
Consequently, the position to which Coros was appointed and later
on removed from, is not a corporate office despite its nomenclature,
but an ordinary office in the corporation.
Coros’ alleged illegal dismissal therefrom is, therefore, within the
jurisdiction of the labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners’ motion for reconsideration on April 2,
2003.13
Issue
Thus, the petitioners are now before the Court for a review on
certiorari, positing that the respondent was a stockholder/member of
the Matling’s Board of Directors as well as its Vice President for
18
Finance and Administration; and that the CA consequently erred in
holding that the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer
of Matling or not. The resolution of the issue determines whether the
LA or the RTC had jurisdiction over his complaint for illegal
dismissal.
Ruling
The appeal fails.
I
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a
private employer is properly cognizable by the LA. This is pursuant
to Article 217 (a) 2 of the Labor Code, as amended, which provides
as follows:
Article 217. Jurisdiction of the Labor Arbiters and the Commission. -
(a) Except as otherwise provided under this Code, the Labor Arbiters
shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case by
the parties for decision without extension, even in the absence of
stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement,
those cases that workers may file involving
wages, rates of pay, hours of work and other
terms and conditions of employment;
4. Claims for actual, moral, exemplary and other
forms of damages arising from the employer-
employee relations;
5. Cases arising from any violation of Article 264
of this Code, including questions involving the
legality of strikes and lockouts; and
6. Except claims for Employees Compensation,
Social Security, Medicare and maternity benefits,
all other claims arising from employer-employee
relations, including those of persons in domestic
or household service, involving an amount
exceeding five thousand pesos (₱5,000.00)
regardless of whether accompanied with a claim
for reinstatement.
(b) The Commission shall have exclusive appellate
jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation
of collective bargaining agreements and those arising from
the interpretation or enforcement of company personnel
 policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and
voluntary arbitration as may be provided in said
agreements. (As amended by Section 9, Republic Act No.
6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate
officer, however, the controversy falls under the jurisdiction of the
Securities and Exchange Commission (SEC), because the controversy
arises out of intra-corporate or partnership relations between and
among stockholders, members, or associates, or 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
the controversy concerns their individual franchise or right to exist as
such entity; or because the controversy involves the election or
appointment of a director, trustee, officer, or manager of such
corporation, partnership, or association.14 Such controversy, among
others, is known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No.
8799,15 otherwise known as The Securities Regulation Code, the
SEC’s jurisdiction over all intra-corporate disputes was transferred to
the RTC, pursuant to Section 5.2 of RA No. 8799, to wit:
countersign all certificates, contracts and other instruments of the
corporation as authorized by the Board of Directors; shall have full
power to hire and discharge any or all employees of the corporation;
shall have full power to create new offices and to appoint the officers
thereto as he may deem proper and necessary in the operations of the
corporation and as the progress of the business and welfare of the
corporation may demand; shall make reports to the directors and
stockholders and perform all such other duties and functions as are
incident to his office or are properly required of him by the Board of
Directors. In case of the absence or disability of the President, the
Executive Vice President shall have the power to exercise his
functions.
The petitioners argue that the power to create corporate offices and to
appoint the individuals to assume the offices was delegated by
Matling’s Board of Directors to its President through By-Law No. V,
as amended; and that any office the President created, like the
position of the respondent, was as valid and effective a creation as
that made by the Board of Directors, making the office a corporate
office. In justification, they cite Tabang v. National Labor Relations
Commission,17 which held that "other offices are sometimes created
by the charter or by-laws of a corporation, or the board of directors
may be empowered under the by-laws of a corporation to create
additional officers as may be necessary."

5.2. The Commission’s jurisdiction over all cases enumerated under
Section 5 of Presidential Decree No. 902-A is hereby transferred to
the Courts of general jurisdiction or the appropriate Regional Trial
Court: Provided, that the Supreme Court in the exercise of its
authority may designate the Regional Trial Court branches that shall
exercise jurisdiction over these cases. The Commission shall retain
jurisdiction over pending cases involving intra-corporate disputes
submitted for final resolution which should be resolved within one
(1) year from the enactment of this Code. The Commission shall
retain jurisdiction over pending suspension of payments/rehabilitation
cases filed as of 30 June 2000 until finally disposed.
Considering that the respondent’s complaint for illegal dismissal was
commenced on August 10, 2000, it might come under the coverage of
Section 5.2 of RA No. 8799, supra, should it turn out that the
respondent was a corporate, not a regular, officer of Matling.
II
Was the Respondent’s Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondent’s position as
Vice President for Finance and Administration was a corporate
office. If it was, his dismissal by the Board of Directors rendered the
matter an intra-corporate dispute cognizable by the RTC pursuant to
RA No. 8799.
The petitioners contend that the position of Vice President for
Finance and Administration was a corporate office, having been
created by Matling’s President pursuant to By-Law No. V, as
amended,16 to wit:
BY LAW NO.
Officers
The President shall be the executive head of the corporation; shall
preside over the meetings of the stockholders and directors; shall
The respondent counters that Matling’s By-Laws did not list his
position as Vice President for Finance and Administration as one of
the corporate offices; that Matling’s By-Law No. III listed only four
corporate officers, namely: President, Executive Vice President,
Secretary, and Treasurer; 18 that the corporate offices contemplated in
the phrase "and such other officers as may be provided for in the by-
laws" found in Section 25 of the Corporation Code should be clearly
and expressly stated in the By-Laws; that the fact that Matling’s By-
Law No. III dealt with Directors & Officers while its By-Law No. V
dealt with Officers proved that there was a differentiation between
the officers mentioned in the two provisions, with those classified
under By-Law No. V being ordinary or non-corporate officers; and
that the officer, to be considered as a corporate officer, must be
elected by the Board of Directors or the stockholders, for the
President could only appoint an employee to a position pursuant to
By-Law No. V.
We agree with respondent.
Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their
election, the directors of a corporation must formally organize by the
election of a president, who shall be a director, a treasurer who may
or may not be a director, a secretary who shall be a resident and
citizen of the Philippines, and such other officers as may be
provided for in the by-laws. Any two (2) or more positions may be
held concurrently by the same person, except that no one shall act as
president and secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the
duties enjoined on them by law and the by-laws of the corporation.
Unless the articles of incorporation or the by-laws provide for a
greater majority, a majority of the number of directors or trustees as
V fixed in the articles of incorporation shall constitute a quorum for the
transaction of corporate business, and every decision of at least a
majority of the directors or trustees present at a meeting at which
there is a quorum shall be valid as a corporate act, except for the
19
election of officers which shall require the vote of a majority of all
the members of the board.
Directors or trustees cannot attend or vote by proxy at board
meetings.
Conformably with Section 25, a position must be expressly
mentioned in the By-Laws in order to be considered as a corporate
office. Thus, the creation of an office pursuant to or under a By-Law
enabling provision is not enough to make a position a corporate
office. Guerrea v. Lezama,19 the first ruling on the matter, held that
the only officers of a corporation were those given that character
either by the Corporation Code or by the By-Laws; the rest of the
corporate officers could be considered only as employees or
subordinate officials. Thus, it was held in Easycall Communications
Phils., Inc. v. King:20
An "office" is created by the charter of the corporation and the officer
is elected by the directors or stockholders. On the other hand, an
employee occupies no office and generally is employed not by the
action of the directors or stockholders but by the managing officer of
the corporation who also determines the compensation to be paid to
such employee.
In this case, respondent was appointed vice president for nationwide
expansion by Malonzo, petitioner’'s general manager, not by the
board of directors of petitioner. It was also Malonzo who determined
the compensation package of respondent. Thus, respondent was an
employee, not a "corporate officer." The CA was therefore correct in
ruling that jurisdiction over the case was properly with the NLRC,
not the SEC (now the RTC).
This interpretation is the correct application of Section 25 of the
Corporation Code, which plainly states that the corporate officers are
the President, Secretary, Treasurer and such other officers as may be
provided for in the By-Laws. Accordingly, the corporate officers in
the context of PD No. 902-A are exclusively those who are given that
character either by the Corporation Code or by the corporation’s By-
Laws.
A different interpretation can easily leave the way open for the Board
of Directors to circumvent the constitutionally guaranteed security of
tenure of the employee by the expedient inclusion in the By-Laws of
an enabling clause on the creation of just any corporate officer
position.
It is relevant to state in this connection that the SEC, the primary
agency administering the Corporation Code, adopted a similar
interpretation of Section 25 of the Corporation Code in its Opinion
dated November 25, 1993,21 to wit:
Thus, pursuant to the above provision (Section 25 of the Corporation
Code), whoever are the corporate officers enumerated in the by-laws
are the exclusive Officers of the corporation and the Board has no
power to create other Offices without amending first the corporate
By-laws. However, the Board may create appointive positions
other than the positions of corporate Officers, but the persons
occupying such positions are not considered as corporate officers
within the meaning of Section 25 of the Corporation Code and are
not empowered to exercise the functions of the corporate Officers,
except those functions lawfully delegated to them. Their functions
and duties are to be determined by the Board of Directors/Trustees.
20
Moreover, the Board of Directors of Matling could not validly
delegate the power to create a corporate office to the President, in
light of Section 25 of the Corporation Code requiring the Board of
Directors itself to elect the corporate officers. Verily, the power to
elect the corporate officers was a discretionary power that the law
exclusively vested in the Board of Directors, and could not be
delegated to subordinate officers or agents.22 The office of Vice
President for Finance and Administration created by Matling’s
President pursuant to By Law No. V was an ordinary, not a corporate,
office.
To emphasize, the power to create new offices and the power to
appoint the officers to occupy them vested by By-Law No. V merely
allowed Matling’s President to create non-corporate offices to be
occupied by ordinary employees of Matling. Such powers were
incidental to the President’s duties as the executive head of Matling
to assist him in the daily operations of the business.
The petitioners’ reliance on Tabang, supra, is misplaced. The
statement in Tabang, to the effect that offices not expressly
mentioned in the By-Laws but were created pursuant to a By-Law
enabling provision were also considered corporate offices, was
plainly obiter dictum due to the position subject of the controversy
being mentioned in the By-Laws. Thus, the Court held therein that
the position was a corporate office, and that the determination of the
rights and liabilities arising from the ouster from the position was an
intra-corporate controversy within the SEC’s jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation,23 which may
be the more appropriate ruling, the position subject of the controversy
was not expressly mentioned in the By-Laws, but was created
pursuant to a By-Law enabling provision authorizing the Board of
Directors to create other offices that the Board of Directors might see
fit to create. The Court held there that the position was a corporate
office, relying on the obiter dictum in Tabang.
Considering that the observations earlier made herein show that the
soundness of their dicta is not
unassailable, Tabang and Nacpil should no longer be controlling.
III
Did Respondent’s Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a
Director/stockholder of Matling, and relying on Paguio v. National
Labor Relations Commission24 and Ongkingko v. National Labor
Relations Commission,25 the NLRC had no jurisdiction over his
complaint, considering that any case for illegal dismissal brought by
a stockholder/officer against the corporation was an intra-corporate
matter that must fall under the jurisdiction of the SEC conformably
with the context of PD No. 902-A.
The petitioners’ insistence is bereft of basis.
To begin with, the reliance on Paguio and Ongkingko is misplaced.
In both rulings, the complainants were undeniably corporate officers
due to their positions being expressly mentioned in the By-Laws,
aside from the fact that both of them had been duly elected by the
respective Boards of Directors. But the herein respondent’s position
of Vice President for Finance and Administration was not expressly
mentioned in the By-Laws; neither was the position of Vice President
for Finance and Administration created by Matling’s Board of
Directors. Lastly, the President, not the Board of Directors, appointed
him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between a
stockholder and the corporation. There is no distinction, qualification
or any exemption whatsoever. The provision is broad and covers all
kinds of controversies between stockholders and corporations.26
However, the Tabang pronouncement is not controlling because it is
too sweeping and does not accord with reason, justice, and fair play.
In order to determine whether a dispute constitutes an intra-corporate
controversy or not, the Court considers two elements instead, namely:
(a) the status or relationship of the parties; and (b) the nature of the
question that is the subject of their controversy. This was our thrust
in Viray v. Court of Appeals:27
The establishment of any of the relationships mentioned above will
not necessarily always confer jurisdiction over the dispute on the
SEC to the exclusion of regular courts. The statement made in one
case that the rule admits of no exceptions or distinctions is not that
absolute. The better policy in determining which body has
jurisdiction over a case would be to consider not only the status or
relationship of the parties but also the nature of the question that is
the subject of their controversy.
Not every conflict between a corporation and its stockholders
involves corporate matters that only the SEC can resolve in the
exercise of its adjudicatory or quasi-judicial powers. If, for example,
a person leases an apartment owned by a corporation of which he is a
stockholder, there should be no question that a complaint for his
ejectment for non-payment of rentals would still come under the
jurisdiction of the regular courts and not of the SEC. By the same
token, if one person injures another in a vehicular accident, the
complaint for damages filed by the victim will not come under the
jurisdiction of the SEC simply because of the happenstance that both
parties are stockholders of the same corporation. A contrary
interpretation would dissipate the powers of the regular courts and
distort the meaning and intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v. Movilla,28 the
Court reiterated these determinants thuswise:
In order that the SEC (now the regular courts) can take cognizance of
a case, the controversy must pertain to any of the following
relationships:
a) between the corporation, partnership or association and
the public;
b) between the corporation, partnership or association and
its stockholders, partners, members or officers;
c) between the corporation, partnership or association and
the State as far as its franchise, permit or license to operate
is concerned; and
d) among the stockholders, partners or associates
themselves.
21
The fact that the parties involved in the controversy are all
stockholders or that the parties involved are the stockholders and the
corporation does not necessarily place the dispute within the ambit of
the jurisdiction of SEC. The better policy to be followed in
determining jurisdiction over a case should be to consider concurrent
factors such as the status or relationship of the parties or the nature of
the question that is the subject of their controversy. In the absence of
any one of these factors, the SEC will not have jurisdiction.
Furthermore, it does not necessarily follow that every conflict
between the corporation and its stockholders would involve such
corporate matters as only the SEC can resolve in the exercise of its
adjudicatory or quasi-judicial powers.29
The criteria for distinguishing between corporate officers who may
be ousted from office at will, on one hand, and ordinary corporate
employees who may only be terminated for just cause, on the other
hand, do not depend on the nature of the services performed, but on
the manner of creation of the office. In the respondent’s case, he was
supposedly at once an employee, a stockholder, and a Director of
Matling. The circumstances surrounding his appointment to office
must be fully considered to determine whether the dismissal
constituted an intra-corporate controversy or a labor termination
dispute. We must also consider whether his status as Director and
stockholder had any relation at all to his appointment and subsequent
dismissal as Vice President for Finance and Administration.
Obviously enough, the respondent was not appointed as Vice
President for Finance and Administration because of his being a
stockholder or Director of Matling. He had started working for
Matling on September 8, 1966, and had been employed continuously
for 33 years until his termination on April 17, 2000, first as a
bookkeeper, and his climb in 1987 to his last position as Vice
President for Finance and Administration had been gradual but
steady, as the following sequence indicates:
1966 – Bookkeeper
1968 – Senior Accountant
1969 – Chief Accountant
1972 – Office Supervisor
1973 – Assistant Treasurer
1978 – Special Assistant for Finance
1980 – Assistant Comptroller
1983 – Finance and Administrative Manager
1985 – Asst. Vice President for Finance and Administration
1987 to April 17, 2000 – Vice President for Finance and
Administration
Even though he might have become a stockholder of Matling in 1992,
his promotion to the position of Vice President for Finance and
Administration in 1987 was by virtue of the length of quality service
he had rendered as an employee of Matling. His subsequent
acquisition of the status of Director/stockholder had no relation to his
promotion. Besides, his status of Director/stockholder was unaffected
by his dismissal from employment as Vice President for Finance and
Administration.1avvphi1

