G.R. No.

169207 March 25, 2010

(for continuous service)

WPP MARKETING COMMUNICATIONS, INC., JOHN STEEDMAN, MARK WEBSTER, and NOMINADA Office :
LANSANG, Petitioners,
vs.
JOCELYN M. GALERA, Respondent.
6. Housing Allowance

DECISION
The Company will provide
other associated costs) of
CARPIO, Acting C.J.:
7. Other benefits.
The Case
The Company will provide
G.R. Nos. 169207 and 169239 are petitions for review1 assailing the Decision2 promulgated on 14 April 2005 as well
as the Resolution3 promulgated on 1 August 2005 of the Court of Appeals (appellate court) in CA-G.R. SP No.
78721. The appellate court granted and gave due course to the petition filed by Jocelyn M. Galera (Galera). The The Company will continu
appellate court’s decision reversed and set aside that of the National Labor Relations Commission (NLRC), and amount not exceeding Pe
directed WPP Marketing Communications, Inc. (WPP) to pay Galera backwages, separation pay, unpaid housing provided by JWT Manila.
benefit, unpaid personal and accident insurance benefits, cash value under the company’s pension plan, 30 days
paid holiday benefit, moral damages, exemplary damages, 10% of the total judgment award as attorney’s fees, and The Company will reimbu
costs of the suit. and the related shipping a
If you leave the Company
The Facts relocation as described th

You will participate in the

The appellate court narrated the facts as follows:
to transfer this benefit to a

Petitioner is Jocelyn Galera (GALERA), a [sic] American citizen who was recruited from the United States of America
by private respondent John Steedman, Chairman-WPP Worldwide and Chief Executive Officer of Mindshare, Co., a 8. Holidays
corporation based in Hong Kong, China, to work in the Philippines for private respondent WPP Marketing
Communications, Inc. (WPP), a corporation registered and operating under the laws of Philippines. GALERA You are entitled to 20 day
accepted the offer and she signed an Employment Contract entitled "Confirmation of Appointment and Statement of times agreed with the Com
Terms and Conditions" (Annex B to Petition for Certiorari). The relevant portions of the contract entered into between will not normally be allowe
the parties are as follows: employment, unless you h
unused accrued holiday p
final salary payment.
Particulars:
9. Leave Due to Sickness or Injury
Name : Jocelyn M. Galera
The maximum provision fo
Address : 163 Mediterranean Avenue
Hayward, CA 94544
12. Invention/Know-How
Position : Managing Director
Mindshare Philippines Any discovery, invention,
ups made, discovered or c
Annual Salary : Peso 3,924,000 the business of the Comp
required to do so by the C
Start Date : 1 September 1999 at the expense of the com
all other rights, title and in
improvement in procedure
Commencement Date : 1 September 1999
Nominee) absolutely and

14. Notice. xxxx

The first three months of your employment will be a trial period during which either you or the Company Considering the work performance a
may terminate your employment on one week’s notice. If at the end of that period, the Company is alleged claim of incompetence by he
satisfied with your performance, you will become a permanent employee. Thereafter you will give been able to generate enormous am
Company and the Company will give you three months notice of termination of employment. The above is liked as a leader by her subordinate
always subject to the following: (1) the Company’s right to terminate the contract of employment on no or respondents.
short notice where you are in breach of contract; (2) your employment will at any event cease without
notice on your retirement date when you are 60 years of age.
A man’s job being a property right d
defend himself is liable for damages
SIGNED JOCELYN M. GALERA 8-16-99 the employment of his worker based
Date of Birth [sic] 12-25-55 situation. The unflinching rule in illeg

Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the In the instant case, respondents hav
instruction of the CEO and upon signing of the contract, without any further action from the Board of Directors of allegations remain and stand absen
private respondent WPP. against respondents who clearly hav
procedural due process.5
Four months had passed when private respondent WPP filed before the Bureau of Immigration an application for
petitioner GALERA to receive a working visa, wherein she was designated as Vice President of WPP. Petitioner The dispositive portion of Arbiter Ma
alleged that she was constrained to sign the application in order that she could remain in the Philippines and retain
her employment.
WHEREFORE, premises considered
and award to [Galera], by virtue of h
Then, on December 14, 2000, petitioner GALERA alleged she was verbally notified by private respondent
STEEDMAN that her services had been terminated from private respondent WPP. A termination letter followed the
a. Reinstatement without
next day.4

b. Backwages amounting
On 3 January 2001, Galera filed a complaint for illegal dismissal, holiday pay, service incentive leave pay, 13th
transportation and housin
month pay, incentive plan, actual and moral damages, and attorney’s fees against WPP and/or John Steedman
(Steedman), Mark Webster (Webster) and Nominada Lansang (Lansang). The case was docketed as NLRC NCR
Case No. 30-01-00044-01. c. Remuneration for busin
(₱2,850,000.00) and Med
total of not less than One
The Labor Arbiter’s Ruling

d. US Tax Protection of up
In his Decision dated 31 January 2002, Labor Arbiter Edgardo M. Madriaga (Arbiter Madriaga) held WPP, Steedman,
Webster, and Lansang liable for illegal dismissal and damages. Arbiter Madriaga stated that Galera was not only
illegally dismissed but was also not accorded due process. Arbiter Madriaga explained, thus: e. Moral damages includin
(US$2,000,000.00).
[WPP] failed to observe the two-notice rule. [WPP] through respondent Steedman for a five (5) minute meeting on
December 14, 2000 where she was verbally told that as of that day, her employment was being terminated. [WPP] f. Exemplary damages eq
did not give [Galera] an opportunity to defend herself and explain her side. [Galera] was even prohibited from
reporting for work that day and was told not to report for work the next day as it would be awkward for her and
respondent Steedman to be in the same premises after her termination. [WPP] only served [Galera] her written g. Attorney’s fees of 10%
notice of termination only on 15 December 2001, one day after she was verbally apprised thereof.
SO ORDERED.6
The law mandates that the dismissal must be properly done otherwise, the termination is gravely defective and may
be declared unlawful as we hereby hold [Galera’s] dismissal to be illegal and unlawful. Where there is no showing of
a clear, valid and legal cause for the termination of employment, the law considers the matter a case of illegal
dismissal and the burden is on the employer to prove that the termination was for a valid or authorized cause. The
law mandates that both the substantive and procedural aspects of due process should be observed. The facts clearly The First Division of the NLRC rever
show that respondents were remiss on both aspects. Perforce, the dismissal is void and unlawful. 2003, the NLRC stressed that Galer
was removed by the Board of Direct

It matters not that her having been elected by the Board to an added position of being a member of the Board of SO ORDERED.10
Directors did not take effect as her May 31, 2000 election to such added position was conditioned to be effective
upon approval by SEC of the Amended By-Laws, an approval which took place only in February 21, 2001, i.e., after
Galera assailed the NLRC’s decision
her removal on December 14, 2000. What counts is, at the time of her removal, she continued to be WPP’s Vice-
President, a corporate officer, on hold over capacity.
The National Labor Relations Comm
jurisdiction when it reversed the dec
Ms. Galera’s claim that she was not a corporate officer at the time of her removal because her May 31, 2000 election
as Vice President for Media, under WPP’s Amended By-Laws, was subject to the approval by the Securities and
Exchange Commission and that the SEC approved the Amended By-Laws only in February 2001. Such claim is
unavailing. Even if Ms. Galera’s subsequent election as Vice President for Media on May 31, 2000 was subject to
approval by the SEC, she continued to hold her previous position as Vice President under the December 31, 1999
The appellate court reversed and se
election until such time that her successor is duly elected and qualified. It is a basic principle in corporation law,
dismissal of Galera’s appeal is not in
which principle is also embodied in WPP’s by-laws, that a corporate officer continues to hold his position as such
until his successor has been duly elected and qualified. When Ms. Galera was elected as Vice President on only if appointed as such by a corpo
December 31, 1999, she was supposed to have held that position until her successor has been duly elected and Articles of Incorporation or the By-La
qualified. The record shows that Ms. Galera was not replaced by anyone. She continued to be Vice President of
WPP with the same operational title of Managing Director for Mindshare and continued to perform the same The appellate court explained:
functions she was performing prior to her May 31, 2000 election.
A corporation, through its board of d
In the recent case of Dily Dany Nacpil v. International Broadcasting Corp., the definition of corporate officer for by its charter or by the general law.
purposes of intra-corporate controversy was even broadened to include a Comptroller/Assistant Manager who was without legal effect whatsoever. The
appointed by the General Manager, and whose appointment was later approved by the Board of Directors. In this same effect as the laws of the corpo
case, the position of comptroller was not even expressly mentioned in the By-Laws of the corporation, and yet, the of the fundamental law of the corpor
Supreme Court found him to be a corporate officer. The Court ruled that —
Even if petitioner GALERA had been
(since) petitioner’s appointment as comptroller required the approval and formal action of IBC’s Board of Directors to WPP’s By-Laws provided for only on
become valid, it is clear therefore that petitioner is a corporate officer whose dismissal may be the subject of a The same defect also stains the Boa
controversy cognizable by the SEC... Had the petitioner been an ordinary employee, such board action would not corporation, because at that time the
have been required. empowered the Board of Directors t
officers in addition to a chairman, pr
Such being the case, the imperatives of law require that we hold that the Arbiter below had no jurisdiction over entitled "Managing Director."
Galera’s case as, again, she was a corporate officer at the time of her removal.
Hence, when the Board of Directors
its authority under the By-Laws and
WHEREFORE, the appeals of petitioner from the Decision of Labor Arbiter Edgardo Madriaga dated January 31,
2002 and his Order dated March 21, 2002, respectively, are granted. The January 31, 2002 decision of the Labor these defects by filing Amended By-
the ultra vires resolutions because th
Arbiter is set aside for being null and void and the temporary restraining order we issued on April 24, 2002 is hereby
approved by the SEC. Since by-laws
made permanent. The complaint of Jocelyn Galera is dismissed for lack of jurisdiction.

The dispositive portion of the appella

SO ORDERED.8

WHEREFORE, the petition is hereby

In its Resolution9 promulgated on 4 June 2003, the NLRC further stated:
Labor Relations Commission is here
respondent WPP MARKETING COM
We are fully convinced that this is indeed an intra-corporate dispute which is beyond the labor arbiter’s jurisdiction.
These consolidated cases clearly [involve] the relationship between a corporation and its officer and is properly
1. Pay [Galera] backwage
within the definition of an intra-corporate relationship which, under P.D. No. 902-A, is within the jurisdiction of the
her summary December 1
SEC (now the commercial courts). Such being the case, We are constrained to rule that the Labor Arbiter below had
under the contract, plus 1
no jurisdiction over Ms. Galera’s complaint for illegal dismissal.
normally entitled, had she
tax protection of up to 35%
WHEREFORE, the motion for reconsideration filed by Ms. Galera is hereby denied for lack of merit. We reiterate our
February 19, 2003 Decision setting aside the Labor Arbiter’s Decision dated January 31, 2002 for being null and
2. Pay x x x GALERA the
void.

 3. Pay x x x GALERA any unpaid housing benefit for the 18 ½ months of her employment in the service to The individual respondents Steedma
the Company as an expatriate in Manila, Philippines at the rate of ₱576,000 per year; unpaid personal and the wanton and summary dismissal
accident insurance benefits for premiums at the rate of ₱300,000.00 per year; whatever cash value in the specific finding of the CA of bad faith
JWT Pension Plan; and thirty days paid holiday benefit under the contract for the 1 ½ calendar years with
the Company;
This Court ordered the consolidation

4. Pay x x x GALERA the reduced amount of PhP2,000,000.00 as moral damages;

5. Pay [Galera] the reduced amount of PhP1,000,000.00 as exemplary damages;

In its consolidated comment, the Off
April 2005 of the appellate court find
6. Pay [Galera] an amount equivalent to 10% of the judgment award as attorney’s fees; jurisdiction over the present case; an
remanded to the Labor Arbiter for th
recommendations, we see that Gale
7. Pay the cost of the suit.
serious problem in seeking relief bef
guidance of the bench and bar.
SO ORDERED.14
Wheth
Respondents filed a motion for reconsideration on 5 May 2005. Galera filed a motion for partial reconsideration
and/or clarification on the same date. The appellate court found no reason to revise or reverse its previous decision
Galera, on the belief that she is an e
and subsequently denied the motions in a Resolution promulgated on 1 August 2005.15
Steedman, Webster and Lansang co
dismissal is under the jurisdiction of
The Issues
Corporate officers are given such ch
WPP, Steedman, Webster, and Lansang raised the following grounds in G.R. No. 169207: Section 25 of the Corporation Code,
officers as may be provided in the b
corporation, or the board of directors
I. The Court of Appeals seriously erred in ruling that the NLRC has jurisdiction over [Galera’s] complaint
offices as may be necessary.
because she was not an employee. [Galera] was a corporate officer of WPP from the beginning of her term
until her removal from office.
An examination of WPP’s by-laws re
President with the operational title o
II. Assuming arguendo that the Court of Appeals correctly ruled that the NLRC has jurisdiction over
Directors is an appointment to a non
[Galera’s] complaint, it should have remanded the case to the Labor Arbiter for reception of evidence on At the time of Galera’s appointment
the merits of the case. Webster. Galera cannot be said to b
by-laws are already occupied. Finall
III. [Galera] is an alien, hence, can never attain a regular or permanent working status in the Philippines. is a corporate officer. The Amended
directors. Even though WPP’s stock
amendments only on 16 February 2
IV. [Galera] is not entitled to recover backwages, other benefits and damages from WPP.16 and Lansang did not present any ev
Directors.1avvphi1
On the other hand, in G.R. No. 169239, Galera raised the following grounds in support of her petition:
The appellate court further justified t
The CA decision should be consistent with Article 279 of the Labor Code and applicable jurisprudence, that full Galera’s relationship to the four-fold
backwages and separation pay (when in lieu of reinstatement), should be reckoned from time of dismissal up to time wages; (c) the power of dismissal; a
of reinstatement (or payment of separation pay, in case separation instead of reinstatement is awarded). and methods by which the work is to

Accordingly, petitioner Galera should be awarded full backwages and separation pay for the period from 14 x x x Sections 1 and 4 of the employ
December 2000 until the finality of judgment by the respondents, or, at the very least, up to the promulgation date of sections 3, 5, 6 and 7 show that wag
the CA decision. clearly state that she is subject to th

Another indicator that she was a reg

clearly states that she is a permanen

xxxx (b) The Commis
Arbiters.
Another indication that the Employment Contract was one of regular employment is Section 12, which states that the
rights to any invention, discovery, improvement in procedure, trademark, or copyright created or discovered by (c) Cases arisin
petitioner GALERA during her employment shall automatically belong to private respondent WPP. Under Republic from the interpr
Act 8293, also known as the Intellectual Property Code, this condition prevails if the creator of the work subject to the Labor Arbiter by
laws of patent or copyright is an employee of the one entitled to the patent or copyright. be provided in s

Another convincing indication that she was only a regular employee and not a corporate officer is the disciplinary In contrast, Section 5.2 of Republic
procedure under Sections 10 and 11 of the Employment Contract, which states that her right of redress is through
Mindshare’s Chief Executive Officer for the Asia-Pacific. This implies that she was not under the disciplinary control
The Commission’s jurisdiction over a
of private respondent WPP’s Board of Directors (BOD), which should have been the case if in fact she was a
transferred to the courts of general j
corporate officer because only the Board of Directors could appoint and terminate such a corporate officer.
Court in the exercise of its authority
over these cases. The Commission
Although petitioner GALERA did sign the Alien Employment Permit from the Department of Labor and Employment submitted for final resolution which s
and the application for a 9(g) visa with the Bureau of Immigration – both of which stated that she was private Commission shall retain jurisdiction
respondent’s WPP’ Vice President – these should not be considered against her. Assurming arguendo that her 2000 until finally disposed.
appointment as Vice-President was a valid act, it must be noted that these appointments occurred afater she was
hired as a regular employee. After her appointments, there was no appreciable change in her duties.20
The pertinent portions of Section 5 o

Whether the Labor Arbiter and the NLRC

b) Controversies arising o
members or associates; b
have jurisdiction over the present case which they are stockholde
partnership or association
such entity;
Galera being an employee, then the Labor Arbiter and the NLRC have jurisdiction over the present case. Article 217
of the Labor Code provides:
c) Controversies in the ele
corporations, partnerships
Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided under this Code, the Labor
Arbiters shall have original and exclusive jurisdiction to hear and decide x x x the following cases involving all
workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases; WPP’s dismissal of Galera lacked bo

2. Termination disputes; Apart from Steedman’s letter dated

for Galera’s dismissal. Steedman’s l
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; The operations are currently in a sha
agency partners and some clients.
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations; Most of the staff I spoke with felt the
Managing Director, that is just not ac
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts; I believe your priorities are mismana
important than a new business pitch
6. Except claims for Employees Compensation, Social Security, Medicare and other maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or You failed to lead and advise on the
household service, involving an amount exceeding five thousand pesos (₱5,000.00) regardless of whether As I discussed with you back in July
accompanied with a claim for reinstatement. [that] confusion existed internally rig

The quality output is still not to an acceptable standard, which was also part of my directive that you needed to focus WHEREFORE, we PARTIALLY GR
on back in July. Decision of the Court of Appeals pro
2005 in CA-G.R. SP No. 78721.
I do not believe you understand the basic skills and industry knowledge required to run a media special operation.21
SO ORDERED.
WPP, Steedman, Webster, and Lansang, however, failed to substantiate the allegations in Steedman’s letter. Galera,
on the other hand, presented documentary evidence22 in the form of congratulatory letters, including one from G.R. No. 157802 October
Steedman, which contents are diametrically opposed to the 15 December 2000 letter.
MATLING INDUSTRIAL AND COM
The law further requires that the employer must furnish the worker sought to be dismissed with two written notices AND ALEX MANCILLA, Petitioners
before termination of employment can be legally effected: (1) notice which apprises the employee of the particular vs.
acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the employee of the RICARDO R. COROS, Respondent
employer’s decision to dismiss him. Failure to comply with the requirements taints the dismissal with
illegality.23WPP’s acts clearly show that Galera’s dismissal did not comply with the two-notice rule.

Whether Galera is entitled to the monetary award

BERSAMIN, J.:

WPP, Steedman, Webster, and Lansang argue that Galera is not entitled to backwages because she is an alien.
They further state that there is no guarantee that the Bureau of Immigration and the Department of Labor and This case reprises the jurisdictional
Employment will continue to grant favorable rulings on the applications for a 9(g) visa and an Alien Employment Arbiter (LA) or by the Regional Trial
Permit after the expiry of the validity of Galera’s documents on 31 December 2000. WPP’s argument is a circular employee or a corporate officer unra
argument, and assumes what it attempts to prove. Had WPP not dismissed Galera, there is no doubt in our minds otherwise, the RTC exercises the le
that WPP would have taken action for the approval of documents required for Galera’s continued employment.
In this appeal via petition for review
This is Galera’s dilemma: Galera worked in the Philippines without a proper work permit but now wants to claim 20021and the resolution dated April
employee’s benefits under Philippine labor laws. and Commercial Corporation, et al.
Court of Appeals (CA) sustained the
LA had jurisdiction because the resp
Employment of GALERA with private respondent WPP became effective on September 1, 1999 solely on the Commercial Corporation (Matling).
instruction of the CEO and upon signing of the contract, without any further action from the Board of Directors of
private respondent WPP.

Four months had passed when private respondent WPP filed before the Bureau of Immigration an
application for petitioner GALERA to receive a working visa, wherein she was designated as Vice President of After his dismissal by Matling as its
WPP. Petitioner alleged that she was constrained to sign the application in order that she could remain in the 10, 2000 a complaint for illegal susp
Philippines and retain her employment.24 (petitioners) in the NLRC, Sub-Regio

The law and the rules are consistent in stating that the employment permit must be acquired prior to employment. The petitioners moved to dismiss the
The Labor Code states: "Any alien seeking admission to the Philippines for employment purposes and any domestic the jurisdiction of the Securities and
or foreign employer who desires to engage an alien for employment in the Philippines shall obtain an employment inasmuch as the respondent was a m
permit from the Department of Labor."25 Section 4, Rule XIV, Book 1 of the Implementing Rules and Regulations Finance and Administration prior to
provides:
The respondent opposed the petition
Employment permit required for entry. — No alien seeking employment, whether as a resident or non-resident, may of Directors was doubtful, considerin
enter the Philippines without first securing an employment permit from the Ministry. If an alien enters the country share of stock in Matling, considerin
under a non-working visa and wishes to be employed thereafter, he may only be allowed to be employed upon certificate of stock he had been give
presentation of a duly approved employment permit. custody; and that even assuming tha
for Finance and Administration, not
showed.
Galera cannot come to this Court with unclean hands. To grant Galera’s prayer is to sanction the violation of the
Philippine labor laws requiring aliens to secure work permits before their employment. We hold that the status quo
must prevail in the present case and we leave the parties where they are. This ruling, however, does not bar Galera On October 16, 2000, the LA grante
from seeking relief from other jurisdictions. officer because he was occupying th

was a Member of the Board of Directors of Matling; and that, consequently, his removal was a corporate act of The petitioners elevated the issue to
Matling and the controversy resulting from such removal was under the jurisdiction of the SEC, pursuant to Section contending that the NLRC committe
5, paragraph (c) of Presidential Decree No. 902. correct decision of the LA.

Ruling of the NLRC In its assailed decision promulgated

The respondent appealed to the NLRC,7 urging that: For a position to be considered as a
officer, the position must, if not listed
the occupant thereof appointed or e
I
the ruling in Tabang v. National Lab

THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION GRANTING APPELLEE’S
"The president, vice president, secre
MOTION TO DISMISS WITHOUT GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS OPPOSITION
of a corporation, and modern corpor
THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE PROCESS.
However, other offices are sometime
may be empowered under the by-law
II
It has been held that an 'office' is cre
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE FOR LACK OF or stockholders. On the other hand,
JURISDICTION. of the directors or stockholders but b
to be paid to such employee."
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 This ruling was reiterated in the sub
position in Matling, albeit high ranking and managerial, not being among the positions listed in Matling’s Constitution Rossi v. National Labor Relations C
and By-Laws.8 The NLRC disposed thuswise:
The position of vice-president for ad
WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring and holding that the case at created by the corporation’s board o
bench does not involve any intracorporate matter. Hence, jurisdiction to hear and act on said case is vested with the by-laws of the corporation. Moreove
Labor Arbiter, not the SEC, considering that the position of Vice-President for Finance and Administration being held of directors or stockholders of the co
by complainant-appellant is not listed as among respondent's corporate officers. removed from, is not a corporate off

Accordingly, let the records of this case be REMANDED to the Arbitration Branch of origin in order that the Labor Coros’ alleged illegal dismissal there
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.
WHEREFORE, the petition for certio

SO ORDERED.
SO ORDERED.

The petitioners sought reconsideration,9 reiterating that the respondent, being a member of the Board of Directors,
The CA denied the petitioners’ motio
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 Thus, the petitioners are now before
June 7, 1999 by Matling’s Board of Directors to prove that the respondent was, indeed, a Member of the Board of stockholder/member of the Matling’s
Directors.10 and that the CA consequently erred

Nonetheless, on April 30, 2001, the NLRC denied the petitioners’ motion for reconsideration.11 The decisive issue is whether the re
determines whether the LA or the R
Ruling of the CA

The appeal fails. Effective on August 8, 2000, upon th
Regulation Code, the SEC’s jurisdic
Section 5.2 of RA No. 8799, to wit:
I

5.2. The Commission’s jurisdiction o

The Law on Jurisdiction in Dismissal Cases
hereby transferred to the Courts of g
Supreme Court in the exercise of its
As a rule, the illegal dismissal of an officer or other employee of a private employer is properly cognizable by the LA. jurisdiction over these cases. The C
This is pursuant to Article 217 (a) 2 of the Labor Code, as amended, which provides as follows: disputes submitted for final resolutio
The Commission shall retain jurisdic
June 2000 until finally disposed.
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 Considering that the respondent’s co
stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: under the coverage of Section 5.2 o
a regular, officer of Matling.
1. Unfair labor practice cases;

2. Termination disputes;
Was the Respondent’s Position o
for Administration and Finance a
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;
We must first resolve whether or not
a corporate office. If it was, his dism
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
cognizable by the RTC pursuant to R
employee relations;

The petitioners contend that the pos

5. Cases arising from any violation of Article 264 of this Code, including questions involving the
having been created by Matling’s Pr
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. The President shall be the executive
directors; shall countersign all certifi
Board of Directors; shall have full po
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters. power to create new offices and to a
operations of the corporation and as
(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those make reports to the directors and sto
arising from the interpretation or enforcement of company personnel policies shall be disposed of by the office or are properly required of him
Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be the Executive Vice President shall h
provided in said agreements. (As amended by Section 9, Republic Act No. 6715, March 21, 1989).
The petitioners argue that the power
Where the complaint for illegal dismissal concerns a corporate officer, however, the controversy falls under the was delegated by Matling’s Board o
jurisdiction of the Securities and Exchange Commission (SEC), because the controversy arises out of intra-corporate office the President created, like the
or partnership relations between and among stockholders, members, or associates, or between any or all of them the Board of Directors, making the o
and the corporation, partnership, or association of which they are stockholders, members, or associates, Relations Commission,17 which held
respectively; and between such corporation, partnership, or association and the State insofar as the controversy corporation, or the board of directors
concerns their individual franchise or right to exist as such entity; or because the controversy involves the election or officers as may be necessary."
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. The respondent counters that Matlin
Administration as one of the corpora
namely: President, Executive Vice P
the phrase "and such other officers a

Code should be clearly and expressly stated in the By-Laws; that the fact that Matling’s By-Law No. III dealt with It is relevant to state in this connecti
Directors & Officers while its By-Law No. V dealt with Officers proved that there was a differentiation between the adopted a similar interpretation of S
officers mentioned in the two provisions, with those classified under By-Law No. V being ordinary or non-corporate wit:
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.
Thus, pursuant to the above provisio
enumerated in the by-laws are the e
We agree with respondent. Offices without amending first the co
than the positions of corporate Of
corporate officers within the mean
Section 25 of the Corporation Code provides:
exercise the functions of the corpora
and duties are to be determined by t
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
Moreover, the Board of Directors of
secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in
President, in light of Section 25 of th
the by-laws. Any two (2) or more positions may be held concurrently by the same person, except that no one shall
officers. Verily, the power to elect th
act as president and secretary or as president and treasurer at the same time.
the Board of Directors, and could no
for Finance and Administration crea
The directors or trustees and officers to be elected shall perform the duties enjoined on them by law and the by-laws corporate, office.
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 fixed in the articles of incorporation shall constitute a quorum for the transaction of
To emphasize, the power to create n
corporate business, and every decision of at least a majority of the directors or trustees present at a meeting at
Law No. V merely allowed Matling’s
which there is a quorum shall be valid as a corporate act, except for the election of officers which shall require the
of Matling. Such powers were incide
vote of a majority of all the members of the board.
daily operations of the business.

Directors or trustees cannot attend or vote by proxy at board meetings.