In Prudential Bank and Trust Company v. Reyes,30 a case involving a

lady bank manager who had risen from the ranks but was dismissed,
the Court held that her complaint for illegal dismissal was correctly
brought to the NLRC, because she was deemed a regular employee of
the bank. The Court observed thus:

It appears that private respondent was appointed Accounting Clerk by

the Bank on July 14, 1963. From that position she rose to become
supervisor. Then in 1982, she was appointed Assistant Vice-President
which she occupied until her illegal dismissal on July 19, 1991. The
bank’s contention that she merely holds an elective position and
that in effect she is not a regular employee is belied by the nature
of her work and her length of service with the Bank. As earlier
stated, she rose from the ranks and has been employed with the Bank
since 1963 until the termination of her employment in 1991. As
Assistant Vice President of the Foreign Department of the Bank, she
is tasked, among others, to collect checks drawn against overseas
banks payable in foreign currency and to ensure the collection of
foreign bills or checks purchased, including the signing of transmittal
letters covering the same. It has been stated that "the primary
standard of determining regular employment is the reasonable
connection between the particular activity performed by the
employee in relation to the usual trade or business of the employer.
Additionally, "an employee is regular because of the nature of work
and the length of service, not because of the mode or even the reason
for hiring them." As Assistant Vice-President of the Foreign
Department of the Bank she performs tasks integral to the operations
of the bank and her length of service with the bank totaling 28 years
speaks volumes of her status as a regular employee of the bank. In
fine, as a regular employee, she is entitled to security of tenure; that
is, her services may be terminated only for a just or authorized cause.
This being in truth a case of illegal dismissal, it is no wonder then
that the Bank endeavored to the very end to establish loss of trust and
confidence and serious misconduct on the part of private respondent
but, as will be discussed later, to no avail.

WHEREFORE, we deny the petition for review on certiorari, and

affirm the decision of the Court of Appeals.

Costs of suit to be paid by the petitioners.

SO ORDERED.

22
G.R. No. 113191 September 18, 1996
DEPARTMENT OF FOREIGN AFFAIRS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON.
LABOR ARBITER NIEVES V. DE CASTRO and JOSE C.
MAGNAYI, respondents.
VITUG, J.:
The questions raised in the petition for certiorari are a few
coincidental matters relative to the diplomatic immunity extended to
the Asian Development Bank ("ADB").
On 27 January 1993, private respondent initiated NLRC-NCR Case
No. 00-01-0690-93 for his alleged illegal dismissal by ADB and the
latter's violation of the "labor-only" contracting law. Two summonses
were served, one sent directly to the ADB and the other through the
Department of Foreign Affairs ("DFA"), both with a copy of the
complaint. Forthwith, the ADB and the DFA notified respondent
Labor Arbiter that the ADB, as well as its President and Office, were
covered by an immunity from legal process except for borrowings,
guaranties or the sale of securities pursuant to Article 50(1) and
Article 55 of the Agreement Establishing the Asian Development
Bank (the "Charter") in relation to Section 5 and Section 44 of
the Agreement Between The Bank And The Government Of The
Philippines Regarding The Bank's Headquarters (the "Headquarters
Agreement").
The Labor Arbiter took cognizance of the complaint on the
impression that the ADB had waived its diplomatic immunity from
suit. In time, the Labor Arbiter rendered his decision, dated 31
August 1993, that concluded:
WHEREFORE, above premises considered,
judgment is hereby rendered declaring the
complainant as a regular employee of respondent
ADB, and the termination of his services as
illegal. Accordingly, respondent Bank is hereby
ordered:
1. To immediately reinstate the complainant to
his former position effective September 16, 1993;
2. To pay complainant full backwages from
December 1, 1992 to September 15, 1993 in the
amount of P42,750.00 (P4,500.00 x 9 months);
3. And to pay complainants other benefits and
without loss of seniority rights and other
privileges and benefits due a regular employee of
Asian Development Bank from the time he was
terminated on December 31, 1992;
4. To pay 10% attorney's fees of the total
entitlements.1
The ADB did not appeal the decision. Instead, on 03 November 1993,
the DFA referred the matter to the National Labor Relations
Commission ("NLRC"); in its referral, the DFA sought a "formal
23
vacation of the void judgment." Replying to the letter, the NLRC
Chairman. wrote:
The undersigned submits that the request for the "investigation" of
Labor Arbiter Nieves de Castro, by the National Labor Relations
Commission, has been erroneously premised on Art. 218(c) of the
Labor Code, as cited in the letter of Secretary Padilla, considering
that the provision deals with "a question, matter or controversy within
its (the Commission) jurisdiction" obviously referring to a labor
disputewithin the ambit of Art. 217 (on jurisdiction of Labor Arbiters
and the Commission over labor cases).
The procedure, in the adjudication of labor cases, including raising of
defenses, is prescribed by law. The defense of immunity could have
been raised before the Labor Arbiter by a special appearance which,
naturally, may not be considered as a waiver of the very defense
being raised. Any decision thereafter is subject to legal remedies,
including appeals to the appropriate division of the Commission
and/or a petition for certiorari with the Supreme Court, under Rule
65 of the Rules of Court. Except where an appeal is seasonably and
properly made, neither the Commission nor the undersigned may
review, or even question, the property of any decision by a Labor
Arbiter. Incidentally, the Commission sits en banc (all fifteen
Commissioners) only to promulgate rules of procedure, or to
formulate policies (Art. 213, Labor Code).
On the other hand, while the undersigned exercises "administrative
supervision over the Commission and its regional branches and all its
personnel, including the Executive Labor Arbiters and Labor
Arbiters" (penultimate paragraph, Art. 213, Labor Code), he does not
have the competence to investigate or review any decision of a Labor
Arbiter. However, on the purely administrative aspect of the
decision-making process, he may cause that an misconduct,
malfeasance or misfeasance, upon complaint properly made.
If the Department of Foreign Affairs feels that the action of Labor
Arbiter Nieves de Castro constitutes misconduct, malfeasance or
misfeasance, it is suggested that an appropriate complaint be lodged
with the Office of the Ombudsman.
Thank you for kind attention. 2
Dissatisfied, the DFA lodged the instant petition for certiorari. In this
Court's resolution of 31 January 1994, respondents were required to
comment. Petitioner was later constrained to make an application for
a restraining order and/or writ of preliminary injunction following the
issuance, on 16 March 199, by the Labor Arbiter of a writ of
execution. In a resolution, dated 07 April 1994, the Court issued the
temporary restraining order prayed for.
The Office of the Solicitor General ("OSG"), in its comment of 26
May 1994, initially assailed the claim of immunity by the ADB.
Subsequently, however, it submitted a Manifestation (dated 20 June
1994) stating, among other things, that "after a thorough review of
the case and the records," it became convinced that ADB, indeed,
was correct in invoking its immunity from suit under the Charter and
the Headquarters Agreement.
The Court is of the same view.
Article 50(1) of the Charter provides:
The Bank shall enjoy immunity from every form of legal
process, except in cases arising out of or in connection with the
exercise of its powers to borrow money, to guarantee obligations, or
to buy and sell or underwrite the sale of securities. 3
Under Article 55 thereof —
All Governors, Directors, alternates, officers and employees of the
Bank, including experts performing missions for the Bank:
(1) shall be immune from legal process with respect of acts
performed by them in their official capacity, except when the Bank
waives the immunity. 4
Like provisions are found in the Headquarters Agreement. Thus, its
Section 5 reads:
The Bank shall enjoy immunity from every form of legal process,
except in cases arising out of, or in connection with, the exercise of
its powers to borrow money, to guarantee obligations, or to buy and
sell or underwrite the sale of securities. 5
And, with respect to certain officials of the bank, Section
44 of the agreement states:
Governors, other representatives of Members, Directors, the
president, Vice-President and executive officers as may be agreed
upon between the Government and the Bank shall enjoy, during their
stay in the Republic of the Philippines in connection with their
official duties with the Bank:
xxx xxx xxx
(b) Immunity from legal process of every kind in respect of words
spoken or written and all acts done by them in their official
capacity. 6
The above stipulations of both the Charter and Headquarters
Agreement should be able, may well enough, to establish that, except
in the specified cases of borrowing and guarantee operations, as well
as the purchase, sale and underwriting of securities, the ADB enjoys
immunity from legal process of every form. The Bank's officers, on
their part, enjoy immunity in respect of all acts performed by them in
their official capacity. The Charter and the Headquarters Agreement
granting these immunities and privileges are treaty covenants and
commitments voluntarily assumed by the Philippines government
which must be respected.
In World Health Organization vs. Aquino. 7 we have declared:
It is a recognized principle of international law and under our system
of separation of powers that diplomatic immunity is essentially a
political question and courts should refuse to look beyond a
determination by the executive branch of the government, and where
the plea of diplomatic immunity is recognized and affirmed by the
executive branch of the government . . . it is then the duty of the
courts to accept the claim of immunity upon appropriate suggestion
by the principal law officer of the government, . . . or other officer
acting under his direction. Hence, in adherence to the settled principle
that courts may not so exercise their jurisdiction . . . as to embarrass
the executive arm of the government in conducting foreign relations,
it is accepted doctrine that in "such cases the judicial department of
24
government follows the action of the political branch and will not
embarrass the latter by assuming an antagonistic
jurisdiction." 8
To the same effect is the decision in International Catholic Migration
Commission vs. Calleja, 9 which has similarly deemed the
Memoranda of the Legal Adviser of the Department of Foreign
Affairs to be "a categorical recognition by the Executive Branch of
Government that ICMC . . . enjoy(s) immunities accorded to
international organizations" and which determination must be held
"conclusive upon the Courts in order not to embarrass a political
department of Government." In the instant case, the filing of the
petition by the DFA, in behalf of ADB, is itself an affirmance of the
government's own recognition of ADB's immunity.
Being an international organization that has been extended diplomatic
status, the ADB is independent of the municipal law. 10 In Southeast
Asian Fisheries Development Center vs. Acosta. 11 The Court has
cited with approval the opinion 12 of the Minister of justice; thus —
One of the basic immunities of an international organization is
immunity from local jurisdiction, i.e., that it is immune from the legal
writs and processes issued by the tribunals of the country where it is
found. (See Jenks, Id., pp. 37-44). The obvious reason for this is that
the subjection of such an organization to the authority of the local
courts would afford a convenient medium thru which the host
government may interfere in their operations or even influence or
control its policies and decisions of the organization; besides, such
subjection to local jurisdiction would impair the capacity of such
body to discharge its responsibilities impartially behalf of its
member-states. 13
Contrary to private respondent's assertion, the claim of immunity is
not here being raised for the first time, it has been invoked before the
forum of origin through communications sent by petitioner and the
ADB to the Labor Arbiter, as well as before the NLRC following the
rendition of the questioned judgment by the Labor Arbiter, but
evidently to no avail.
In its communication of 27 May 1993, the DFA, through the Office
of legal Affairs, has advised the NLRC:
Respectfully returned to the Honorable Domingo B. Mabazza, Labor
Arbitration Associate Commission, National Labor Relations
Commission, National Capital Judicial Region, Arbitration Branch,
Associated Bank Bldg., T.M. Kalaw St., Ermita, Manila, the attached
Notice of Hearing addressed to the Asian Development Bank, in
connection with the aforestated case, for the reason stated in the
Department's 1st Indoresment dated 23 March 1993, copy attached,
which is self-explanatory.
In view of the fact that the Asian Development Bank (ADB) invokes
its immunity which is sustained by the Department of Foreign
Affairs, a continuos hearing of this case erodes the credibility of the
Philippine government before the international community, let alone
the negative implication of such a suit on the official relationship of
the Philippine government with the ADB.
For the Secretary of Foreign Affairs
Dear Secretary Confesor,
 I am writing to draw your attention to a case filed by a
certain Jose C. Magnayi against the Asian Development
Bank and its President, Kimmasa Tarumizu, before the
National Labor Relations Commission, National Capital
Region Arbitration Board (NLRC NCR Case No. 00-
01690-93).
Last March 8, the Labor Arbiter charged with the case, Ms.
Nieves V. de Castro, addressed a Notice of
Resolution/Order to the Bank which brought it to the
attention of the Department of Foreign Affairs on the
ground that the service of such notice was in violation of
the RP-ADB Headquarters Agreement which
provided, inter alia, for the immunity of the Bank, its
President and officers from every form of legal process,
except only, in cases of borrowings, guarantees or the sale
of securities.
The Department of Foreign Affairs, in turn, informed Labor
Arbiter Nieves V. de Castro of this fact by letter dated
March 22, copied to you.
Despite this, the labor arbiter in question persited to send
summons, the latest dated May 4, herewith attached,
regarding the Magnayi case.
The Supreme Court has long settled the matter of
diplomatic immunities. In WHO vs. Aquino, SCRA 48, it
ruled that courts should respect diplomatic immunities of
foreign officials recognized by the Supreme Court forms
part of the law of the land.
Perhaps you should point out to Labor Arbiter
Nieves V. de Castro that ignorance of the law is a
ground for dismissal.
Very truly yours,
(Sgd
There are two conflicting concept of sovereign immunity, each
widely held and firmly established. According to the classical or
absolute theory, a sovereign cannot, without its consent, be made a
respondent in the Courts of another
sovereign. According to the newer or restrictive
theory, the immunity of the sovereign is
recognized only with regard to public acts or
acts jure imperii of a state, but not with regard to
private act or acts jure gestionis.
xxx xxx xxx
Certainly, the mere entering into a contract by a
foreign state with a private party cannot be the
ultimate test. Such an act can only be the start of
the inquiry. The logical question is whether the
foreign state is engaged in the activity in regular
course of business. If the foreign state is not
engaged regularly in a business or trade, the
particular act or transaction must then be tested
by its nature. If the act is in pursuit of a sovereign
activity, or an incident thereof, then it is an
25
act jure imperit, especially when it is not
undertaken for gain or profit. 17
The service contracts referred to by private respondent have
not been intended by the ADB for profit or gain but are
official acts over which a waiver of immunity would not
attack.
With regard to the issue of whether or not the DFA has the legal
standing to file the present petition, and whether or not petitioner has
regarded the basic rule that certiorari can be availed of only when
there is no appeal nor plain, speedy and adequate remedy in the
ordinary course of law, we hold both in the affirmative.
The DFA's function includes, among its other mandates, the
determination of persons and institutions covered by diplomatic
immunities, a determination which, when challenge, entitles it to seek
relief from the court so ass not to seriously impair the conduct of the
country's foreign relations. The DFA must be allowed to plead its
case whenever necessary or advisable to enable it to help keep the
credibility of the Philippine government before the international
community. When international agreements are concluded, the
parties therto are deemed to have likewise accepted the responsibility
of seeing to it that their agreements are duly regarded. In our country,
this task falls principally of the DFA as being the highest executive
department with the competence and authority to so act in this aspect
of the international arena. 18 In Holy See vs. Hon. Rosario, Jr., 19 this
Court has explained the matter in good datail; viz:
In Public International Law, when a state or
international agency wishes to plead sovereign or
diplomatic immunity in a foreign court, it
requests the Foreign Office of the state where it is
sued to convey to the court that said defendant is
entitled to immunity.
In the United States, the procedure followed is
the process of "suggestion," where the foreign
state or the international organization sued in an
American court requests the Secretary of State to
make a determination as to whether it is entitled
to immunity. If the Secretary of State finds that
the defendant is immune from suit, he, in turn,
asks the attorney General to submit to the court a
"suggestion" that the defendant is entitled to
immunity. In England, a similar procedure is
followed, only the Foreign Office issues a
certification to the effect instead of submitting a
"suggestion" (O'Connell, In International Law
130 [1965]; Note: Immunity from Suit of Foreign
Sovereign Instrumentalities and Obligations 50
Yale Law Journal 1088 [1941]).
In the Philippines, the practice is for the foreign
government or the international organization to
first secure an executive endorsement of its claim
of sovereign or diplomatic immunity. But how
the Philippine Foreign Office conveys its
endorsement to the courts varies. In International
Catholic Migration Commission vs. Calleja, 190
SCRA 130 (1990), the Secretary of Foreign
Affairs just sent a letter directly to the Secretary
of Labor and Employment, informing the latter
that the respondent-employer could not be sued
 because it enjoyed diplomatic immunity.
In World Health Organization vs. Aquino, 48
SCRA 242 (1972), the Secretary of Foreign
Affairs sent the trial court a telegram to that
effect. In Baer vs. Tizon, 57 SCRA 1 (1974), the
U.S. Embassy asked the Secretary of Foreign
Affairs to request the Solicitor General to make,
in behalf of the Commander of the United States
Naval Base at Olongapo City, Zambales, a
"suggestion" to respondent Judge. The Solicitor
General embodied the "suggestion" in a
manifestation and memorandum as amicus
curiae.