The petitioners’ reliance on Tabang,
expressly mentioned in the By-Laws
Conformably with Section 25, a position must be expressly mentioned in the By-Laws in order to be considered as a corporate offices, was plainly obiter
corporate office. Thus, the creation of an office pursuant to or under a By-Law enabling provision is not enough to Laws. Thus, the Court held therein t
make a position a corporate office. Guerrea v. Lezama,19 the first ruling on the matter, held that the only officers of a and liabilities arising from the ouster
corporation were those given that character either by the Corporation Code or by the By-Laws; the rest of the jurisdiction.
corporate officers could be considered only as employees or subordinate officials. Thus, it was held in Easycall
Communications Phils., Inc. v. King:20
In Nacpil v. Intercontinental Broadca
subject of the controversy was not e
An "office" is created by the charter of the corporation and the officer is elected by the directors or stockholders. On enabling provision authorizing the B
the other hand, an employee occupies no office and generally is employed not by the action of the directors or to create. The Court held there that
stockholders but by the managing officer of the corporation who also determines the compensation to be paid to
such employee.
Considering that the observations ea
unassailable, Tabang and Nacpil sh
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).
Did Respondent’s Status as Direc
Stockholder Automatically Conve
This interpretation is the correct application of Section 25 of the Corporation Code, which plainly states that the
into an Intra-Corporate Dispute?
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. Yet, the petitioners insist that becau
v. National Labor Relations Commis
no jurisdiction over his complaint, co
A different interpretation can easily leave the way open for the Board of Directors to circumvent the constitutionally
against the corporation was an intra
guaranteed security of tenure of the employee by the expedient inclusion in the By-Laws of an enabling clause on
with the context of PD No. 902-A.
the creation of just any corporate officer position.

The petitioners’ insistence is bereft o

To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings, the complainants were undeniably as the status or relationship of the p
corporate officers due to their positions being expressly mentioned in the By-Laws, aside from the fact that both of absence of any one of these factors
them had been duly elected by the respective Boards of Directors. But the herein respondent’s position of Vice that every conflict between the corpo
President for Finance and Administration was not expressly mentioned in the By-Laws; neither was the position of SEC can resolve in the exercise of i
Vice President for Finance and Administration created by Matling’s Board of Directors. Lastly, the President, not the
Board of Directors, appointed him.
The criteria for distinguishing betwee
ordinary corporate employees who m
True it is that the Court pronounced in Tabang as follows: nature of the services performed, bu
supposedly at once an employee, a
appointment to office must be fully c
Also, an intra-corporate controversy is one which arises between a stockholder and the corporation. There is no
controversy or a labor termination di
distinction, qualification or any exemption whatsoever. The provision is broad and covers all kinds of controversies
had any relation at all to his appointm
between stockholders and corporations.26
Administration.

However, the Tabang pronouncement is not controlling because it is too sweeping and does not accord with reason,
Obviously enough, the respondent w
justice, and fair play. In order to determine whether a dispute constitutes an intra-corporate controversy or not, the
his being a stockholder or Director o
Court considers two elements instead, namely: (a) the status or relationship of the parties; and (b) the nature of the
been employed continuously for 33
question that is the subject of their controversy. This was our thrust in Viray v. Court of Appeals:27
in 1987 to his last position as Vice P
following sequence indicates:
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
1966 – Bookkeeper
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. 1968 – Senior Accountant

Not every conflict between a corporation and its stockholders involves corporate matters that only the SEC can 1969 – Chief Accountant
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
1972 – Office Supervisor
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 1973 – Assistant Treasure
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.
1978 – Special Assistant f
28
In another case, Mainland Construction Co., Inc. v. Movilla, the Court reiterated these determinants thuswise:
1980 – Assistant Comptro

In order that the SEC (now the regular courts) can take cognizance of a case, the controversy must pertain to any of
1983 – Finance and Admi
the following relationships:

1985 – Asst. Vice Preside

a) between the corporation, partnership or association and the public;

b) between the corporation, partnership or association and its stockholders, partners, members or officers; 1987 to April 17, 2000 – V

Even though he might have become

c) between the corporation, partnership or association and the State as far as its franchise, permit or
for Finance and Administration in 19
license to operate is concerned; and
of Matling. His subsequent acquisitio
his status of Director/stockholder wa
d) among the stockholders, partners or associates themselves. and Administration.1avvphi1

The fact that the parties involved in the controversy are all stockholders or that the parties involved are the In Prudential Bank and Trust Compa
stockholders and the corporation does not necessarily place the dispute within the ambit of the jurisdiction of SEC. ranks but was dismissed, the Court
The better policy to be followed in determining jurisdiction over a case should be to consider concurrent factors such because she was deemed a regular

It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position On August 5, 2005, a little over seve
she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-President which she occupied until a special meeting at the Manila Polo
her illegal dismissal on July 19, 1991. The bank’s contention that she merely holds an elective position and that Unfortunately, Locsin was neither re
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
Aggrieved, on June 19, 2007, Locsin
termination of her employment in 1991. As Assistant Vice President of the Foreign Department of the Bank, she is
backwages, damages and attorney’s
tasked, among others, to collect checks drawn against overseas banks payable in foreign currency and to ensure the
President of NCLPI.9
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, The Compulsory Arbitration Proceed
"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
On July 11, 2007, instead of filing th
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, that the Labor Arbiter did not have ju
her services may be terminated only for a just or authorized cause. This being in truth a case of illegal dismissal, it is involves an intra-corporate dispute.
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. On August 16, 2007, Locsin submitt
employee of NCLPI.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision of the Court of Appeals.
On March 10, 2008, Labor Arbiter C
acquired "jurisdiction to arbitrate and
Costs of suit to be paid by the petitioners.
employee relationship."11

SO ORDERED.
NCLPI, on June 3, 2008, elevated th
Court.12 NCLPI raised the issue on w
G.R. No. 185567 October 20, 2010 Motion to Dismiss and holding that h

ARSENIO Z. LOCSIN, Petitioner, The CA Decision - Locsin was a cor

vs. dispute under the RTC’s jurisdiction
NISSAN LEASE PHILS. INC. and LUIS BANSON, Respondents.
On August 28, 2008,13 the CA revers
DECISION ruled that Locsin was a corporate of

BRION, J.: Citing PD 902-A, the CA defined "co

either by the Corporation Code or by
Through a petition for review on certiorari,1 petitioner Arsenio Z. Locsin (Locsin) seeks the reversal of the Decision2of
the Court of Appeals (CA) dated August 28, 2008,3 in "Arsenio Z. Locsin v. Nissan Car Lease Phils., Inc. and Luis Scrutinizing the records, We hold th
Banson," docketed as CA-G.R. SP No. 103720 and the Resolution dated December 9, 2008,4 denying Locsin’s respondent was a corporate officer w
Motion for Reconsideration. The assailed ruling of the CA reversed and set aside the Decision5 of the Hon. Labor by-laws of petitioner corporation and
Arbiter Thelma Concepcion (Labor Arbiter Concepcion) which denied Nissan Lease Phils. Inc.’s (NCLPI) and Luis T.
Banson’s (Banson) Motion to Dismiss. That private respondent is a corpora
is specifically included in the roster o
THE FACTUAL ANTECEDENTS duties and responsibilities, as well a

On January 1, 1992, Locsin was elected Executive Vice President and Treasurer (EVP/Treasurer) of NCLPI. As Article 280 of the Labor Code, the re
EVP/Treasurer, his duties and responsibilities included: (1) the management of the finances of the company; (2) control in the performance of work d
carrying out the directions of the President and/or the Board of Directors regarding financial management; and (3) employee – were held inapplicable b
the preparation of financial reports to advise the officers and directors of the financial condition of NCLPI.6 Locsin position of EVP/Treasurer is specific
held this position for 13 years, having been re-elected every year since 1992, until January 21, 2005, when he was
nominated and elected Chairman of NCLPI’s Board of Directors.7 Further, the CA pointed out Locsin’s
corporate officer that would make hi
retention as EVP/Treasurer was bas

performed only those functions that were "specifically set forth in the By-Laws or required of him by the Board of Substantively, Locsin submits that h
Directors.17" and the CA - his relationship with the

With respect to the suit Locsin filed with the Labor Arbiter, the CA held that: First, Locsin contends that NCLPI ha
regular wages from NCLPI, from wh
deducted. Third, NCLPI had the pow
Private respondent, in belatedly filing this suit before the Labor Arbiter, questioned the legality of his "dismissal" but
the performance of his functions as
in essence, he raises the issue of whether or not the Board of Directors had the authority to remove him from the
he carried out in accordance with th
corporate office to which he was elected pursuant to the By-Laws of the petitioner corporation. Indeed, had private
even after his election as Chairman,
respondent been an ordinary employee, an election conducted by the Board of Directors would not have been
and administrative operations of the
necessary to remove him as Executive Vice-President/Treasurer. However, in an obvious attempt to preclude the
application of settled jurisprudence that corporate officers whose position is provided in the by-laws, their election,
removal or dismissal is subject to Section 5 of P.D. No. 902-A (now R.A. No. 8799), private respondent would even Under these claimed facts, Locsin c
claim in his Position Paper, that since his responsibilities were akin to that of the company’s Executive Vice- has jurisdiction to decide the controv
President/Treasurer, he was "hired under the pretext that he was being ‘elected’ into said post.18 [Emphasis election as Chairman of the Board o
supplied.] EVP/Treasurer having continuously
"unceremonious removal" as EVP/T
As a consequence, the CA concluded that Locsin does not have any recourse with the Labor Arbiter or the NLRC
since the removal of a corporate officer, whether elected or appointed, is an intra-corporate controversy over which
the NLRC has no jurisdiction.19 Instead, according to the CA, Locsin’s complaint for "illegal dismissal" should have
been filed in the Regional Trial Court (RTC), pursuant to Rule 6 of the Interim Rules of Procedure Governing Intra-
It its April 17, 2009 Comment,26 Niss
Corporate Controversies.20
CA correctly ruled that the Labor Arb
support, Nissan maintains that Locs
Finally, the CA addressed Locsin’s invocation of Article 4 of the Labor Code. Dismissing the application of the defect Locsin raised, Nissan brushe
provision, the CA cited Dean Cesar Villanueva of the Ateneo School of Law, as follows: Reconsideration, and that (2) in any
decisions, resolutions and orders ar
x x x the non-coverage of corporate officers from the security of tenure clause under the Constitution is now well-
established principle by numerous decisions upholding such doctrine under the aegis of the 1987 Constitution in the
face of contemporary decisions of the same Supreme Court likewise confirming that security of tenure covers all
employees or workers including managerial employees.21
We resolve to deny the petition for la

THE PETITIONER’S ARGUMENTS

At the outset, we stress that there ar
one hand, Locsin raises a procedura
Failing to obtain a reconsideration of the CA’s decision, Locsin filed the present petition on January 28, 2009, raising for using an improper remedy. On th
the following procedural and substantive issues: implementation of the rules of proce

(1) Whether the CA has original jurisdiction to review decision of the Labor Arbiter under Rule 65? Prefatorily, we agree with Locsin’s s
Motion to Dismiss to the CA. Locsin
general rule, an aggrieved party’s pr
(2) Whether he is a regular employee of NCLPI under the definition of Article 280 of the Labor Code? and
relied upon in the motion to dismiss
the labor arbiter’s decision can be a
(3) Whether Locsin’s position as Executive Vice-President/Treasurer makes him a corporate officer
thereby excluding him from the coverage of the Labor Code?
As a rule, we strictly adhere to the ru
to encourage respect for these rules
Procedurally, Locsin essentially submits that NCLPI wrongfully filed a petition for certiorari before the CA, as the of these rules would cause substant
latter’s remedy is to proceed with the arbitration, and to appeal to the NLRC after the Labor Arbiter shall have ruled
on the merits of the case. Locsin cites, in this regard, Rule V, Section 6 of the Revised Rules of the National Labor
We see it appropriate to apply the ex
Relations Commission (NLRC Rules), which provides that a denial of a motion to dismiss by the Labor Arbiter is not
to go beyond procedure and rule on
subject to an appeal. Locsin also argues that even if the Labor Arbiter committed grave abuse of discretion in
to rule on the employer-employee re
denying the NCLPI motion, a special civil action for certiorari, filed with the CA was not the appropriate remedy, since
order was incorrectly brought to the
this was a breach of the doctrine of exhaustion of administrative remedies.

The NLRC Rules are clear: the denial by the labor arbiter of the motion to dismiss is not appealable because the (a) If there is prima facie evidence
denial is merely an interlocutory order. supplied.]

In Metro Drug v. Metro Drug Employees,27 we definitively stated that the denial of a motion to dismiss by a labor Pursuant to this Article, we held in M
arbiter is not immediately appealable.28 NLRC is clothed with sufficient autho
arbiters:
We similarly ruled in Texon Manufacturing v. Millena,29 in Sime Darby Employees Association v. National Labor
Relations Commission30 and in Westmont Pharmaceuticals v. Samaniego.31 In Texon, we specifically said: In Air Services Cooperative, et al. v.
was put in issue and was assailed th
regional trial court, this Court had th
The Order of the Labor Arbiter denying petitioners’ motion to dismiss is interlocutory. It is well-settled that a denial of
the Labor Code, thus:
a motion to dismiss a complaint is an interlocutory order and hence, cannot be appealed, until a final judgment on the
merits of the case is rendered. [Emphasis supplied.]32
x x x Also, while the title of the Articl
33 in procedural law and as distinguish
and indicated the appropriate recourse in Metro Drug, as follows:
it is not as limited as understood by

x x x The NLRC rule proscribing appeal from a denial of a motion to dismiss is similar to the general rule observed in
Abuse of discretion is admittedly wit
civil procedure that an order denying a motion to dismiss is interlocutory and, hence, not appealable until final
the lawmakers’ intention to broaden
judgment or order is rendered [1 Feria and Noche, Civil Procedure Annotated 453 (2001 ed.)]. The remedy of the
petitioners cannot argue now that th
aggrieved party in case of denial of the motion to dismiss is to file an answer and interpose, as a defense or
assumption of jurisdiction by the Lab
defenses, the ground or grounds relied upon in the motion to dismiss, proceed to trial and, in case of adverse
G.R. No. 118693, 23 July 1998, 293
judgment, to elevate the entire case by appeal in due course [Mendoza v. Court of Appeals, G.R. No. 81909,
September 5, 1991, 201 SCRA 343]. In order to avail of the extraordinary writ of certiorari, it is incumbent upon
petitioner to establish that the denial of the motion to dismiss was tainted with grave abuse of discretion. [Macawiwili Since the legislature had clothed the
Gold Mining and Development Co., Inc. v. Court of Appeals, G.R. No. 115104, October 12, 1998, 297 SCRA 602] of jurisdiction" on the part of the labo
petitioner in this case is patently erro
In so citing Feria and Noche, the Court was referring to Sec. 1 (b), Rule 41 of the Rules of Court, which specifically
enumerates interlocutory orders as one of the court actions that cannot be appealed. In the same rule, as amended In Metro Drug, as in the present cas
by A.M. No. 07-7-12-SC, the aggrieved party is allowed to file an appropriate special civil action under Rule 65. The lack of jurisdiction since Locsin is all
latter rule, however, also contains limitations for its application, clearly outlined in its Section 1 which provides: cases is undeniable, as they are sim
issued an Order denying the Motion
the alleged lack of jurisdiction by the
Section 1. Petition for certiorari.
Labor Arbiter, the aggrieved party lik

When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its
The similarities end there, however.
or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no
subsequent Motion for Reconsidera
appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby
was an appeal to the NLRC and not
may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered
different position despite our clear ru
annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
the merits.
and justice may require.