In the case at bench, the Department of Foreign

Affairs, through the Office of Legal Affairs
moved with this Court to be allowed to intervene
on the side of petitioner. The Court allowed the
said Department to file its memorandum in
support of petitioner's claim of sovereign
immunity.

In some cases, the defense of sovereign immunity

was submitted directly to the local courts by the
respondents through their private counsels
(Raquiza vs. Bradford, 75 Phil. 50 [1945];
Miquiabas vs. Philippine-Ryukyus Command, 80
Phil. 262 [1948]; United States of America vs.
Guinto, 182 SCRA 644 [1990] and companion
cases). In cases where the foreign states bypass
the Foreign Office, the courts can in quire into
the facts and make their own determination as to
the nature of the acts and transactions involved. 20

Relative to the property of the extraordinary remedy of certiorari, the

Court has, under special circumstances, so allowed and entertained
such a petition when (a) the questioned order or decision is issued in
excess of or without jurisdiction, 21 or (b) where the order or decision
is a patent nullity, 22 which, verily, are the circumstances that can be
said to obtain in the present case. When an adjudicator is devoid of
jurisdiction on a matter before him, his action that assumes otherwise
would be a clear nullity.

WHEREFORE, the petition for certiorari is GRANTED, and the

decision of the Labor Arbiter, dated 31 August 1993 is VACATED,
for being NULL AND VOID. The temporary restraining order issued
by this Court on 07 April 1994 is hereby made permanent. No costs.

SO ORDERED.

26
G.R. No. 76607 February 26, 1990 On February 24, 1986, the Western Pacific Contracting Office,
Okinawa Area Exchange, U.S. Air Force, solicited bids for such
UNITED STATES OF AMERICA, FREDERICK M. SMOUSE contracts through its contracting officer, James F. Shaw. Among
AND YVONNE REEVES, petitioners, those who submitted their bids were private respondents Roberto
vs. T. Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Valencia had been a concessionaire inside Clark for 34 years; del
Regional Trial Court, Angeles City, ROBERTO T. VALENCIA, Pilar for 12 years; and Tanglao for 50 years.
EMERENCIANA C. TANGLAO, AND PABLO C. DEL
PILAR, respondents. The bidding was won by Ramon Dizon, over the objection of the
private respondents, who claimed that he had made a bid for
G.R. No. 79470 February 26, 1990 four facilities, including the Civil Engineering Area, which was
not included in the invitation to bid.
UNITED STATES OF AMERICA, ANTHONY LAMACHIA,
T/SGT. USAF, WILFREDO BELSA, PETER ORASCION AND The private respondents complained to the Philippine Area
ROSE CARTALLA, petitioners, Exchange (PHAX). The latter, through its representatives,
vs. petitioners Yvonne Reeves and Frederic M. Smouse explained
HON. RODOLFO D. RODRIGO, as Presiding Judge of Branch that the Civil Engineering concession had not been awarded to
7, Regional Trial Court (BAGUIO CITY), La Trinidad, Benguet Dizon as a result of the February 24, 1986 solicitation. Dizon was
and FABIAN GENOVE, respondents. already operating this concession, then known as the NCO club
concession, and the expiration of the contract had been extended
from June 30, 1986 to August 31, 1986. They further explained
G.R. No. 80018 February 26, 1990 that the solicitation of the CE barbershop would be available
only by the end of June and the private respondents would be
UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL notified.
D. DYE and STEVEN F. BOSTICK, petitioners,
vs. On June 30, 1986, the private respondents filed a complaint in
HON. JOSEFINA D. CEBALLOS, As Presiding Judge, Regional the court below to compel PHAX and the individual petitioners to
Trial Court, Branch 66, Capas, Tarlac, and LUIS cancel the award to defendant Dizon, to conduct a rebidding for
BAUTISTA, respondents. the barbershop concessions and to allow the private respondents
by a writ of preliminary injunction to continue operating the
G.R. No. 80258 February 26, 1990 concessions pending litigation. 1

UNITED STATES OF AMERICA, MAJOR GENERAL
MICHAEL P. C. CARNS, AIC ERNEST E. RIVENBURGH,
AIC ROBIN BLEVINS, SGT. NOEL A. GONZALES, SGT.
THOMAS MITCHELL, SGT. WAYNE L. BENJAMIN, ET
AL., petitioners,
vs.
HON. CONCEPCION S. ALARCON VERGARA, as Presiding
Judge, Branch 62 REGIONAL TRIAL COURT, Angeles City,
and RICKY SANCHEZ, FREDDIE SANCHEZ AKA FREDDIE
RIVERA, EDWIN MARIANO, AKA JESSIE DOLORES
SANGALANG, ET AL., respondents.
Luna, Sison & Manas Law Office for petitioners.
Upon the filing of the complaint, the respondent court issued
an ex parte order directing the individual petitioners to maintain
the status quo.
On July 22, 1986, the petitioners filed a motion to dismiss and
opposition to the petition for preliminary injunction on the
ground that the action was in effect a suit against the United
States of America, which had not waived its non-suability. The
individual defendants, as official employees of the U.S. Air Force,
were also immune from suit.
On the same date, July 22, 1986, the trial court denied the
application for a writ of preliminary injunction.

On October 10, 1988, the trial court denied the petitioners'