From this perspective, the CA clearl

In the labor law setting, a plain, speedy and adequate remedy is still open to the aggrieved party when a labor arbiter
provisions of the NLRC Rules, as we
denies a motion to dismiss. This is Article 223 of Presidential Decree No. 442, as amended (Labor Code), 34which
reiterate, the proper action of an agg
states:
submit his position paper and raise t
appeal the denial since it is an interl
ART. 223. APPEAL Article 223 of the Labor Code, not a

Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any A strict implementation of the NLRC
or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be Labor Arbiter clearly has no jurisdict
entertained only on any of the following grounds:
Our ruling in Mejillano v. Lucillo36 sta
said:

Time and again, we have ruled that procedural rules do not exist for the convenience of the litigants. Rules of Third. Even as Executive Vice-Presi
Procedure exist for a purpose, and to disregard such rules in the guise of liberal construction would be to defeat such of Executive Vice-President/Treasur
purpose. Procedural rules were established primarily to provide order to and enhance the efficiency of our judicial specifically provides for this position
system. [Emphasis supplied.]

An exception to this rule is our ruling in Lazaro v. Court of Appeals37 where we held that the strict enforcement of the
rules of procedure may be relaxed in exceptionally meritorious cases:
Section 1. Election and Appointmen
x x x Procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in officers of the Corporation a Chairm
prejudice to a party's substantive rights. Like all rules, they are required to be followed except only for the most President/General Manager and a C
persuasive of reasons when they may be relaxed to relieve a litigant of an injustice not commensurate with the be appointed by the Board upon the
degree of his thoughtlessness in not complying with the procedure prescribed. The Court reiterates that rules of
procedure, especially those prescribing the time within which certain acts must be done, "have oft been held as
absolutely indispensable to the prevention of needless delays and to the orderly and speedy discharge of business. x
x x The reason for rules of this nature is because the dispatch of business by courts would be impossible, and
intolerable delays would result, without rules governing practice x x x. Such rules are a necessary incident to the Section 4. Executive Vice-President
proper, efficient and orderly discharge of judicial functions." Indeed, in no uncertain terms, the Court held that the and perform such duties as are pres
said rules may be relaxed only in exceptionally meritorious cases. [Emphasis supplied.] Directors. As the concurrent Treasu
and disbursements of the Corporatio
such banks or trust companies, or w
Whether a case involves an exceptionally meritorious circumstance can be tested under the guidelines we
time designate. He shall tender to th
established in Sanchez v. Court of Appeals,38 as follows:
financial condition of the corporation
of each fiscal year, he shall make an
Aside from matters of life, liberty, honor or property which would warrant the suspension of the Rules of the most correct books of account of all the b
mandatory character and an examination and review by the appellate court of the lower court’s findings of fact, the
other elements that should be considered are the following: (a) the existence of special or compelling circumstances,
In Okol v. Slimmers World Internatio
(b) the merits of the case, (c) a cause not entirely attributable to the fault or negligence of the party favored by the
suspension of the rules, (d) a lack of any showing that the review sought is merely frivolous and dilatory, and (e) the
other party will not be unjustly prejudiced thereby. [Emphasis supplied.] x x x an "office" is created by the ch
stockholders. On the other hand, a
of the directors or stockholders but b
Under these standards, we hold that exceptional circumstances exist in the present case to merit the relaxation of
to be paid to such employee. [Emph
the applicable rules of procedure.

In this case, Locsin was elected by t

Due to existing exceptional circumstances, the ruling on the merits that Locsin is an officer and not an employee of
The following factual determination b
Nissan must take precedence over procedural considerations.

More important, private respondent

We arrived at the conclusion that we should go beyond the procedural rules and immediately take a look at the
"engaged his services" as corporate
intrinsic merits of the case based on several considerations.
President/Treasurer was elected on
were stated by private respondent w
First, the parties have sufficiently ventilated their positions on the disputed employer-employee relationship and set forth in the By-Laws or required
have, in fact, submitted the matter for the CA’s consideration. respondent held the position of Exec
in the latter’s by-laws, by virtue of el
President/Treasurer pursuant to the
Second, the CA correctly ruled that no employer-employee relationship exists between Locsin and Nissan.
simply not re-elected to the said pos
election of a new set of officers held
Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan board pursuant to replaced as Executive Vice-Presiden
its By-laws.39 As such, he was a corporate officer, not an employee. The CA reached this conclusion by relying on
the submitted facts and on Presidential Decree 902-A, which defines corporate officers as "those officers of a
We fully agree with this factual deter
corporation who are given that character either by the Corporation Code or by the corporation’s by-laws." Likewise,
rule, based on law and established j
Section 25 of Batas Pambansa Blg. 69, or the Corporation Code of the Philippines (Corporation Code) provides that
latter’s corporate officer.
corporate officers are the president, secretary, treasurer and such other officers as may be provided for in the by-
laws.
a. The Question of Jurisdiction

Given Locsin’s status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has jurisdiction to hear the 00-06-06165-07. This Decision is wi
legality of the termination of his relationship with Nissan. As we also held in Okol, a corporate officer’s dismissal from appropriate remedy in the proper for
service is an intra-corporate dispute:
No pronouncement as to costs.
In a number of cases [Estrada v. National Labor Relations Commission, G.R. No. 106722, 4 October 1996, 262
SCRA 709; Lozon v. National Labor Relations Commission, 310 Phil. 1 (1995); Espino v. National Labor Relations
SO ORDERED.
Commission, 310 Phil. 61 (1995); Fortune Cement Corporation v. National Labor Relations Commission, G.R. No.
79762, 24 January 1991, 193 SCRA 258], we have held that a corporate officer’s dismissal is always a corporate act,
or an intra-corporate controversy which arises between a stockholder and a corporation.43 [Emphasis supplied.] G.R. No. 168757 January

so that the RTC should exercise jurisdiction based on the following legal reasoning: RENATO REAL, Petitioner,
vs.
Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A (PD 902-A) provided that intra-corporate SANGU PHILIPPINES, INC. and/ o
disputes fall within the jurisdiction of the Securities and Exchange Commission (SEC):

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over
corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws DEL CASTILLO, J.:
and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:
The perennial question of whether a
xxxx of the Labor Arbiter is the core issue

c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, This Petition for Review on Certiorar
partnerships or associations. G.R. SP. No. 86017 which dismisse

Subsection 5.2, Section 5 of Republic Act No. 8799, which took effect on 8 August 2000, transferred to regional trial Factual Antecedents
courts the SEC’s jurisdiction over all cases listed in Section 5 of PD 902-A:

Petitioner Renato Real was the Man

5.2. The Commission’s jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is the business of providing manpower
hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court. [Emphasis supplied.] to various clients. In 2001, petitioner
maintenance men, all employed by r
b. Precedence of Substantive Merits; against the latter and respondent Ki
Primacy of Element of Jurisdiction complaints were later on consolidate

Based on the above jurisdictional considerations, we would be forced to remand the case to the Labor Arbiter for With regard to petitioner, he was rem
further proceedings if we were to dismiss the petition outright due to the wrongful use of Rule 65.44 We cannot close by respondent corporation’s Board o
our eyes, however, to the factual and legal reality, established by evidence already on record, that Locsin is a Meeting during which said board res
corporate officer whose termination of relationship is outside a labor arbiter’s jurisdiction to rule upon. from respondents a letter4 dated Ma
25, 2001 for the following reasons: (
which was detrimental to the corpora
Under these circumstances, we have to give precedence to the merits of the case, and primacy to the element of operational expenses to reduce furth
jurisdiction. Jurisdiction is the power to hear and rule on a case and is the threshold element that must exist before
any quasi-judicial officer can act. In the context of the present case, the Labor Arbiter does not have jurisdiction over
the termination dispute Locsin brought, and should not be allowed to continue to act on the case after the absence of Respondents, on the other hand, ref
jurisdiction has become obvious, based on the records and the law. In more practical terms, a contrary ruling will only appointed Manager, he committed g
cause substantial delay and inconvenience as well as unnecessary expenses, to the point of injustice, to the parties. them, petitioner would almost alway
This conclusion, of course, does not go into the merits of termination of relationship and is without prejudice to the and that he would come to the office
filing of an intra-corporate dispute on this point before the appropriate RTC. neglected to supervise the employee
one instance, petitioner together wit
respondents’ clients, Epson Precisio
WHEREFORE, we DISMISS the petitioner’s petition for review on certiorari, and AFFIRM the Decision of the Court Because of this, respondent Abe alle
of Appeals, in CA-G.R. SP No. 103720, promulgated on August 28, 2008, as well as its Resolution of December 9, petitioner’s conduct. Respondents li
2008, which reversed and set aside the March 10, 2008 Order of Labor Arbiter Concepcion in NLRC NCR Case No. business as respondent corporation

clients. Because of all these, the Board of Directors of respondent corporation met on March 24, 2001 and adopted While admitting that he is indeed a s
Board Resolution No. 2001-03 removing petitioner as Manager. Petitioner was thereafter informed of his removal declaration of the NLRC that he is a
through a letter dated March 26, 2001 which he, however, refused to receive. managerial employee do not ipso fa
petitioner called the CA’s attention to
officer. He pointed out that although
Further, in what respondents believed to be an act of retaliation, petitioner allegedly encouraged the employees who
corporation, he is not an officer there
had been placed in the manpower pool to file a complaint for illegal dismissal against respondents. Worse, he later
officer column. Said column requires
incited those assigned in Epson Precision (Phils.) Inc., Ogino Philippines Corporation, Hitachi Cable Philippines Inc.
entry "N/A". Petitioner further argued
and Philippine TRC Inc. to stage a strike on April 10 to 16, 2001. Not satisfied, petitioner together with other
likewise mean that he is a corporate
employees also barricaded the premises of respondent corporation. Such acts respondents posited constitute just
with the requisites of a valid dismiss
cause for petitioner’s dismissal and that same was validly effected.
resolution. Moreover, he insisted tha
stemmed from employee-employer r
Rulings of the Labor Arbiter and the National Labor Relations Commission deduced and is bolstered by the last
entitled to benefits under the Labor C
The Labor Arbiter in a Decision5 dated June 5, 2003 declared petitioner and his co-complainants as having been
illegally dismissed and ordered respondents to reinstate complainants to their former positions without loss of In this connection (his dismissal) you
seniority rights and other privileges and to pay their full backwages from the time of their dismissal until actually Code of the Philippines.8 (Emphas
reinstated and furthermore, to pay them attorney’s fees. The Labor Arbiter found no convincing proof of the causes
for which petitioner was terminated and noted that there was complete absence of due process in the manner of his
In contrast, respondents stood firm t
termination.
National Labor Relations Commissio
arises between a stockholder and th
Respondents thus appealed to the National Labor Relations Commission (NLRC) and raised therein as one of the whatsoever;" and that it is "broad an
issues the lack of jurisdiction of the Labor Arbiter over petitioner’s complaint. Respondents claimed that petitioner is view of this ruling and since petitione
both a stockholder and a corporate officer of respondent corporation, hence, his action against respondents is an the action instituted by petitioner aga
intra-corporate controversy over which the Labor Arbiter has no jurisdiction. regional trial court. Hence, the NLRC

The NLRC found such contention of respondents to be meritorious. Aside from petitioner’s own admission in the In the assailed Decision10 dated Jun
pleadings that he is a stockholder and at the same time occupying a managerial position, the NLRC also gave weight aside from being a stockholder of re
to the corporation’s General Information Sheet6 (GIS) dated October 27, 1999 listing petitioner as one of its consequently, his complaint is an int
stockholders, consequently his termination had to be effected through a board resolution. These, the NLRC opined, court opined that if it was true that p
clearly established petitioner’s status as a stockholder and as a corporate officer and hence, his action against board meeting to pass a resolution f
respondent corporation is an intra-corporate controversy over which the Labor Arbiter has no jurisdiction. As to the Directors to convene and to adopt a
other complainants, the NLRC ruled that there was no dismissal. The NLRC however, modified the appealed support its finding, the CA likewise c
decision of the Labor Arbiter in a Decision7 dated February 13, 2004, the dispositive portion of which reads: NLRC’S finding that they were neve

WHEREFORE, all foregoing premises considered, the appealed Decision dated June 5, 2003 is hereby MODIFIED. WHEREFORE, the instant petition is
Accordingly, judgment is hereby rendered DISMISSING the complaint of Renato Real for lack of jurisdiction. As to public respondent National Labor Re
the rest of the complainants, they are hereby ordered to immediately report back to work but without the payment of 01-B/05-6619-02-B/05-6620-02-B/10
backwages.
SO ORDERED.
All other claims against respondents including attorney’s fees are DISMISSED for lack of merit.
Now alone but still undeterred, petiti
SO ORDERED.
The Parties’ Arguments
Still joined by his co-complainants, petitioner brought the case to the CA by way of petition for certiorari.
Petitioner continues to insist that he
Ruling of the Court of Appeals elective position as provided in the A
Board of Directors as specifically au
showing that he was appointed by th
Before the CA, petitioner imputed upon the NLRC grave abuse of discretion amounting to lack or excess of
not a corporate officer contrary to th
jurisdiction in declaring him a corporate officer and in holding that his action against respondents is an intra-corporate
controversy and thus beyond the jurisdiction of the Labor Arbiter.

Petitioner likewise contends that his complaint for illegal dismissal against respondents is not an intra-corporate Two-tier test in determining the exis
controversy. He avers that for an action or suit between a stockholder and a corporation to be considered an intra-
corporate controversy, same must arise from intra-corporate relations, i.e., an action involving the status of a
Respondents strongly rely on this C
stockholder as such. He believes that his action against the respondents does not arise from intra-corporate relations
Commission, to wit:
but rather from employer-employee relations. This, according to him, was even impliedly recognized by respondents
as shown by the earlier quoted portion of the termination letter they sent to him.
[A]n intra-corporate controversy is o
distinction, qualification nor any exe
For their part, respondents posit that what petitioner is essentially assailing before this Court is the finding of the
between stockholders and corporati
NLRC and the CA that he is a corporate officer of respondent corporation. To the respondents, the question of
whether petitioner is a corporate officer is a question of fact which, as held in a long line of jurisprudence, cannot be
the subject of review under this Petition for Review on Certiorari. At any rate, respondents insist that petitioner who is In view of this, respondents contend
undisputedly a stockholder of respondent corporation is likewise a corporate officer and that his action against them still constitutes an intra-corporate co
is an intra-corporate dispute beyond the jurisdiction of the labor tribunals. To support this, they cited several corporation.
jurisprudence such as Pearson & George (S.E. Asia), Inc. v. National Labor Relations Commission,11 Philippine
School of Business Administration v. Leano,12 Fortune Cement Corporation v. National Labor Relations
It is worthy to note, however, that be
Commission13 and again, Tabang v. National Labor Relations Commission.14
Construction Co., Inc. v. Movilla17 a
Commission (SEC) and the Labor A
Moreover, in an attempt to demolish petitioner’s claim that the present controversy concerns employer-employee intra-corporate or not, viz:
relations, respondents enumerated the following facts and circumstances: (1) Petitioner was an incorporator,
stockholder and manager of respondent company; (2) As an incorporator, he was one of only seven incorporators of
The fact that the parties involved in
respondent corporation and one of only four Filipino members of the Board of Directors; (3) As stockholder, he has
stockholders and the corporation do
One Thousand (1,000) of the Ten Thousand Eight Hundred (10,800) common shares held by Filipino stockholders,
with a par-value of One Hundred Thousand Pesos (₱100,000.00); (4) His appointment as manager was by virtue of SEC (now the Regional Trial Court19
should be to consider concurrent
Section 1, Article IV of respondent corporation’s By-Laws; (5) As manager, he had direct management and authority
question that is subject of their co
over all of respondent corporation’s skilled employees; (6) Petitioner has shown himself to be an incompetent
manager, unable to properly supervise the employees and even causing friction with the corporation’s clients by jurisdiction. Furthermore, it does not
stockholders would involve such cor
engaging in unruly behavior while in client’s premises; (7) As if his incompetence was not enough, in a blatant and
palpable act of disloyalty, he established another company engaged in the same line of business as respondent exercise of its adjudicatory or quasi-
corporation; (8) Because of these acts of incompetence and disloyalty, respondent corporation through a Resolution
adopted by its Board of Directors was finally constrained to remove petitioner as Manager and declare his office And, while Tabang was promulgated
vacant; (9) After his removal, petitioner urged the employees under him to stage an unlawful strike by leading them latter appears to have developed int
to believe that they have been illegally dismissed from employment.15 Apparently, respondents intended to show controversy. This is explained length
from this enumeration that petitioner’s removal pertains to his relationship with respondent corporation, that is, his
utter failure to advance its interest and the prejudice caused by his acts of disloyalty. For this reason, respondents
see the action against them not as a case between an employer and an employee as what petitioner alleges, but one Intra-Corporate Controversy
by an officer and at same time a major stockholder seeking to be reinstated to his former office against the
corporation that declared his position vacant. A review of relevant jurisprudence s
intra-corporate controversy. Initially,
Finally, respondents state that the fact that petitioner is being given benefits under the Labor Code as stated in his corporate controversy was limited to
termination letter does not mean that they are recognizing the employer-employee relations between them. They the parties. The types of relationship
explain that the benefits provided under the Labor Code were merely made by respondent corporation as the basis in
determining petitioner’s compensation package and that same are merely part of the perquisites of petitioner’s office a) between the corporatio
as a director and manager. It does not and it cannot change the intra-corporate nature of the controversy. Hence,
respondents pray that this petition be dismissed for lack of merit.
b) between the corporatio

Issues
c) between the corporatio
license to operate is conc
From the foregoing and as earlier mentioned, the core issue to be resolved in this case is whether petitioner’s
complaint for illegal dismissal constitutes an intra-corporate controversy and thus, beyond the jurisdiction of the
Labor Arbiter. d) among the stockholder

Our Ruling The existence of any of the above in

RTC), regardless of the subject mat

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the Court introduced the Petitioner negates his status as a co
nature of the controversy test. We declared in this case that it is not the mere existence of an intra-corporate through a board resolution, he was n
relationship that gives rise to an intra-corporate controversy; to rely on the relationship test alone will divest the Directors. While the By-Laws of resp
regular courts of their jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or officers as it may deem necessary o
stockholders. We saw that there is no legal sense in disregarding or minimizing the value of the nature of the was appointed pursuant to said By-L
transactions which gives rise to the dispute. corporation solely by respondent Ab
corporation rather than as a corpora
Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of
ascertaining whether the controversy itself is intra-corporate. The controversy must not only be rooted in the We find merit in petitioner’s contenti
existence of an intra-corporate relationship, but must as well pertain to the enforcement of the parties’ correlative
rights and obligations under the Corporation Code and the internal and intra-corporate regulatory rules of the
"‘Corporate officers’ in the context o
corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict
given that character by the Corporat
even if the relationship does not exist, then no intra-corporate controversy exists.
a corporation must have under Sect
treasurer. The number of officers is
The Court then combined the two tests and declared that jurisdiction should be determined by considering not only provided for by its by-laws like, but n
the status or relationship of the parties, but also the nature of the question under controversy. This two-tier test was number of corporate officers is thus
adopted in the recent case of Speed Distribution Inc. v. Court of Appeals:
Respondents claim that petitioner w
‘To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the corporation’s By-Laws which provide
branches of the RTC specifically designated by the Court to try and decide such cases, two elements must concur:
(a) the status or relationship of the parties, and (2) the nature of the question that is the subject of their controversy.

The first element requires that the controversy must arise out of intra-corporate or partnership relations between any
or all of the parties and the corporation, partnership, or association of which they are not stockholders, members or
Section 1. Election/Appointment – Im
associates, between any or all of them and the corporation, partnership or association of which they are
electing the President, Vice-Preside
stockholders, members or associates, respectively; and between such corporation, partnership, or association and
the State insofar as it concerns the individual franchises. The second element requires that the dispute among the
parties be intrinsically connected with the regulation of the corporation. If the nature of the controversy involves The Board, may from time to time
matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy.’ proper. Any two (2) or more position
[Citations omitted.] President and Treasurer or Secretar

Guided by this recent jurisprudence, we thus find no merit in respondents’ contention that the fact alone that x x x x23 (Emphasis ours)
petitioner is a stockholder and director of respondent corporation automatically classifies this case as an intra-
corporate controversy. To reiterate, not all conflicts between the stockholders and the corporation are classified as
intra-corporate. There are other factors to consider in determining whether the dispute involves corporate matters as We have however examined the rec
made pursuant to the above-quoted
to consider them as intra-corporate controversies.
appointing petitioner as Manager or
the board was submitted by respond
What then is the nature of petitioner’s Complaint for Illegal Dismissal? Is it intra-corporate and thus beyond the various pleadings24 that petitioner w
jurisdiction of the Labor Arbiter? We shall answer this question by using the standards set forth in the Reyes case. Court has stressed time and again t
definitely not evidence."25
No intra-corporate relationship between the parties
It also does not escape our attention
Memorandum on Appeal26 filed befo
As earlier stated, petitioner’s status as a stockholder and director of respondent corporation is not disputed. What the
parties disagree on is the finding of the NLRC and the CA that petitioner is a corporate officer. An examination of the
complaint for illegal dismissal, however, reveals that the root of the controversy is petitioner’s dismissal as Manager xxxx
of respondent corporation, a position which respondents claim to be a corporate office. Hence, petitioner is involved
in this case not in his capacity as a stockholder or director, but as an alleged corporate officer. In applying the
24. Complainant-appellee Renato R
relationship test, therefore, it is necessary to determine if petitioner is a corporate officer of respondent corporation
6, 1998. Priorly [sic], he was working
so as to establish the intra-corporate relationship between the parties. And albeit respondents claim that the
determination of whether petitioner is a corporate officer is a question of fact which this Court cannot pass upon in illegal alien for the past eleven (11) y
him to surrender himself to Japan’s
this petition for review on certiorari, we shall nonetheless proceed to consider the same because such question is not
employer, Mr. Tsutomo Nogami requ
the main issue to be resolved in this case but is merely collateral to the core issue earlier mentioned.
Directors, if complainant-appellee R

he had been blacklisted at Japan’s Immigration Office and could no longer go back to Japan. And so it was Administration v. Leano32 and Pears
arranged that he would serve as respondent-appellant Sangu’s manager, receiving a salary of ₱25,000.00. As complaint for illegal dismissal by cor
such, he was tasked to oversee the operations of the company. x x x (Emphasis ours) The Court declared all these cases a
SEC (now the RTC)34 over them pre
reelection to their respective corpora
xxxx
discussed earlier, petitioner here is n

As earlier stated, complainant-appellee Renato Real was hired as the manager of respondent-appellant Sangu. As
With the foregoing, it is clear that the
such, his position was reposed with full trust and confidence. x x x
complaint for lack of jurisdiction. In c
it to properly dispose of the case on
While respondents repeatedly claim that petitioner was appointed as Manager pursuant to the corporation’s By- of the merits of petitioner’s case ma
Laws, the above-quoted inconsistencies in their allegations as to how petitioner was placed in said position, coupled in order to prevent further delays in
by the fact that they failed to produce any documentary evidence to prove that petitioner was appointed thereto by to strive to settle the entire controve
action or with approval of the board, only leads this Court to believe otherwise. It has been consistently held that "[a]n litigation. If, based on the records, th
‘office’ is created by the charter of the corporation and the officer is elected (or appointed) by the directors or so to serve the ends of justice instea
stockholders."27 Clearly here, respondents failed to prove that petitioner was appointed by the board of directors. gone over the records before us and
Thus, we cannot subscribe to their claim that petitioner is a corporate officer. Having said this, we find that there is no petitioner’s dismissal and hence, we
intra-corporate relationship between the parties insofar as petitioner’s complaint for illegal dismissal is concerned and
that same does not satisfy the relationship test.
Petitioner’s dismissal not in accorda

Present controversy does not relate to intra-corporate dispute

"In an illegal dismissal case, the onu
for a valid cause."37 Here, as correct
We now go to the nature of controversy test. As earlier stated, respondents terminated the services of petitioner for proof to support the grounds for whi
the following reasons: (1) his continuous absences at his post at Ogino Philippines, Inc; (2) respondents’ loss of trust absent for several months, yet they
and confidence on petitioner; and, (3) to cut down operational expenses to reduce further losses being experienced Also, the fact that petitioner was still
by the corporation. Hence, petitioner filed a complaint for illegal dismissal and sought reinstatement, backwages, truthfulness of such charge. Respon
moral damages and attorney’s fees. From these, it is not difficult to see that the reasons given by respondents for employees of Epson, one of respond
dismissing petitioner have something to do with his being a Manager of respondent corporation and nothing with his an investigation on the matter was d
being a director or stockholder. For one, petitioner’s continuous absences in his post in Ogino relates to his have reviewed the records of this ca
performance as Manager. Second, respondents’ loss of trust and confidence in petitioner stemmed from his alleged charges are not sufficient bases for
acts of establishing a company engaged in the same line of business as respondent corporation’s and submitting by petitioner when he established a
proposals to the latter’s clients while he was still serving as its Manager. While we note that respondents also claim and submitted proposals to two of th
these acts as constituting acts of disloyalty of petitioner as director and stockholder, we, however, think that same is mere allegations without sufficient p
a mere afterthought on their part to make it appear that the present case involves an element of intra-corporate mere allegation is definitely not evid
controversy. This is because before the Labor Arbiter, respondents did not see such acts to be disloyal acts of a
director and stockholder but rather, as constituting willful breach of the trust reposed upon petitioner as Manager.28 It
Moreover, petitioner’s dismissal was
was only after respondents invoked the Labor Arbiter’s lack of jurisdiction over petitioner’s complaint in the
and hearing constitute the essential
Supplemental Memorandum of Appeal29 filed before the NLRC that respondents started considering said acts as
sought to be dismissed with two writ
such. Third, in saying that they were dismissing petitioner to cut operational expenses, respondents actually want to
written notice apprising the employe
save on the salaries and other remunerations being given to petitioner as its Manager. Thus, when petitioner sought
afford him an opportunity to be hear
for reinstatement, he wanted to recover his position as Manager, a position which we have, however, earlier declared
subsequent notice informing the em
to be not a corporate position. He is not trying to recover a seat in the board of directors or to any appointive or
and its absence taints the dismissal
elective corporate position which has been declared vacant by the board. Certainly, what we have here is a case of
board resolution and all that petition
termination of employment which is a labor controversy and not an intra-corporate dispute. In sum, we hold that
the abovementioned procedure was
petitioner’s complaint likewise does not satisfy the nature of controversy test.
that petitioner has been illegally dism
backwages and reinstatement,40 we
With the elements of intra-corporate controversy being absent in this case, we thus hold that petitioner’s complaint former position without loss of senio
for illegal dismissal against respondents is not intra-corporate. Rather, it is a termination dispute and, consequently, dismissal until actually reinstated. C
falls under the jurisdiction of the Labor Arbiter pursuant to Section 21730 of the Labor Code. interest and necessarily has to incur
10% of the total backwages that res
We take note of the cases cited by respondents and find them inapplicable to the case at bar. Fortune Cement
Corporation v. National Labor Relations Commission31 involves a member of the board of directors and at the same WHEREFORE, the petition is hereb
time a corporate officer who claims he was illegally dismissed after he was stripped of his corporate position of insofar as it affirmed the National La
Executive Vice-President because of loss of trust and confidence. On the other hand, Philippine School of Business jurisdiction, is hereby REVERSED a

petitioner Renato Real is AFFIRMED and this case is ordered REMANDED to the National Labor Relations On March 30, 2009, Cosare receive
Commission for the computation of petitioner’s backwages and attorney’s fees in accordance with this Decision. Administration, a memo10 signed by
providing in part:
SO ORDERED.
1. A confidential memo wa
very least tried to persuad
G.R. No. 201298 February 5, 2014 a gross and willful violatio
Sales and is an attempt to
RAUL C. COSARE, Petitioner, of this company, derive yo
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents. 2. A company vehicle ass
outside of the office witho
DECISION The vehicle was found to
to a nearby auto repair sh