motion to dismiss, holding in part as follows:
CRUZ, J.:
From the pleadings thus far presented to this
These cases have been consolidated because they all involve the Court by the parties, the Court's attention is
doctrine of state immunity. The United States of America was not called by the relationship between the
impleaded in the complaints below but has moved to dismiss on plaintiffs as well as the defendants, including
the ground that they are in effect suits against it to which it has the US Government, in that prior to the
not consented. It is now contesting the denial of its motions by the bidding or solicitation in question, there was a
respondent judges. binding contract between the plaintiffs as well
as the defendants, including the US
In G.R. No. 76607, the private respondents are suing several Government. By virtue of said contract of
officers of the U.S. Air Force stationed in Clark Air Base in concession it is the Court's understanding that
connection with the bidding conducted by them for contracts for neither the US Government nor the herein
barber services in the said base. principal defendants would become the
employer/s of the plaintiffs but that the latter
are the employers themselves of the barbers,
etc. with the employer, the plaintiffs herein,
27
 remitting the stipulated percentage of
commissions to the Philippine Area Exchange.
The same circumstance would become in effect
when the Philippine Area Exchange opened
for bidding or solicitation the questioned
barber shop concessions. To this extent,
therefore, indeed a commercial transaction
has been entered, and for purposes of the said
solicitation, would necessarily be entered
between the plaintiffs as well as the
defendants.
The Court, further, is of the view that Article
XVIII of the RP-US Bases Agreement does not
cover such kind of services falling under the
concessionaireship, such as a barber shop
concession. 2
On December 11, 1986, following the filing of the herein petition
for certiorari and prohibition with preliminary injunction, we issued
a temporary restraining order against further proceedings in the court
below. 3
In G.R. No. 79470, Fabian Genove filed a complaint for damages
against petitioners Anthony Lamachia, Wilfredo Belsa, Rose Cartalla
and Peter Orascion for his dismissal as cook in the U.S. Air Force
Recreation Center at the John Hay Air Station in Baguio City. It had
been ascertained after investigation, from the testimony of Belsa
Cartalla and Orascion, that Genove had poured urine into the soup
stock used in cooking the vegetables served to the club customers.
Lamachia, as club manager, suspended him and thereafter referred
the case to a board of arbitrators conformably to the collective
bargaining agreement between the Center and its employees. The
board unanimously found him guilty and recommended his dismissal.
This was effected on March 5, 1986, by Col. David C. Kimball,
Commander of the 3rd Combat Support Group, PACAF Clark Air
Force Base. Genove's reaction was to file Ms complaint in the
Regional Trial Court of Baguio City against the individual
petitioners. 4
On March 13, 1987, the defendants, joined by the United States of
America, moved to dismiss the complaint, alleging that Lamachia, as
an officer of the U.S. Air Force stationed at John Hay Air Station,
was immune from suit for the acts done by him in his official
capacity. They argued that the suit was in effect against the United
States, which had not given its consent to be sued.
This motion was denied by the respondent judge on June 4, 1987, in
an order which read in part:
It is the understanding of the Court, based on the
allegations of the complaint — which have been
hypothetically admitted by defendants upon the
filing of their motion to dismiss — that although
defendants acted initially in their official
capacities, their going beyond what their
functions called for brought them out of the
protective mantle of whatever immunities they
may have had in the beginning. Thus, the
allegation that the acts complained of were
illegal, done. with extreme bad faith and with
pre-conceived sinister plan to harass and finally
dismiss the plaintiff, gains significance. 5
28
The petitioners then came to this Court seeking certiorari and
prohibition with preliminary injunction.
In G.R. No. 80018, Luis Bautista, who was employed as a barracks
boy in Camp O' Donnell, an extension of Clark Air Base, was
arrested following a buy-bust operation conducted by the individual
petitioners herein, namely, Tomi J. King, Darrel D. Dye and Stephen
F. Bostick, officers of the U.S. Air Force and special agents of the
Air Force Office of Special Investigators (AFOSI). On the basis of
the sworn statements made by them, an information for violation of
R.A. 6425, otherwise known as the Dangerous Drugs Act, was filed
against Bautista in the Regional Trial Court of Tarlac. The above-
named officers testified against him at his trial. As a result of the
filing of the charge, Bautista was dismissed from his employment. He
then filed a complaint for damages against the individual petitioners
herein claiming that it was because of their acts that he was
removed. 6
During the period for filing of the answer, Mariano Y. Navarro a
special counsel assigned to the International Law Division, Office of
the Staff Judge Advocate of Clark Air Base, entered a special
appearance for the defendants and moved for an extension within
which to file an "answer and/or other pleadings." His reason was that
the Attorney General of the United States had not yet designated
counsel to represent the defendants, who were being sued for their
official acts. Within the extended period, the defendants, without the
assistance of counsel or authority from the U.S. Department of
Justice, filed their answer. They alleged therein as affirmative
defenses that they had only done their duty in the enforcement of the
laws of the Philippines inside the American bases pursuant to the RP-
US Military Bases Agreement.
On May 7, 1987, the law firm of Luna, Sison and Manas, having
been retained to represent the defendants, filed with leave of court a
motion to withdraw the answer and dismiss the complaint. The
ground invoked was that the defendants were acting in their official
capacity when they did the acts complained of and that the complaint
against them was in effect a suit against the United States without its
consent.
The motion was denied by the respondent judge in his order dated
September 11, 1987, which held that the claimed immunity under the
Military Bases Agreement covered only criminal and not civil cases.
Moreover, the defendants had come under the jurisdiction of the
court when they submitted their answer.7
Following the filing of the herein petition for certiorari and
prohibition with preliminary injunction, we issued on October 14,
1987, a temporary restraining order. 8
In G.R. No. 80258, a complaint for damages was filed by the private
respondents against the herein petitioners (except the United States of
America), for injuries allegedly sustained by the plaintiffs as a result
of the acts of the defendants. 9 There is a conflict of factual
allegations here. According to the plaintiffs, the defendants beat them
up, handcuffed them and unleashed dogs on them which bit them in
several parts of their bodies and caused extensive injuries to them.
The defendants deny this and claim the plaintiffs were arrested for
theft and were bitten by the dogs because they were struggling and
resisting arrest, The defendants stress that the dogs were called off
and the plaintiffs were immediately taken to the medical center for
treatment of their wounds.
In a motion to dismiss the complaint, the United States of America
and the individually named defendants argued that the suit was in
effect a suit against the United States, which had not given its consent
to be sued. The defendants were also immune from suit under the RP-
US Bases Treaty for acts done by them in the performance of their
official functions.
The motion to dismiss was denied by the trial court in its order dated
August 10, 1987, reading in part as follows:
The defendants certainly cannot correctly argue
that they are immune from suit. The allegations,
of the complaint which is sought to be dismissed,
had to be hypothetically admitted and whatever
ground the defendants may have, had to be
ventilated during the trial of the case on the
merits. The complaint alleged criminal acts
against the individually-named defendants and
from the nature of said acts it could not be said
that they are Acts of State, for which immunity
should be invoked. If the Filipinos themselves are
duty bound to respect, obey and submit
themselves to the laws of the country, with more
reason, the members of the United States Armed
Forces who are being treated as guests of this
country should respect, obey and submit
themselves to its laws. 10
and so was the motion for reconsideration. The defendants submitted
their answer as required but subsequently filed their petition
for certiorari and prohibition with preliminary injunction with this
Court. We issued a temporary restraining order on October 27,
1987. 11
II
The rule that a state may not be sued without its consent, now
expressed in Article XVI, Section 3, of the 1987 Constitution, is one
of the generally accepted principles of international law that we have
adopted as part of the law of our land under Article II, Section 2. This
latter provision merely reiterates a policy earlier embodied in the
1935 and 1973 Constitutions and also intended to manifest our
resolve to abide by the rules of the international community.
Even without such affirmation, we would still be bound by the
generally accepted principles of international law under the doctrine
of incorporation. Under this doctrine, as accepted by the majority of
states, such principles are deemed incorporated in the law of every
civilized state as a condition and consequence of its membership in
the society of nations. Upon its admission to such society, the state is
automatically obligated to comply with these principles in its
relations with other states.
As applied to the local state, the doctrine of state immunity is based
on the justification given by Justice Holmes that "there can be no
legal right against the authority which makes the law on which the
right depends." 12 There are other practical reasons for the
enforcement of the doctrine. In the case of the foreign state sought to
be impleaded in the local jurisdiction, the added inhibition is
expressed in the maxim par in parem, non habet imperium. All states
are sovereign equals and cannot assert jurisdiction over one another.
A contrary disposition would, in the language of a celebrated case,
"unduly vex the peace of nations." 13
29
While the doctrine appears to prohibit only suits against the state
without its consent, it is also applicable to complaints filed against
officials of the state for acts allegedly performed by them in the
discharge of their duties. The rule is that if the judgment against such
officials will require the state itself to perform an affirmative act to
satisfy the same, such as the appropriation of the amount needed to
pay the damages awarded against them, the suit must be regarded as
against the state itself although it has not been formally
impleaded. 14 In such a situation, the state may move to dismiss the
complaint on the ground that it has been filed without its consent.
The doctrine is sometimes derisively called "the royal prerogative of
dishonesty" because of the privilege it grants the state to defeat any
legitimate claim against it by simply invoking its non-suability. That
is hardly fair, at least in democratic societies, for the state is not an
unfeeling tyrant unmoved by the valid claims of its citizens. In fact,
the doctrine is not absolute and does not say the state may not be sued
under any circumstance. On the contrary, the rule says that the state
may not be sued without its consent, which clearly imports that it
may be sued if it consents.
The consent of the state to be sued may be manifested expressly or
impliedly. Express consent may be embodied in a general law or a
special law. Consent is implied when the state enters into a contract
or it itself commences litigation.
The general law waiving the immunity of the state from suit is found
in Act No. 3083, under which the Philippine government "consents
and submits to be sued upon any moneyed claim involving liability
arising from contract, express or implied, which could serve as a
basis of civil action between private parties." In Merritt v.
Government of the Philippine Islands, 15 a special law was passed to
enable a person to sue the government for an alleged tort. When the
government enters into a contract, it is deemed to have descended to
the level of the other contracting party and divested of its sovereign
immunity from suit with its implied consent. 16 Waiver is also
implied when the government files a complaint, thus opening itself to
a counterclaim. 17
The above rules are subject to qualification. Express consent is
effected only by the will of the legislature through the medium of a
duly enacted statute. 18 We have held that not all contracts entered
into by the government will operate as a waiver of its non-suability;
distinction must be made between its sovereign and proprietary
acts. 19 As for the filing of a complaint by the government, suability
will result only where the government is claiming affirmative relief
from the defendant. 20
In the case of the United States of America, the customary rule of
international law on state immunity is expressed with more
specificity in the RP-US Bases Treaty. Article III thereof provides as
follows:
It is mutually agreed that the United States shall have the rights,
power and authority within the bases which are necessary for the
establishment, use, operation and defense thereof or appropriate for
the control thereof and all the rights, power and authority within the
limits of the territorial waters and air space adjacent to, or in the
vicinity of, the bases which are necessary to provide access to them
or appropriate for their control.
The petitioners also rely heavily on Baer v. Tizon, 21 along with
several other decisions, to support their position that they are not
suable in the cases below, the United States not having waived its
sovereign immunity from suit. It is emphasized that in Baer, the
Court held:
The invocation of the doctrine of immunity from suit of a foreign
state without its consent is appropriate. More specifically, insofar as
alien armed forces is concerned, the starting point is Raquiza v.
Bradford, a 1945 decision. In dismissing a habeas corpus petition for
the release of petitioners confined by American army authorities,
Justice Hilado speaking for the Court, cited Coleman v. Tennessee,
where it was explicitly declared: 'It is well settled that a foreign army,
permitted to march through a friendly country or to be stationed in it,
by permission of its government or sovereign, is exempt from the
civil and criminal jurisdiction of the place.' Two years later, in Tubb
and Tedrow v. Griess, this Court relied on the ruling in Raquiza v.
Bradford and cited in support thereof excerpts from the works of the
following authoritative writers: Vattel, Wheaton, Hall, Lawrence,
Oppenheim, Westlake, Hyde, and McNair and Lauterpacht. Accuracy
demands the clarification that after the conclusion of the Philippine-
American Military Bases Agreement, the treaty provisions should
control on such matter, the assumption being that there was a
manifestation of the submission to jurisdiction on the part of the
foreign power whenever appropriate. More to the point is Syquia v.
Almeda Lopez, where plaintiffs as lessors sued the Commanding
General of the United States Army in the Philippines, seeking the
restoration to them of the apartment buildings they owned leased to
the United States armed forces stationed in the Manila area. A motion
to dismiss on the ground of non-suability was filed and upheld by
respondent Judge. The matter was taken to this Court in a mandamus
proceeding. It failed. It was the ruling that respondent Judge acted