REYES, J.:
3. You have repeatedly fa
1
within and outside of com
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, which assails the you have been both frequ
Decision2 dated November 24, 2011 and Resolution3 dated March 26, 2012 of the Court of Appeals (CA) in CA-G.R. supervisor, the VP for Sal
SP. No. 117356, wherein the CA ruled that the Regional Trial Court (RTC), and not the Labor Arbiter (LA), had the
jurisdiction over petitioner Raul C. Cosare's (Cosare) complaint for illegal dismissal against Broadcom Asia, Inc.
(Broadcom) and Dante Arevalo (Arevalo), the President of Broadcom (respondents). 4. You have been remiss
you have not recorded an
that my office decided to r
The Antecedents Sales since June last yea

The case stems from a complaint4 for constructive dismissal, illegal suspension and monetary claims filed with the Cosare was given forty-eight (48) ho
National Capital Region Arbitration Branch of the National Labor Relations Commission (NLRC) by Cosare against charges. He was also "suspended fr
the respondents. assets effective immediately."12 Thu
2009, and was instead instructed to
Cosare claimed that sometime in April 1993, he was employed as a salesman by Arevalo, who was then in the was also prevented by Villareal from
business of selling broadcast equipment needed by television networks and production houses. In December 2000,
Arevalo set up the company Broadcom, still to continue the business of trading communication and broadcast On April 1, 2009, Cosare was totally
equipment. Cosare was named an incorporator of Broadcom, having been assigned 100 shares of stock with par the office building for further instruct
value of ₱1.00 per share.5 In October 2001, Cosare was promoted to the position of Assistant Vice President for to seek the assistance of the official
Sales (AVP for Sales) and Head of the Technical Coordination, having a monthly basic net salary and average barangay blotter.13
commissions of ₱18,000.00 and ₱37,000.00, respectively.6

On April 2, 2009, Cosare attempted

Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice President for Sales and thus, became accusations cited in Arevalo’s memo
Cosare’s immediate superior. On March 23, 2009, Cosare sent a confidential memo7 to Arevalo to inform him of the ground of late filing, prompting Cosa
following anomalies which were allegedly being committed by Abiog against the company: (a) he failed to report to Cosare filed the subject labor compl
work on time, and would immediately leave the office on the pretext of client visits; (b) he advised the clients of respondents. He further argued that
Broadcom to purchase camera units from its competitors, and received commissions therefor; (c) he shared in the life or property of his employer and c
"under the-table dealings" or "confidential commissions" which Broadcom extended to its clients’ personnel and
engineers; and (d) he expressed his complaints and disgust over Broadcom’s uncompetitive salaries and wages and
delay in the payment of other benefits, even in the presence of office staff. Cosare ended his memo by clarifying that In refuting Cosare’s complaint, the r
he was not interested in Abiog’s position, but only wanted Arevalo to know of the irregularities for the corporation’s from employment. They also conten
sake. Broadcom: (a) he failed to sell any b
HMC 150 Camera which was to be s
Broadcom’s name for its principal, P
Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that he was instead called for a meeting attend the National Association of B
by Arevalo on March 25, 2009, wherein he was asked to tender his resignation in exchange for "financial assistance" Cosare abandoned his job17 by cont
in the amount of ₱300,000.00.8 Cosare refused to comply with the directive, as signified in a letter9dated March 26, on April 14, 2009 a memorandum18
2009 which he sent to Arevalo.

 The Ruling of the LA

On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his Decision19 dismissing the complaint on the On November 24, 2011, the CA rend
ground of Cosare’s failure to establish that he was dismissed, constructively or otherwise, from his employment. For the respondents’ contention that the
the LA, what transpired on March 30, 2009 was merely the respondents’ issuance to Cosare of a show-cause memo, Decree No. 902-A, as amended, wa
giving him a chance to present his side on the charges against him. He explained:
Record shows that [Cosare] was ind
It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the charges leveled against him in the Moreover, he held the position of [AV
show-cause memo. What he did was to pre-empt that action by filing this complaint just a day after he submitted his president, secretary or treasurer are
written explanation. Moreover, by specifically seeking payment of "Separation Pay" instead of reinstatement, modern corporation statutes usually
[Cosare’s] motive for filing this case becomes more evident.20 that under Section 25 of the Corpora
officers as it may deem necessary. I
It was also held that Cosare failed to substantiate by documentary evidence his allegations of illegal suspension and
non-payment of allowances and commissions.

Unyielding, Cosare appealed the LA decision to the NLRC.

Section 1. Election / Appointment –
electing the President, the Vice-Pres
The Ruling of the NLRC

The Board, may, from time to time, a

On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA Menese. The dispositive portion
of the NLRC Decision reads:
We hold that [the respondents] were
office, as evidenced by the General
WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents are found guilty of Illegal
Commission (SEC) on October 22, 2
Constructive Dismissal. Respondents BROADCOM ASIA, INC. and Dante Arevalo are ordered to pay [Cosare’s]
backwages, and separation pay, as well as damages, in the total amount of ₱1,915,458.33, per attached
Computation. Thus, the CA reversed the NLRC de
complaint on the ground of lack of ju
the petition. Cosare filed a motion fo
SO ORDERED.22
March 26, 2012. Hence, this petition

In ruling in favor of Cosare, the NLRC explained that "due weight and credence is accorded to [Cosare’s] contention
The Present Petition
that he was constructively dismissed by Respondent Arevalo when he was asked to resign from his
employment."23The fact that Cosare was suspended from using the assets of Broadcom was also inconsistent with
the respondents’ claim that Cosare opted to abandon his employment. The pivotal issues for the petition’s f
an intra-corporate dispute that was w
not Cosare was constructively and il
Exemplary damages in the amount of ₱100,000.00 was awarded, given the NLRC’s finding that the termination of
Cosare’s employment was effected by the respondents in bad faith and in a wanton, oppressive and malevolent
manner. The claim for unpaid commissions was denied on the ground of the failure to include it in the prayer of
pleadings filed with the LA and in the appeal.
The petition is impressed with merit.
The respondents’ motion for reconsideration was denied.24 Dissatisfied, they filed a petition for certiorari with the CA
founded on the following arguments: (1) the respondents did not have to prove just cause for terminating the
Jurisdiction over the controversy
employment of Cosare because the latter’s complaint was based on an alleged constructive dismissal; (2) Cosare
resigned and was thus not dismissed from employment; (3) the respondents should not be declared liable for the
payment of Cosare’s monetary claims; and (4) Arevalo should not be held solidarily liable for the judgment award. As regards the issue of jurisdiction,
not the regular courts, which has the
which falls within the jurisdiction of r
In a manifestation filed by the respondents during the pendency of the CA appeal, they raised a new argument, i.e.,
involve any of the following relations
the case involved an intra-corporate controversy which was within the jurisdiction of the RTC, instead of the
between the corporation, partnership
LA.25They argued that the case involved a complaint against a corporation filed by a stockholder, who, at the same
operate is concerned; (3) between th
time, was a corporate officer.
members or officers; and (4) among
however, qualifies that when the dis

jurisdiction of the LAs upon whose jurisdiction, as a rule, falls termination disputes and claims for damages arising This was also the CA’s main basis in
from employer-employee relations as provided in Article 217 of the Labor Code. Consistent with this jurisprudence, courts’ jurisdiction.
the mere fact that Cosare was a stockholder and an officer of Broadcom at the time the subject controversy
developed failed to necessarily make the case an intra-corporate dispute.
The Court disagrees with the respon
officers who are specifically listed, a
In Matling Industrial and Commercial Corporation v. Coros,30 the Court distinguished between a "regular employee" the President, Vice-President, Treas
and a "corporate officer" for purposes of establishing the true nature of a dispute or complaint for illegal dismissal appointment of such other officers a
and determining which body has jurisdiction over it. Succinctly, it was explained that "[t]he determination of whether establish that the position of AVP fo
the dismissed officer was a regular employee or corporate officer unravels the conundrum" of whether a complaint was specifically elected or appointed
for illegal dismissal is cognizable by the LA or by the RTC. "In case of the regular employee, the LA has jurisdiction; form part of the case records. Furthe
otherwise, the RTC exercises the legal authority to adjudicate.31 corporation’s by-laws empowering it
passage of a board resolution to tha
no power to create other corporate o
Applying the foregoing to the present case, the LA had the original jurisdiction over the complaint for illegal dismissal
newly created corporate office.39 "To
because Cosare, although an officer of Broadcom for being its AVP for Sales, was not a "corporate officer" as the
corporate by-laws of an enabling cla
term is defined by law. We emphasized in Real v. Sangu Philippines, Inc.32 the definition of corporate officers for the
of that constitutionally well-protected
purpose of identifying an intra-corporate controversy. Citing Garcia v. Eastern Telecommunications Philippines,
Inc.,33 we held:
The CA’s heavy reliance on the con
respondents during the appeal proce
" ‘Corporate officers’ in the context of Presidential Decree No. 902-A are those officers of the corporation who are
was clearly misplaced. The said doc
given that character by the Corporation Code or by the corporation’s by-laws. There are three specific officers whom
Cosare and his appointment thereto
a corporation must have under Section 25 of the Corporation Code. These are the president, secretary and the
provided in the General Information
treasurer. The number of officers is not limited to these three. A corporation may have such other officers as may be
office as it is defined under the Corp
provided for by its by-laws like, but not limited to, the vice-president, cashier, auditor or general manager. The
Secretary of Broadcom, Atty. Efren L
number of corporate officers is thus limited by law and by the corporation’s by-laws."34 (Emphasis ours)
Information Sheets, the respondents
Securities and Exchange Commissio
In Tabang v. NLRC,35 the Court also made the following pronouncement on the nature of corporate offices: an AVP for Sales, when among thei
severed his relationship with the cor
It has been held that an "office" is created by the charter of the corporation and the officer is elected by the directors
and stockholders. On the other hand, an "employee" usually occupies no office and generally is employed not by Finally, the mere fact that Cosare wa
action of the directors or stockholders but by the managing officer of the corporation who also determines the make the action an intra- corporate
compensation to be paid to such employee.36 (Citations omitted) classified as intra-corporate. There a
matters as to consider them as intra
determining the existence of an intra
As may be deduced from the foregoing, there are two circumstances which must concur in order for an individual to question that is the subject of the co
be considered a corporate officer, as against an ordinary employee or officer, namely: (1) the creation of the position
particularly relates to Cosare’s rights
is under the corporation’s charter or by-laws; and (2) the election of the officer is by the directors or stockholders. It is
the corporation, the controversy can
only when the officer claiming to have been illegally dismissed is classified as such corporate officer that the issue is
explained by the Court in Reyes v. H
deemed an intra-corporate dispute which falls within the jurisdiction of the trial courts.