correctly considering that the 4 action must be considered as one
against the U.S. Government. The opinion of Justice Montemayor
continued: 'It is clear that the courts of the Philippines including the
Municipal Court of Manila have no jurisdiction over the present case
for unlawful detainer. The question of lack of jurisdiction was raised
and interposed at the very beginning of the action. The U.S.
Government has not given its consent to the filing of this suit which
is essentially against her, though not in name. Moreover, this is not
only a case of a citizen filing a suit against his own Government
without the latter's consent but it is of a citizen firing an action
against a foreign government without said government's consent,
which renders more obvious the lack of jurisdiction of the courts of
his country. The principles of law behind this rule are so elementary
and of such general acceptance that we deem it unnecessary to cite
authorities in support thereof then came Marvel Building Corporation
v. Philippine War Damage Commission, where respondent, a United
States Agency established to compensate damages suffered by the
Philippines during World War II was held as falling within the above
doctrine as the suit against it would eventually be a charge against or
financial liability of the United States Government because ... , the
Commission has no funds of its own for the purpose of paying money
judgments.' The Syquia ruling was again explicitly relied upon
in Marquez Lim v. Nelson, involving a complaint for the recovery of
a motor launch, plus damages, the special defense interposed being
'that the vessel belonged to the United States Government, that the
defendants merely acted as agents of said Government, and that the
United States Government is therefore the real party in interest.' So it
was in Philippine Alien Property Administration v. Castelo, where it
was held that a suit against Alien Property Custodian and the
Attorney General of the United States involving vested property
under the Trading with the Enemy Act is in substance a suit against
the United States. To the same effect is Parreno v. McGranery, as the
following excerpt from the opinion of justice Tuazon clearly shows:
'It is a widely accepted principle of international law, which is made a
part of the law of the land (Article II, Section 3 of the Constitution),
that a foreign state may not be brought to suit before the courts of
another state or its own courts without its consent.' Finally, there
30
is Johnson v. Turner, an appeal by the defendant, then Commanding
General, Philippine Command (Air Force, with office at Clark Field)
from a decision ordering the return to plaintiff of the confiscated
military payment certificates known as scrip money. In reversing the
lower court decision, this Tribunal, through Justice Montemayor,
relied on Syquia v. Almeda Lopez, explaining why it could not be
sustained.
It bears stressing at this point that the above observations do not
confer on the United States of America a blanket immunity for all
acts done by it or its agents in the Philippines. Neither may the other
petitioners claim that they are also insulated from suit in this country
merely because they have acted as agents of the United States in the
discharge of their official functions.
There is no question that the United States of America, like any other
state, will be deemed to have impliedly waived its non-suability if it
has entered into a contract in its proprietary or private capacity. It is
only when the contract involves its sovereign or governmental
capacity that no such waiver may be implied. This was our ruling
in UnitedStates of America v. Ruiz, 22 where the transaction in
question dealt with the improvement of the wharves in the naval
installation at Subic Bay. As this was a clearly governmental
function, we held that the contract did not operate to divest the
United States of its sovereign immunity from suit. In the words of
Justice Vicente Abad Santos:
The traditional rule of immunity exempts a State from being sued in
the courts of another State without its consent or waiver. This rule is
a necessary consequence of the principles of independence and
equality of States. However, the rules of International Law are not
petrified; they are constantly developing and evolving. And because
the activities of states have multiplied, it has been necessary to
distinguish them — between sovereign and governmental acts (jure
imperii) and private, commercial and proprietary acts (jure gestionis).
The result is that State immunity now extends only to acts jure
imperii The restrictive application of State immunity is now the rule
in the United States, the United kingdom and other states in Western
Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only when the
proceedings arise out of commercial transactions of the foreign
sovereign, its commercial activities or economic affairs. Stated
differently, a State may be said to have descended to the level of an
individual and can thus be deemed to have tacitly given its consent to
be sued only when it enters into business contracts. It does not apply
where the contract relates to the exercise of its sovereign functions. In
this case the projects are an integral part of the naval base which is
devoted to the defense of both the United States and the Philippines,
indisputably a function of the government of the highest order; they
are not utilized for nor dedicated to commercial or business purposes.
The other petitioners in the cases before us all aver they have acted in
the discharge of their official functions as officers or agents of the
United States. However, this is a matter of evidence. The charges
against them may not be summarily dismissed on their mere assertion
that their acts are imputable to the United States of America, which
has not given its consent to be sued. In fact, the defendants are sought
to be held answerable for personal torts in which the United States
itself is not involved. If found liable, they and they alone must satisfy
the judgment.
In Festejo v. Fernando, 23 a bureau director, acting without any
authority whatsoever, appropriated private land and converted it into
public irrigation ditches. Sued for the value of the lots invalidly taken
by him, he moved to dismiss the complaint on the ground that the suit
was in effect against the Philippine government, which had not given
its consent to be sued. This Court sustained the denial of the motion
and held that the doctrine of state immunity was not applicable. The
director was being sued in his private capacity for a personal tort.
With these considerations in mind, we now proceed to resolve the
cases at hand.
III
It is clear from a study of the records of G.R. No. 80018 that the
individually-named petitioners therein were acting in the exercise of
their official functions when they conducted the buy-bust operation
against the complainant and thereafter testified against him at his
trial. The said petitioners were in fact connected with the Air Force
Office of Special Investigators and were charged precisely with the
function of preventing the distribution, possession and use of
prohibited drugs and prosecuting those guilty of such acts. It cannot
for a moment be imagined that they were acting in their private or
unofficial capacity when they apprehended and later testified against
the complainant. It follows that for discharging their duties as agents
of the United States, they cannot be directly impleaded for acts
imputable to their principal, which has not given its consent to be
sued. As we observed in Sanders v. Veridiano: 24
Given the official character of the above-
described letters, we have to conclude that the
petitioners were, legally speaking, being sued as
officers of the United States government. As they
have acted on behalf of that government, and
within the scope of their authority, it is that
government, and not the petitioners personally,
that is responsible for their acts.
The private respondent invokes Article 2180 of the Civil Code which
holds the government liable if it acts through a special agent. The
argument, it would seem, is premised on the ground that since the
officers are designated "special agents," the United States
government should be liable for their torts.
There seems to be a failure to distinguish between suability and
liability and a misconception that the two terms are synonymous.
Suability depends on the consent of the state to be sued, liability on
the applicable law and the established facts. The circumstance that a
state is suable does not necessarily mean that it is liable; on the other
hand, it can never be held liable if it does not first consent to be sued.
Liability is not conceded by the mere fact that the state has allowed
itself to be sued. When the state does waive its sovereign immunity, it
is only giving the plaintiff the chance to prove, if it can, that the
defendant is liable.
The said article establishes a rule of liability, not suability. The
government may be held liable under this rule only if it first allows
itself to be sued through any of the accepted forms of consent.
Moreover, the agent performing his regular functions is not a special
agent even if he is so denominated, as in the case at bar. No less
important, the said provision appears to regulate only the relations of
the local state with its inhabitants and, hence, applies only to the
31
Philippine government and not to foreign governments impleaded in
our courts.
We reject the conclusion of the trial court that the answer filed by the
special counsel of the Office of the Sheriff Judge Advocate of Clark
Air Base was a submission by the United States government to its
jurisdiction. As we noted in Republic v. Purisima, 25 express waiver
of immunity cannot be made by a mere counsel of the government
but must be effected through a duly-enacted statute. Neither does
such answer come under the implied forms of consent as earlier
discussed.
But even as we are certain that the individual petitioners in G.R. No.
80018 were acting in the discharge of their official functions, we
hesitate to make the same conclusion in G.R. No. 80258. The
contradictory factual allegations in this case deserve in our view a
closer study of what actually happened to the plaintiffs. The record is
too meager to indicate if the defendants were really discharging their
official duties or had actually exceeded their authority when the
incident in question occurred. Lacking this information, this Court
cannot directly decide this case. The needed inquiry must first be
made by the lower court so it may assess and resolve the conflicting
claims of the parties on the basis of the evidence that has yet to be
presented at the trial. Only after it shall have determined in what
capacity the petitioners were acting at the time of the incident in
question will this Court determine, if still necessary, if the doctrine of
state immunity is applicable.
In G.R. No. 79470, private respondent Genove was employed as a
cook in the Main Club located at the U.S. Air Force Recreation
Center, also known as the Open Mess Complex, at John Hay Air
Station. As manager of this complex, petitioner Lamachia is
responsible for eleven diversified activities generating an annual
income of $2 million. Under his executive management are three
service restaurants, a cafeteria, a bakery, a Class VI store, a coffee
and pantry shop, a main cashier cage, an administrative office, and a
decentralized warehouse which maintains a stock level of
$200,000.00 per month in resale items. He supervises 167 employees,
one of whom was Genove, with whom the United States government
has concluded a collective bargaining agreement.
From these circumstances, the Court can assume that the restaurant
services offered at the John Hay Air Station partake of the nature of a
business enterprise undertaken by the United States government in its
proprietary capacity. Such services are not extended to the American
servicemen for free as a perquisite of membership in the Armed
Forces of the United States. Neither does it appear that they are
exclusively offered to these servicemen; on the contrary, it is well
known that they are available to the general public as well, including
the tourists in Baguio City, many of whom make it a point to visit
John Hay for this reason. All persons availing themselves of this
facility pay for the privilege like all other customers as in ordinary
restaurants. Although the prices are concededly reasonable and
relatively low, such services are undoubtedly operated for profit, as a
commercial and not a governmental activity.
The consequence of this finding is that the petitioners cannot invoke
the doctrine of state immunity to justify the dismissal of the damage
suit against them by Genove. Such defense will not prosper even if it
be established that they were acting as agents of the United States
when they investigated and later dismissed Genove. For that matter,
not even the United States government itself can claim such
immunity. The reason is that by entering into the employment
contract with Genove in the discharge of its proprietary functions, it
impliedly divested itself of its sovereign immunity from suit.
But these considerations notwithstanding, we hold that the complaint WHEREFORE, after considering all the above premises, the Court
against the petitioners in the court below must still be dismissed. hereby renders judgment as follows:
While suable, the petitioners are nevertheless not liable. It is obvious
that the claim for damages cannot be allowed on the strength of the 1. In G.R. No. 76607, the petition is DISMISSED and the
evidence before us, which we have carefully examined. respondent judge is directed to proceed with the hearing
and decision of Civil Case No. 4772. The temporary
The dismissal of the private respondent was decided upon only after a restraining order dated December 11, 1986, is LIFTED.
thorough investigation where it was established beyond doubt that he
had polluted the soup stock with urine. The investigation, in fact, did 2. In G.R. No. 79470, the petition is GRANTED and Civil
not stop there. Despite the definitive finding of Genove's guilt, the Case No. 829-R(298) is DISMISSED.
case was still referred to the board of arbitrators provided for in the
collective bargaining agreement. This board unanimously affirmed
the findings of the investigators and recommended Genove's 3. In G.R. No. 80018, the petition is GRANTED and Civil
dismissal. There was nothing arbitrary about the proceedings. The Case No. 115-C-87 is DISMISSED. The temporary
petitioners acted quite properly in terminating the private restraining order dated October 14, 1987, is made
respondent's employment for his unbelievably nauseating act. It is permanent.
surprising that he should still have the temerity to file his complaint
for damages after committing his utterly disgusting offense. 4. In G.R. No. 80258, the petition is DISMISSED and the
respondent court is directed to proceed with the hearing and
Concerning G.R. No. 76607, we also find that the barbershops decision of Civil Case No. 4996. The temporary restraining
subject of the concessions granted by the United States government order dated October 27, 1987, is LIFTED.
are commercial enterprises operated by private person's. They are not
agencies of the United States Armed Forces nor are their facilities All without any pronouncement as to costs.
demandable as a matter of right by the American servicemen. These
establishments provide for the grooming needs of their customers and SO ORDERED.
offer not only the basic haircut and shave (as required in most
military organizations) but such other amenities as shampoo,
massage, manicure and other similar indulgences. And all for a fee.
Interestingly, one of the concessionaires, private respondent
Valencia, was even sent abroad to improve his tonsorial business,
presumably for the benefit of his customers. No less significantly, if
not more so, all the barbershop concessionaires are under the terms of
their contracts, required to remit to the United States government
fixed commissions in consideration of the exclusive concessions
granted to them in their respective areas.

This being the case, the petitioners cannot plead any immunity from
the complaint filed by the private respondents in the court below. The
contracts in question being decidedly commercial, the conclusion
reached in the United States of America v. Ruiz case cannot be
applied here.

The Court would have directly resolved the claims against the
defendants as we have done in G.R. No. 79470, except for the paucity
of the record in the case at hand. The evidence of the alleged
irregularity in the grant of the barbershop concessions is not before
us. This means that, as in G.R. No. 80258, the respondent court will
have to receive that evidence first, so it can later determine on the
basis thereof if the plaintiffs are entitled to the relief they seek.
Accordingly, this case must also be remanded to the court below for
further proceedings.

IV

There are a number of other cases now pending before us which also
involve the question of the immunity of the United States from the
jurisdiction of the Philippines. This is cause for regret, indeed, as they
mar the traditional friendship between two countries long allied in the
cause of democracy. It is hoped that the so-called "irritants" in their
relations will be resolved in a spirit of mutual accommodation and
respect, without the inconvenience and asperity of litigation and
always with justice to both parties.

32
G.R. No. 81490 August 31, 1988
HAGONOY WATER DISTRICT represented by its General
Manager CELESTINO S. VENGCO, petitioner,
vs.
THE HON. NATIONAL LABOR RELATIONS COMMISSION,
EXECUTIVE LABOR ARBITER VLADIMIR P.L. SAMPANG,
DEPUTY SHERIFF JOSE A. CRUZ and DANTE
VILLANUEVA, respondents.
Mario S. Jugco for petitioner.
Renato C. Guevara for private respondent Villanueva.
FELICIANO, J.:
The present petition for certiorari seeks to annul and set aside: a) the
decision of the Labor Arbiter dated 17 March 1987 in NLRC Case
No. RAB-III-8-2354-85, entitled "Dante Villanueva versus LWA-
Hagonoy Waterworks District/Miguel Santos;" and b) the Resolution
of the National Labor Relations Commission dated 20 August 1987
affirming the mentioned decision.
Private respondent Dante Villanueva was employed as service
foreman by petitioner Hagonoy Water District ("Hagonoy") from 3
January 1977 until 16 May 1985, when he was indefinitely suspended
and thereafter dismissed on 12 July 1985 for abandonment of work
and conflict of interest.
On 14 August 1985, private respondent filed a complaint for illegal
dismissal, illegal suspension and underpayment of wages and
emergency cost of living allowance against petitioner Hagonoy with
the then Ministry of Labor and Employment, Regional Arbitration
Branch III, San Fernando, Pampanga.
Petitioner immediately moved for outright dismissal of the complaint
on the ground of lack of jurisdiction. Being a government entity,
petitioner claimed, its personnel are governed by the provisions of the
Civil Service Law, not by the Labor Code, and protests concerning
the lawfulness of dismissals from the service fall within the
jurisdiction of the Civil Service Commission, not the Ministry of
Labor and Employment. Petitioner cited Resolution No. 1540 of the
Social Security Commission cancelling petitioner's compulsory
coverage from the system effective 16 May 1979 "considering the
rulings that local water districts are instrumentalities owned and
controlled by the government and that their officers and employees
are government employees." In opposing the motion, private
respondent Villanueva contended that local water districts, like
petitioner Hagonoy, though quasi-public corporations, are in the
nature of private corporations since they perform proprietary
functions for the government.
The Labor Arbiter proceeded to hear and try the case and, on 17
March 1986, rendered a Decision in favor of the private respondent
and against petitioner Hagonoy. The dispositive part of the decision
read:
WHEREFORE, premises considered, respondents are hereby ordered
to reinstate petitioner immediately to his former position as Service
Foreman, without loss of seniority rights and privileges, with full
33
backwages, including all benefits provided by law, from the date he
was terminated up to his actual date of reinstatement.
In addition, respondents are hereby ordered to pay the petitioner the
amount of P4,927.50 representing the underpayments of wages from
July 1983 to May 16, 1985.
SO ORDERED.
On appeal, the National Labor Relations Commission affirmed the
decision of the Labor Arbiter in a Resolution dated 20 August 1987.
The petitioner moved for reconsideration, insisting that public
respondents had no jurisdiction over the case. Meanwhile, a Writ of
Execution was issued by the Labor Arbiter on 16 November 1987.
The writ was enforced by garnishing petitioner Hagonoy's deposits
with the Planters Development Bank of Hagonoy.
Petitioner then filed a Motion to Quash the Writ of Execution with
Application for Writ of Preliminary Injunction arguing that the writ
was prematurely issued as its motion for reconsideration had not yet
been resolved. By Resolution dated 10 December 1987, public
respondent Commission denied the application for a preliminary
injunction. The motion to quash was similarly denied by the
Commission which directed petitioner to reinstate immediately
private respondent and to pay him the amount of P63,577.75 out of
petitioner's garnished deposits.
Hence, the instant petition.
The only question here in whether or not local water districts are
government owned or controlled corporations whose employees are
subject to the provisions of the Civil Service Law. The Labor Arbiter
asserted jurisdiction over the alleged illegal dismissal of private
respondent Villanueva by relying on Section 25 of Presidential
Decree No. 198, known as the "Provincial Water Utilities Act of
1973" which went into effect on 25 May 1973, and which provides as
follows:
Exemption from Civil Service. — The district and its
employees, being engaged in a proprietary function, are
hereby exempt from the provisions of the Civil Service
Law. Collective Bargaining shall be available only to
personnel below supervisory levels: Provided,
however, That the total of all salaries, wages, emoluments,
benefits or other compensation paid to all employees in any
month shall not exceed fifty percent (50%) of average net
monthly revenue, said net revenue representing income
from water sales and sewerage service charges, lease pro-
rata share of debt service and expenses for fuel or energy
for pumping during the preceding fiscal year.
The Labor Arbiter however failed to take into account the provisions
of Presidential Decree No. 1479, which went into effect on 11 June
1978. P.D. No. 1479 wiped away Section 25 of P.D. 198 quoted
above, and Section 26 of P.D. 198 was renumbered as Section 25 in
the following manner:
Section 26 of the same decree [P.D. 198] is hereby amended to read
as Section 25 as follows:
Section 25. Authorization. — The district may exercise all the powers
which are expressly granted by this Title or which are necessarily
implied from or incidental to the powers and purposes herein stated.
For the purpose of carrying out the objectives of this Act, a district is
hereby granted the power of eminent domain, the exercise thereof
shall, however, be subject to review by the Administration.
Thus, Section 25 of P.D. 198 exempting the employees of water
districts from the application of the Civil Service Law was removed
from the statute books.
This is not the first time that officials of the Department of Labor and
Employment have taken the position that the Labor Arbiter here
adopted. In Baguio Water District vs. Cresenciano B. Trajano, etc. et
al., 1 the petitioner Water District sought review of a decision of the
Bureau of Labor Relations which affirmed that of a Med-Arbiter
calling for a certification election among the regular rank-and-file
employees of the Baguio Water District (BWD). In granting the
petition, the Court said:
The Baguio Water District was formed pursuant to Title II-Local
Water District Law of P.D. No. 198, as amended, The BWD is by
Sec. 6 of that decree 'a quasi-public corporation performing public
service and supplying public wants.
A part of the public respondent's decision rendered in September,
1983, reads in part:
We find the appeal [of the BWD] to be devoid of merit. The records
show that the operation and administration of BWD is governed and
regulated by special laws, that is, Presidential Decrees Nos. 198 and
1479 which created local water districts throughout the country.
Section 25 of Presidential Decree (PD) 198 clearly provides that the
district and its employees shall be exempt from the provisions of the
Civil Service Law and that its personnel below supervisory level shall
have the right to collectively bargain. Contrary to appellant's claim,
said provision has not been amended much more abrogated expressly
or impliedly by PD 1479 which does not make mention of any matter
on Civil Service Law or collective bargaining. (Rollo, p. 590.)
We grant the petition for the following reasons:
1. Section 25 of P.D. No. 198 was repealed by
Sec. 3 of P.D. No. 1479; Sec. 26 of P.D. No. 198
was amended to read as Sec. 25 by Sec. 4 of P.D.
No. 1479. The amendatory decree took effect on
June 11, 1978.
xxx xxx xxx
3. The BWD is a corporation created pursuant to
a special law — P.D. No. 198, as amended. As
such its officers and employees are part of the
Civil Service. (Sec. 1, Art. XII-B, [1973]
Constitution; P.D. No. 686.)
The broader question of whether employees of government owned or
controlled corporations are governed by the Civil Service Law and
Civil Service Rules and Regulations was addressed by this Court in
1985 in National Housing Corporation vs. Juco. 2 After a review of
constitutional, statutory and case law on the matter, the Court,
through Mr. Justice Gutierrez, held:
There should no longer be any question at this
time that employees of government-owned or
34
controlled corporations are governed by the civil
service law and civil service rules and
regulations.
Section 1. Article XII-B of the [1973]
Constitution specifically provides:
The Civil Service embraces every branch,
agency, subdivision, and instrumentality of the
Government, including every government-owned
or controlled corporation. ...
The 1935 Constitution had a similar provision in
its Section 1, Article XII which stated:
A Civil Service embracing all branches and
subdivisions of the Government shall be provided
by law.
The inclusion of "government-owned or
controlled corporations" within the embrace of
the civil service shows a deliberate effort of the
framers to plug an earlier loophole which allowed
government-owned or controlled corporations to
avoid the full consequences of the all
encompassing coverage of the, civil service
system. The same explicit intent is shown by the
addition of "agency" and "instrumentality" to
branches and subdivisions of the Government.
All offices and firms of the government are
covered.
The amendments introduced in 1973 are not Idle
exercises or meaningless gestures. They carry the
strong message that civil service coverage is
broad and all-embracing insofar as employment
in the government in any of its governmental. or
corporate arms is concerned.
xxx xxx xxx
Section I of Article XII-B, [1973] Constitution
uses the word "every" to modify the phrase
"government-owned or controlled corporation."
"Every" means each one of a group, without
exception. It means all possible and all, taken one
by one. Of course, our decision in this case refers
to a corporation created as a government-owned
or controlled entity. It does not cover cases
involving private firms taken over by the
government in foreclosure or similar proceedings.
We reserve judgment on these latter cases when
the appropriate controversy is brought to this
Court. 3
In Juco, the Court spelled out the law on the issue at bar as such law
existed under the 1973 Constitution and the Provisional Constitution
of 1984, 4 until just before the effectivity of the 1987 Constitution.
Public respondent Commission, in confirming the Labor Arbiter's
assumption of jurisdiction over this case, apparently relied upon
Article IX (B), Section 2 (1) of the 1987 Constitution, which provides
that:
 [T]he Civil Service embraces ... government
owned or controlled corporations with original
charters.(Emphasis supplied)

The NLRC took the position that although petitioner Hagonoy is a

government owned or controlled corporation, it had no original
charter having been created simply by resolution of a local legislative
council. The NLRC concluded that therefore petitioner Hagonoy fell
outside the scope of the civil service.

At the time the dispute in the case at bar arose, and at the time the
Labor Arbiter rendered his decision (i.e., 17 March 1986), there is no
question that the applicable law was that spelled out in National
Housing Corporation vs. Juco (supra) and Baguio Water District vs.
Cresenciano B. Trajano (supra) and that under such applicable law,
the Labor Arbiter had no jurisdiction to render the decision that he in
fact rendered. By the time the public respondent Commission
rendered its decision of 20 August 1987 which is here assailed, the
1987 Constitution had already come into effect. 5 There is,
nonetheless, no necessity for this Court at the present time and in the
present case to pass upon the question of the effect of the provisions
of Article DC (B), Section 2 (1) of the 1987 Constitution upon the
pre-existing statutory and case law. For whatever that effect might be,
— and we will deal with that when an appropriate case comes before
the Court — we believe and so hold that the 1987 Constitution did
not operate retrospectively so as to confer jurisdiction upon the Labor
Arbiter to render a decision which, under the law applicable at the
time of the rendition of such decision, was clearly outside the scope
of competence of the Labor Arbiter. Thus, the respondent
Commission had nothing before it which it could pass upon in the
exercise of its appellate jurisdiction. For it is self-evident that a
decision rendered by the Labor Arbiter without jurisdiction over the
case is a complete nullity, vesting no rights and imposing no
liabilities.