Under the nature of the controversy

To support their argument that Cosare was a corporate officer, the respondents referred to Section 1, Article IV of ascertaining whether the controvers
Broadcom’s by-laws, which reads: existence of an intra-corporate relati
rights and obligations under the Cor
ARTICLE IV corporation. If the relationship and it
OFFICER even if the relationship does not exis

Section 1. Election / Appointment – Immediately after their election, the Board of Directors shall formally organize by It bears mentioning that even the CA
electing the President, the Vice-President, the Treasurer, and the Secretary at said meeting. commenced was unsupported by th
CA decision to support such finding
The Board may, from time to time, appoint such other officers as it may determine to be necessary or proper. Any
two (2) or more compatible positions may be held concurrently by the same person, except that no one shall act as All told, it is then evident that the CA
President and Treasurer or Secretary at the same time.37 (Emphasis ours) that the dispute was an intra-corpora

The charge of constructive dismissal [T]he first written notice to be served
against them, and a directive that th
reasonable period. "Reasonable opp
Towards a full resolution of the instant case, the Court finds it appropriate to rule on the correctness of the NLRC’s
management must accord to the em
ruling finding Cosare to have been illegally dismissed from employment.
construed as a period of at least five
opportunity to study the accusation a
In filing his labor complaint, Cosare maintained that he was constructively dismissed, citing among other decide on the defenses they will rais
circumstances the charges that were hurled and the suspension that was imposed against him via Arevalo’s memo intelligently prepare their explanation
dated March 30, 2009. Even prior to such charge, he claimed to have been subjected to mental torture, having been circumstances that will serve as bas
locked out of his files and records and disallowed use of his office computer and access to personal not suffice. Lastly, the notice should
belongings.47While Cosare attempted to furnish the respondents with his reply to the charges, the latter refused to among the grounds under Art. 282 is
accept the same on the ground that it was filed beyond the 48-hour period which they provided in the memo. and emphasis supplied)

Cosare further referred to the circumstances that allegedly transpired subsequent to the service of the memo, In sum, the respondents were alread
particularly the continued refusal of the respondents to allow Cosare’s entry into the company’s premises. These notwithstanding the facts which coul
incidents were cited in the CA decision as follows: investigation on the matter. In additio
have been made by the respondents
into the matter before making a final
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he could retrieve his personal
manifested from the fact that even b
belongings, but the latter said that x x x Arevalo directed her to deny his request, so [Cosare] again waited at the misconduct and willful breach of trus
receiving section of the office. On April 1, 2009, [Cosare] was not allowed to enter the office premises. He was asked
resignation in exchange for financial
to just wait outside of the Tektite (PSE) Towers, where [Broadcom] had its offices, for further instructions on how and
when he could get his personal belongings. [Cosare] waited until 8 p.m. for instructions but none were given. Thus,
[Cosare] sought the assistance of the officials of Barangay San Antonio, Pasig who advised him to file a labor or The clear intent of the respondents t
replevin case to recover his personal belongings. x x x.48 (Citation omitted) Cosare abandoned his post, alleged
April 1, 2009. This was even the sub
explain his absence within 48 hours
It is also worth mentioning that a few days before the issuance of the memo dated March 30, 2009, Cosare was
placed Cosare under suspension be
allegedly summoned to Arevalo’s office and was asked to tender his immediate resignation from the company, in
company files/records and the use o
exchange for a financial assistance of ₱300,000.00.49 The directive was said to be founded on Arevalo’s choice to memo would be dealt with drastic m
retain Abiog’s employment with the company.50 The respondents failed to refute these claims. imposed suspension. "Abandonmen
employment. To constitute abandon
Given the circumstances, the Court agrees with Cosare’s claim of constructive and illegal dismissal. "[C]onstructive report for work or must have been a
dismissal occurs when there is cessation of work because continued employment is rendered impossible, intention on the part of the employee
unreasonable, or unlikely as when there is a demotion in rank or diminution in pay or when a clear discrimination, act.’"57Cosare’s failure to report to w
insensibility, or disdain by an employer becomes unbearable to the employee leaving the latter with no other option sever his employment with Broadco
but to quit."51 In Dimagan v. Dacworks United, Incorporated,52 it was explained: he failed to do so after he was speci
NLRC:
The test of constructive dismissal is whether a reasonable person in the employee’s position would have felt
compelled to give up his position under the circumstances. It is an act amounting to dismissal but is made to appear [T]he Respondent[s] had charged [C
as if it were not. Constructive dismissal is therefore a dismissal in disguise. The law recognizes and resolves this show-cause letter dated March 3[0],
situation in favor of employees in order to protect their rights and interests from the coercive acts of the but the "assets" of Respondent [Bro
employer.53(Citation omitted) us and make [it appear] that [Cosare
suspension. x x x.58
It is clear from the cited circumstances that the respondents already rejected Cosare’s continued involvement with
the company. Even their refusal to accept the explanation which Cosare tried to tender on April 2, 2009 further Following a finding of constructive d
evidenced the resolve to deny Cosare of the opportunity to be heard prior to any decision on the termination of his awards in Cosare's favor. In Robinso
employment. The respondents allegedly refused acceptance of the explanation as it was filed beyond the mere 48- reiterated that an illegally or constru
hour period which they granted to Cosare under the memo dated March 30, 2009. However, even this limitation was separation pay, if reinstatement is n
a flaw in the memo or notice to explain which only further signified the respondents’ discrimination, disdain and also justified given the NLRC's findin
insensibility towards Cosare, apparently resorted to by the respondents in order to deny their employee of the malevolent manner when they dismi
opportunity to fully explain his defenses and ultimately, retain his employment. The Court emphasized in King of declared solidarily liable for the mon
Kings Transport, Inc. v. Mamac54 the standards to be observed by employers in complying with the service of notices
prior to termination:

WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and Resolution dated March 26, "The auditors of the Bank
2012 of the Court of Appeals in CA-G.R. SP. No. 117356 are SET ASIDE. The Decision dated August 24, 2010 of US$109,650.00, and No.
the National Labor Relations Commission in favor of petitioner Raul C. Cosare is AFFIRMED. April 6, 1989, drawn ,by th
Jurong Branch, Singapore
Shanghai Banking Corpor
SO ORDERED.

The Bank created a comm

G.R. No. 141093 February 20, 2001 were not collected and be

PRUDENTIAL BANK and TRUST COMPANY, petitioner, On March 8, 1991, the pre
vs. the findings of the auditors
CLARITA T. REYES, respondent. extension of one week to
president, complainant sta
GONZAGA-REYES, J.: pertinent documents she i
answer, she was constrain
asked that a formal invest
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 resolution2 of the National Labor As the complainant failed
Relations Commission (NLRC) in NLRC NCR CA No.009364-95, reversing and setting aside the labor arbiter's on May 24, 1991, despite
decision and dismissing for lack of merit private respondent's complaint.3 testimonies of several witn

The case stems from NLRC NCR Case No.00-06-03462-92, which is a complaint for illegal suspension and illegal The Committee's findings
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, 'a) The two (2) H
private respondent Reyes held the position of Assistant Vice President in the foreign department of the Bank, tasked same day, com
with the duties, among others, to collect checks drawn against overseas banks payable in foreign currency and to of P4,780,102.7
ensure the collection of foreign bills or checks purchased, including the signing of transmittal letters covering the to 23-A). On the
same. remittance clerk
two (2) HSBC c
After proceedings duly undertaken by the parties, judgment was rendered by labor Arbiter Cornelio L. Linsangan, the letters (Exhibits
dispositive portion of which reads: instructions dire
letters are in fac

"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 b) After Ms. Jov
P540,000.00 (P15,000.00 x 36 mos.). In lieu of reinstatement, the respondent is also ordered to pay the Foreign Dep
complainant separation pay equivalent to one month salary for every year of service, in the amount of changing the ad
P420,000.00 (P15,000 x 28 mos.). In addition, the respondent should. also pay complainant profit sharing special collectio
and unpaid fringe benefits. Attorney's fees equivalent to ten (10%) percent of the total award should
likewise be paid by respondent. c) After complyi
latter to sign the
SO ORDERED."4 the letters and c
remained unsig
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 d) In June 1989
denied by the NLRC in its Resolution of 28 July 1998. Aggrieved, private respondent commenced on October 28, responsibilities
1998, a petition for certiorari before the Supreme Court.5 The subject petition was referred to the Court of Appeals for turned over to a
appropriate action and disposition per resolution of this Court dated November 25, 1998, in accordance with the 27-29).
ruling in St. Marlin Funeral Homes vs. NLRC.6
e) When asked
In its assailed decision, the Court of Appeals adopted the following antecedent facts leading to Reyes's dismissal as complainant's in
summarized by the NLRC:

 f) About fifteen (15) months after the HSBC checks were received by the Bank, the said checks In her position paper, com
were discovered in the course of an audit conducted by the Bank's auditors. Atty. Pablo Magno, criminal cases against the
the Bank's legal counsel, advised complainant to send the checks for collection despite the lapse being a valid ground for h
of fifteen (15) months. respondent to state that sh
of the two dollar checks. S
the chance to refute the c
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 On the other hand, respon
checks. confidence on the compla
filing the clearly unfounde
exemplary damages and a
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).'
The Court of Appeals found that the
is valid. In effect, the Court of Appea
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.
"WHEREFORE, in the ligh
ASIDE. In lieu thereof, jud
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:
1. To pay petitio
judgment;
'Dear Mrs. Reyes:

2. To pay petitio
After a thorough investigation and appreciation of the charges against you as contained in the
in lieu of reinsta
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: 3. To pay attorn

1. You have deliberately held the clearing of Checks Nos. 11728 and 11730 of Hongkong and SO ORDERED."8
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
Hence, the Bank's recourse to this C
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; "IN SETTING ASIDE THE
JULY 1998 OF THE NLRC
1995 OF LABOR ARBITE
2. You tried to influence the decision of Atty. Pablo P. Magno, Bank legal counsel, by asking him
SERIOUSLY ERRED, IN
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 IT IS THE SEC (NOW TH
relayed a false advice which delayed further the sending of the two checks for collection. AND EXCLUSIVE JURISD
Likewise, you refused to heed the advice of the Bank's legal counsel to send the checks for CORPORATE OFFICERS
collection.

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
EVEN ASSUMING ARGU
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 EVIDENCE OF RESPON
relation thereto, your monetary and retirement benefits are forfeited except those that have CONFIDENCE ON (sic) H
vested in you.'

 EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO BACKWAGES, THE integral to the operations of the bank
HONORABLE COURT OF APPEALS ERRED IN AWARDING UNLIMITED AND UNQUALIFIED status as a regular employee of the
BACKWAGES THEREBY GOING FAR BEYOND THE LABOR ARBITER'S DECISION LIMITING THE her services may be terminated only
SAME TO THREE YEARS, WHICH DECISION RESPONDENT HERSELF SOUGHT TO EXECUTE."9 is no wonder then that the Bank end
misconduct on the part of private res
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 This brings us to the second issue w
awarded was proper. breach of trust on the part of private
disagreed and set aside the findings
checks; that she is guilty of conflict o
On the first issue, petitioner seeks refuge behind the argument that the dispute is an intra-corporate controversy
and that she was dismissed based o
concerning as it does the non-election of private respondent to the position of Assistant Vice-President of the Bank
wit:
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- "FIRST: Respondent Bank
corporate controversy cognizable by the SEC invoking lengthily a number of this Court's decisions.10 to establish loss of confide
subject two dollar checks
dismissal. Except for Jove
Petitioner Bank can no longer raise the issue of jurisdiction under the principle of estoppel. The Bank participated in
respondent Bank failed to
the proceedings from start to finish. It filed its position paper with the Labor Arbiter. When the decision of the Labor
that respondent Bank's wi
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 Upon this point, the rule th
jurisdiction. The Bank actively participated in the proceedings before the Labor Arbiter, the NLRC and the Court of the charge of loss of confi
Appeals. While it is true that jurisdiction over the subject matter of a case may be raised at any time of the is not absolute. The right o
proceedings, this rule presupposes that laches or estoppel has not supervened. In this regard, Bañaga vs. confidence in him must no
Commission on the Settlement of Land Problems,11 is most enlightening. The Court therein stated: to be valid ground for an e
founded on clearly establi
NLRC, 248 SCRA 183).
"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 SECOND. Respondent Ba
question of jurisdiction for the first time in a petition before the Supreme Court when it failed to do so in the the testimony of Atty. Jocs
early stages of the proceedings." Jocson testified that the d
There being conflict in the
be true (U.S. vs. Losada,
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 THIRD. Settled is the rule
Board of Directors." As far as the records before this Court reveal however, such an assertion was made only in the the evidence on record, th
appeal to the NLRC and raised again before the Court of Appeals, not for purposes of questioning jurisdiction but to position to assess and eva
establish that private respondent's tenure was subject to the discretion of the Board of Directors and that her non- Inc. vs. NLRC, 268 SCRA
reelection was a mere expiration of her term. The Bank insists that private respondent was elected Assistant Vice Labor Arbiter Linsangan, t
President sometime in 1990 to serve as such for only one year. This argument will not do either and must be
rejected.
This Office has
testimonies of re
It appears that private respondent was appointed Accounting Clerk by the Bank on July 14, 1963. From that position of complainant's
she rose to become supervisor. Then in 1982, she was appointed Assistant Vice-President which she occupied until (exh. 25-J, supr
her illegal dismissal on July 19, 1991. The bank's contention that she merely holds an elective position and that in witness for the b
effect she is not a regular employee is belied by the nature of her work and her length of service with the Bank. As Analiza Castillo
earlier stated, she rose from the ranks and has been employed with the Bank since 1963 until the termination of her checks and thei
employment in 1991. As Assistant Vice President of the foreign department of the Bank, she is tasked, among Ms. Joven, that
others, to collect checks drawn against overseas banks payable in foreign currency and to ensure the collection of nutshell, therefo
foreign bills or checks purchased, including the signing of transmittal letters covering the same. It has been stated credible.
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
After painstakin
employee is regular because of the nature of work and the length of service, not because of the mode or even the
this Office finds
reason for hiring them."13 As Assistant Vice-President of the Foreign Department of the Bank she performs tasks

 observed the demeanor of Ms. Joven while testifying on the witness stand and was not from the time th
impressed by her assertions. The allegation of Ms. Joven in that her non-release of the dollar was issued a m
checks was upon the instruction of complainant Reyes is extremely doubtful. In the first place, four (4) months
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
The delayed ac
employer bank. It was incumbent upon Ms. Joven not only to disobey the instruction but even to
the latter that he
report the matter to management, if same was really given to her by complainant.
bank's top offici