ACCORDINGLY, the Petition for certiorari is GRANTED. The

decision of the Labor Arbiter dated 17 March 1986, and public
respondent Commission's Resolution dated 20 August 1987 and all
other Resolutions and Orders issued by the Commission in this case
subsequent thereto, are hereby SET ASIDE. This decision is,
however, without prejudice to the right of private respondent
Villanueva to refile, if he so wishes, this complaint in an appropriate
forum. No pronouncement as to costs.

SO ORDERED.

35
G.R. No. 104389 May 27, 1994
ZAMBOANGA CITY WATER DISTRICT, petitioner,
vs.
PRESIDING COMMISSIONER MUSIB M. BUAT,
COMMISSIONERS LEON G. GONZAGA, JR., and OSCAR N.
ABELLA, and PRIVATE RESPONDENTS LUIS C. MARIANO,
FELIX G. LAQUIO, FRANCISCO C. OLIVEROS, MARITTA
S. DELOS REYES, FRANCISBELLO D. CRUZ, EXEQUIEL M.
DAYOT, JR., ERIC A. DELGADO, RICARDO M. FERRER,
JOVITO DUHAYLUNGSOD, ANTONIO F. ALCANTARA,
RICARDO M. CORTEZ, TEOBALDO M. FLORES, ZOILO J.
CAPUY, BERNARDINO T. ALDINETE, ANGIEL M. ESPINA,
WINIFRIDO P. CASIMIRO, ENRIQUE M. MANUEL, JR.,
JOSE P. ATILANO, ANTONIO F. DELOS REYES, JR.,
ELEUTERIO S. TARROZA, ANTONIO B. DESPALO,
ROLANDO B. GARCIA, CESAR P. REYES, GENEROSO L.
CODINO, MARIO E. FERNANDO, BERNARDO B.
GEROLAGA, ANTONIO F. VESAGAS, ANTONIO L. TUBIG,
SAILILLA A. ABDULLA, NOEL A. FERNANDO,
SEVERIANO CASIMIRO, RODOLFO DESCALZO,
ARTEMIO DE LEON, and SANTIAGO FERRER, respondents.
Virginia M. Ramos for petitioner.
Abelardo Climaco, Jr. for private respondents.
QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of
Court to reverse and set aside the Resolutions dated October 24, 1991
and February 19, 1992 of the National Labor Relations Commission
(NLRC) in NLRC CA No. M-000352.
I Nos. 95219-20.
The Zamboanga City Water District, petitioner herein, is a
government-owned and controlled corporation engaged in the
business of supplying water in the City of Zamboanga. Private
respondents are all employees of petitioner.
In March 1987, a strike occurred in the company. It was conducted
and participated in by private respondents, for which reason they
were separated from their employment. Petitioner thereafter filed on
March 17, 1987 a complaint. before the Labor Arbiter to declare the
said strike illegal (NLRC Case No. RAB-IX-03-0090-87). The
following day, March 18, the Zamboanga Utilities Labor Union
(ZULU), to which private respondents belonged, filed before the
Labor Arbiter, a complaint against petitioner for illegal dismissal and
unpaid wages (NLRC Case No. RAB-IX-03-0092-87).
The two cases were consolidated and heard together, and on April 19,
1988, a consolidated decision was rendered by the Executive Labor
Arbiter declaring both the strike and the dismissal of private
respondents illegal and ordering the reinstatement of private
respondents to their former positions, without loss of seniority rights
and privileges, but without back wages.
Petitioner appealed to the NLRC. On July 17, 1990, the NLRC,
through respondent Commissioners, affirmed the decision of the
Executive Labor Arbiter, with the sole modification that the strike
36
leader, respondent Felix Laquio herein, be suspended from work
without pay for a period of six months, effective ten days from
receipt of the decision.
Petitioner received a copy of the decision of the NLRC on August 27
(Rollo, p. 32). Three days later, private respondents filed with the
Executive Labor Arbiter a motion for execution of the said decision.
On September 24, the Executive Labor Arbiter granted the writ of
execution and ordered petitioner to reinstate all private respondents.
On September 28, this Court issued a restraining order in G.R. Nos.
95219-20 enjoining, until further orders, the execution of the NLRC
Decision dated July 17, 1990. However, on March 13, 1991, we
dismissed the petition, affirmed the NLRC Decision dated July 17,
1990 and lifted the restraining order granted earlier.
Petitioner received a copy of the decision of the Supreme Court on
April 10 and on April 16, it reinstated 27 of the respondent
employees. On the same day, petitioner informed the Executive
Labor Arbiter that respondent Laquio would be reinstated on October
16 after the expiration of Laquio's six-month suspension.
On April 17, private respondents filed a motion to compel the
immediate reinstatement of respondent Laquio and the payment of
their back wages. According to private respondents, the decision of
the NLRC was executory immediately upon receipt by petitioner of a
copy thereof on August 27, 1990.
On May 17, the Executive Labor Arbiter issued an order denying
private respondents' motion. Private respondents then appealed to the
NLRC (NLRC CA No. M-00352). On October 24, the NLRC set
aside the questioned order of the Executive Labor Arbiter and
ordered respondent Laquio's reinstatement, if not yet reinstated, and
granted full back wages to him from March 6, 1991 up to the day
prior to his actual reinstatement; and to the other private respondents
from March 21, 1989 up to April 15, 1991, including the period of
effectivity of the temporary restraining order of this Court in G.R.
Petitioner moved for a reconsideration, which the NLRC however
denied on February 19, 1992.
Hence, this petition.
II
Petitioner contends that the NLRC had no jurisdiction to issue the
resolutions in question because jurisdiction over labor disputes is
vested in the Civil Service Commission. It also argues that the NLRC
committed grave abuse of discretion amounting to lack or in excess
of jurisdiction when it ordered the payment of the salaries of private
respondent during the effectivity of the restraining order of this Court
in G.R. Nos. 95219-20.
There is no dispute that petitioner, a water district with an original
charter, is a government-owned and controlled corporation. The
established rule is that the hiring and firing of employees of
government-owned and controlled corporations are governed by the
provisions of the Civil Service Law and Civil Service Rules and
Regulations (Tanjay Water District v. Gabaton, 172 SCRA 253
[1989]; Hagonoy Water District v. National Labor Relations
Commission, 165 SCRA 272 [1988]; National Housing Corporation
v. Juco, 134 SCRA 172 [1985]; Baguio Water District v. Trajano,
127 SCRA 730 [1984]. Jurisdiction over the strike and the dismissal bond by the employer shall not stay the execution
of private respondents is therefore lodged not with the NLRC but for reinstatement provided herein (Emphasis
with the Civil Service Commission. supplied).

Nevertheless, petitioner never raised the issue of lack of jurisdiction
before the Executive Labor Arbiter, the NLRC or even this Court in
G.R. Nos. 95219-20. In fact, petitioner itself filed the complaint
before the Executive Labor Arbiter in NLRC Case No. RAB-IX-03-
0090-87, sought affirmative relief therefrom and even participated
actively in the proceedings below. It is only now in this case before
us, after the NLRC ordered payment of back wages, that petitioner
raises the issue of lack of jurisdiction. Indeed, it is not fair for a party
who has voluntarily invoked the jurisdiction of a tribunal in a
particular matter to secure an affirmative relief therefrom, to
afterwards repudiate and deny that very same jurisdiction to escape a
penalty (Ocheda v. Court of Appeals, 214 SCRA 629 [1992]; Royales
v. Intermediate Appellate Court, 127 SCRA 470 [1984]; Tijam v.
Sibonghanoy, 23 SCRA 29 [1968]).
Petitioner is thus estopped from assailing the jurisdiction of the
NLRC and is bound to respect all the proceedings below.
The second issue involves the determination of when private
respondents should be reinstated as ordered by the decision of the
Executive Labor Arbiter dated April 19, 1988. Their salaries start to
toll from said date.
Petitioner claims that private respondents, except respondent Laquio,
were entitled to reinstatement only after April 10, 1991 when it
received a copy of the decision of the Supreme Court in G.R. Nos.
95219-20. Petitioner reinstated said private respondents on April 16,
1991. In the case of respondent Laquio, petitioner reinstated him on
October 16, 1991 after the expiration of the six-month suspension.
xxx xxx xxx
Under the said provision of law, the decision of the Labor Arbiter
reinstating a dismissed or separated employee insofar as the
reinstatement aspect is concerned, shall be immediately executory,
even pending appeal. The employer shall reinstate the employee
concerned either by: (a) actually admitting him back to work under
the same terms and conditions prevailing prior to his dismissal or
separation; or (b) at the option of the employer, merely reinstating
him in the payroll. Immediate reinstatement is mandated and is not
stayed by the fact that the employer has appealed, or has posted a
cash or surety bond pending appeal.
The issuance of the temporary restraining order in G.R. Nos. 95219-
20 did not nullify the rights of private respondents to their
reinstatement and to collect their wages during the period of the
effectivity of the order but merely suspended the implementation
thereof pending the determination of the validity of the NLRC
resolutions subject of the petition. Naturally, a finding of this Court
that private respondents were not entitled to reinstatement would
mean that they had no right to collect any back wages. On the other
hand, where the Court affirmed the decision of the NLRC and
recognized the right of private respondents to reinstatement, as in
G.R. Nos. 95219-20, private respondents are entitled to the wages
accruing during the effectivity of the temporary restraining order.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.

Petitioner argues that the execution of the NLRC decision dated July
17, 1990 was suspended by the temporary restraining order issued by
this Court in G.R. Nos. 95219-20.

The Executive Labor Arbiter agreed with petitioner's contention.

The NLRC was of the view that private respondents should have
been reinstated on March 21, 1989 and paid their back wages from
that date to April 15, 1991 including the period of effectivity of the
temporary restraining order of this Court in G.R. Nos. 95219-20.
Respondent Laquio on the other hand, should have been reinstated on
March 6, 1991 and paid his back wages from said date up to the day
prior to his actual reinstatement.

The reckoning date of March 21, 1989 used by the NLRC was the
date of effectivity of R.A. No. 6715, amending the third paragraph of
Article 223 of the Labor Code which provides.

xxx xxx xxx

In any event, the decision of the Labor Arbiter

reinstating a dismissed or separated employee,
insofar as the reinstatement aspect is
concerned, shall immediately be executory, even
pending appeal. The employee shall either be
admitted back to work under the same terms and
conditions prevailing prior to his dismissal or
separation or, at the option of the employer,
merely reinstated in the payroll. The posting of a
37