Our doubt on the veracity of Ms. Joven's allegation even deepens as we consider the fact that
It clearly appea
when the non-release of the checks was discovered by Ms. Castillo the former contented herself
less participatio
by continuously not taking any action on the two dollar checks. Worse, Ms. Joven even impliedly
responsible for
told by Ms. Castillo (sic) to ignore the two checks and just withhold their release. In her affidavit
Ms. Castillo said:
FOURTH. Respondent Ba
confidence, petitioner was
'4. When I asked Cecille Joven what I was supposed to do with those checks, she said
nothing confidential in the
the same should be held as per instruction of Mrs. Reyes.' (Exh. "14", supra).
dictates that management
adequately for his defense
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,
The issue of conflict of int
accompanied by driver Celestino Banito, went to her residence and confronted her regarding the
the charge."15
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. We uphold the findings of the Court
and confidence was without basis. T
findings of the Labor Arbiter as conf
On the other hand, the actions taken by the complainant were spontaneous. When complainant
Court is not a trier of facts and will n
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 On the third issue, the Bank questio
to confront her. In this regard, Celestino Bonito, complainant's driver, stated in his affidavit, thus: finality of this judgment; separation p
reinstatement; and attorney's fees e
that private respondent is not entitle
'1. Sometime on November 15, 1989 at about 7:00 o'clock in the evening, Mrs. Clarita
portion of the labor arbiter's judgmen
Tan Reyes and I were in the residence of one Ms. Cecille Joven, then a Processing
respondent filed a special civil action
Clerk in the Foreign Department of Prudential Bank;
An ordinary appeal is distinguished
in ordinary appeals it is settled that a
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan Reyes were seated in granted in the decision of the court b
the sala when the latter asked the former, Ms. Cecille Joven, how it came about that National Labor Relations Commissio
the two dollar checks which she was then holding with the transmittal letters, were of want or excess of jurisdiction and
found in a plastic envelope kept day-to-day by the former; the NLRC gravely abused its discret
the same. Corollary to the foregoing
jurisprudence.
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.
Indeed, jurisprudence is clear on the
illegally dismissed prior to the effect
4. Mrs. Clarita Tan Reyes, upon hearing those words, was surprised and she
three (3) years without deduction or
said: "Ano, papaano mong alam na bouncing na hindi mo pa pinadadala:
inclusive of allowances and other be
withheld from them up to the time of
5. Mrs. Cecille Joven turned pale and was not able to answer.' on July 19, 1991, she is entitled to fu
(which, as a rule, is from the time of
considering that reinstatement is no
There are other factors that constrain this Office to doubt even more the legality of complainant's the strained relations brought about
dismissal based on the first ground stated in the letter of dismissal. The non-release of the dollar
entitled to separation pay equivalent
checks was reported to top management sometime on 15 November 1989 when complainant,
respondent was compelled to file an
accompanied by Supervisor Dante Castor and Analiza Castillo, reported the matter to Vice attorney's fees22 at the rate above-m
President Santos. And yet, it was only on 08 March 1991, after a lapse of sixteen (16) months

should be mitigated on account of its good faith and that private respondent is not entirely blameless. There is no By letter of November 25, 19983 add
showing that private respondent is partly at fault or that the Bank acted in good faith in terminating an employee of Sandra G. Escat, and Olga G. Esca
twenty-eight years. In any event, Article 279 of Republic Act No. 671523 clearly and plainly provides for "full respondent’s willingness to abide by
backwages" to illegally dismissed employees.1âwphi1.nêt separation pay equivalent to 11 mon

WHEREFORE, the instant petition for review on certiorari is DENIED, and the assailed Decision of the Court of Respondent’s counsel thus demand
Appeals, dated October 15, 1999, is AFFIRMED. November 1998, separation pay equ

SO ORDERED. As the demand remained unheeded

and other benefits, docketed as NLR
G.R. No. 164888 December 6, 2006
Petitioners moved for the dismissal
was an intra-corporate controversy i
RURAL BANK OF CORON (PALAWAN), INC., EMPIRE COLD STORAGE AND DEVELOPMENT Secretary of the Rural Bank of Coro
CORPORATION, CITIZENS DEVELOPMENT INCOPRORATED, CARIDAD B. GARCIA, SANDRA G. ESCAT, pursuant to Section 5 of PD 902-A.6
LORNA GARCIA, and OLGA G. ESCAT, petitioners,
vs.
ANNALISA CORTES, respondent. In resolving the issue of jurisdiction,

It is to be noted that comp

Coron, complainant was
respondents herein, who
complaint.
DECISION

Verily, a Financial Assist

corporation, thus, pursua
ambit of original and exclu

CARPIO MORALES, J.: Eventually, the Labor Arbiter found f

In 1987, Virgilio Garcia, "founder" of petitioner corporations (the corporations), hired the then still single Annalisa
Backwages
Cortes (respondent) as clerk of the Rural Bank of Coron (Manila Office).
13th Month Pay for 1998,
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. Separation Pay

Anita soon assumed the position of Vice President of petitioner Citizens Development Incorporated (CDI) and Unpaid Salary
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. Attorney’s fees

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.
Thus, the Labor Arbiter, by Decision
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 WHEREFORE, in view of
anomalies,1drawing petitioners to terminate respondent’s services on November 23, 1998 in petitioner corporations.2 complainant the total amo
(P1,168,090.00) PESOS a

On August 13, 2001, the tenth or last day of the period of appeal,9 petitioners filed a Notice of Appeal and Motion for . . . FAIL[URE] TO RESOL
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
While, indeed, respondent was the C
receivership. They thus prayed that the amount of bond be substantially reduced, preferably to one half thereof or
Assistant and the Personnel Officer
even lower.12

Mainland Construction Co., Inc. v. M

By Resolution of October 16, 200113, the National Labor Relations Commission (NLRC), while noting that petitioners
services under a circumstance whic
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. The Labor Arbiter has thus jurisdictio

Petitioners’ Motion for Reconsideration15 was denied by the NLRC by November 26, 2001 Resolution,16 hence, they On the first three assigned errors wh
filed a Petition for Certiorari17 before the Court of Appeals.
As before the Court of Appeals, peti
By Decision dated May 26, 200418, the appellate court dismissed the petition for lack of merit. Petitioners’ motion for contention that their appeal before th
reconsideration was also denied by Resolution of August 13, 2004.19 cited cases are not in point.

Hence, this petition,20 petitioners faulting the appellate court for: … The appellant in Taber
Supreme Court relaxed th
computation of the monet
I
Supreme Court ruled that
awards must be given libe
. . . FAIL[URE] TO RULE THAT THE NLRC’S RULE OF PROCEDURE WHICH PROVIDES FOR THE their merits. Herein, no ap
POSTING OF A BOND AS A CONDITION PRECEDENT FOR PERFECTING AN APPEAL AS A petitioners.27 (Italics in th
CONDITION PRECEDENT FOR PERFECTING AN APPEAL IS CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.
Petitioners additionally cite Star Ang
between the filing of an appeal withi
II Innovations Center v. National Labo
Angel in this wise:
. . . DISMISS[ING] PETITIONERS[’] PETITION FOR [CERTIORARI] BASED ON TECHNICALITY AND
FAIL[URE] TO DECIDE THE SAME BASED ON ITS MERIT. Petitioners invoke the afor
an appeal within the regle
said reglementary period.
III
necessarily stays the regle
appeal bond, which was in
. . . DISMISSING PETITIONERS’ PETITION FOR CERTIORARI FROM THE DECISION OF THE NLRC of the reglementary period
FOR NON-PERFECTION THEREOF. longer be deemed to hav
this case, of summary d
IV
Moreover, the reference in
the appeal has been point
. . . DISMISSING PETITIONERS’ PETITION FOR [CERTIORARI] FROM THE DECISION OF THE NLRC the sheen of venerability r
WITHOUT RESOLVING THE CASE BASED ON ITS MERITS. evident or material in the L
Moreover, the present pr
V bond shall not stop the run
in Star Angel that there i
. . . 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 Ultimately, the disposition
SHOWING THAT THEY WERE MOTIVATED BY ILL-WILL OR MALICE IN SEVERING HER appeal bond necessarily s
EMPLOYMENT. expected to perfect the ap
resolved. The unduly stre
appeal was not material
VI as obiter dictum.30(Italics

The appellate court did not thus err in dismissing the petition before it. And contrary to petitioners’ assertion, the On 2 December 1978, petitioner Pak
appellate court dismissed its petition not "on a mere technicality." For the non-posting of an appeal bond within the do business in the Philippines, exec
reglementary period divests the NLRC of its jurisdiction to entertain the appeal. Thus, in the same case of Computer respondent Ethelynne B. Farrales an
Innovations Center, this Court held: became effective on 9 January 1979

Petitioners also characterize the appeal bond requirement as a technical rule, and that the dismissal of an 5. DURATION O
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
This agreement
a liberal interpretation thereof, and certainly none premised on the ground that its requirements are mere
the parties.
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 6. TERMINATIO
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
Notwithstanding
eventually paid should the appeal be dismissed. Petitioners should thus have posted a bond, even if it were only
agreement at an
partial, but they did not. No relaxation of the Rule may thus be considered.32
the intended ter
month's salary.
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 10. APPLICABL
proceeding held for that purpose.33 (Emphasis and underscoring supplied)
This agreement
As the decision of the Labor Arbiter had become final and executory, a discussion of the fourth and fifth assigned the Courts of Ka
errors is no longer necessary. under this agree

WHEREFORE, the petition is DENIED. Respondents then commenced train

functions as flight attendants, with b
SO ORDERED. and Europe.

On 2 August 1980, roughly one (1) y

G.R. No. 61594 September 28, 1990 PIA through Mr. Oscar Benares, cou
August 1980 to private respondents
PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner, would be terminated "effective 1 Sep
vs had) executed with [PIA]."2
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO, JR., in his capacity as
Deputy Minister; ETHELYNNE B. FARRALES and MARIA MOONYEEN MAMASIG, respondents. On 9 September 1980, private respo
STF-95151-80, for illegal dismissal a
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner. Ministry of Labor and Employment ("
officer Atty. Jose M. Pascual ordere
respective positions. The PIA submi
Ledesma, Saludo & Associates for private respondents. respondents were habitual absentee
"personal effects"; and that PIA pers
officials to advise private responden
private respondents were terminated
FELICIANO, J.:

In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the reinstatement of private Policy Instruction No. 14 i
respondents with full backwages or, in the alternative, the payment to them of the amounts equivalent to their about the jurisdiction of th
salaries for the remainder of the fixed three-year period of their employment contracts; the payment to private
respondent Mamasig of an amount equivalent to the value of a round trip ticket Manila-USA Manila; and payment of
Under PD 850,
a bonus to each of the private respondents equivalent to their one-month salary. 4 The Order stated that private
jurisdiction of th
respondents had attained the status of regular employees after they had rendered more than a year of continued
first time, are al
service; that the stipulation limiting the period of the employment contract to three (3) years was null and void as
there was a CB
violative of the provisions of the Labor Code and its implementing rules and regulations on regular and casual
arbitration, while
employment; and that the dismissal, having been carried out without the requisite clearance from the MOLE, was
Conciliation Sec
illegal and entitled private respondents to reinstatement with full backwages.

In more details,
On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE, adopted the
regulations with
findings of fact and conclusions of the Regional Director and affirmed the latter's award save for the portion thereof
giving PIA the option, in lieu of reinstatement, "to pay each of the complainants [private respondents] their salaries
corresponding to the unexpired portion of the contract[s] [of employment] . . .". 5 1. The Regiona
there is opposit
In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and the Order of the
Deputy Minister as having been rendered without jurisdiction; for having been rendered without support in the
evidence of record since, allegedly, no hearing was conducted by the hearing officer, Atty. Jose M. Pascual; and for
having been issued in disregard and in violation of petitioner's rights under the employment contracts with private
(Emphasis supp
respondents.

1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the subject matter of the 2. The second contention of petition
and void because it had been issued
complaint initiated by private respondents for illegal dismissal, jurisdiction over the same being lodged in the
however, cannot be given serious co
Arbitration Branch of the National Labor Relations Commission ("NLRC") It appears to us beyond dispute, however,
that both at the time the complaint was initiated in September 1980 and at the time the Orders assailed were its position paper but also such evid
paper; we must assume it had no ev
rendered on January 1981 (by Regional Director Francisco L. Estrella) and August 1982 (by Deputy Minister Vicente
conducted, petitioner had ample opp
Leogardo, Jr.), the Regional Director had jurisdiction over termination cases.
to the Ministry of Labor and Employm

Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of employees with at least one
There is another reason why petition
(1) year of service without prior clearance from the Department of Labor and Employment:
was filed by private respondents on
order on 22 January 1981, applicabl
Art. 278. Miscellaneous Provisions — . . . shall be conclusively presumed to b
required in such case to" order the im
time of the shutdown or dismiss unti
(b) With or without a collective agreement, no employer may shut down his establishment or
Director did not even have to require
dismiss or terminate the employment of employees with at least one year of service during the
de jure) character of the presumptio
last two (2) years, whether such service is continuous or broken, without prior written authority
v. Minister of Labor and Employmen
issued in accordance with such rules and regulations as the Secretary may promulgate . . .
Rules and Regulations, the terminat
(emphasis supplied)
Labor is conclusively presumed to b
contrary proof however strong."
Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made clear that in case
of a termination without the necessary clearance, the Regional Director was authorized to order the
3. In its third contention, petitioner P
reinstatement of the employee concerned and the payment of backwages; necessarily, therefore, the
respondents Farrales and Mamasig,
Regional Director must have been given jurisdiction over such termination cases:
contract rather than by the general p

Sec. 2. Shutdown or dismissal without clearance. — Any shutdown or dismissal without prior
Paragraph 5 of that contract set a te
clearance shall be conclusively presumed to be termination of employment without a just cause.
parties; while paragraph 6 provided
The Regional Director shall, in such case order the immediate reinstatement of the employee
terminate the employment agreeme
and the payment of his wages from the time of the shutdown or dismissal until the time of
notice, one-months salary.
reinstatement. (emphasis supplied)

A contract freely entered into should

parties. 10 The principle of party auto

of our Civil Code is that the contracting parties may establish such stipulations as they may deem As it is evident f
convenient, "provided they are not contrary to law, morals, good customs, public order or public policy." Thus, Code, under a n
counter-balancing the principle of autonomy of contracting parties is the equally general rule that provisions of employment co
applicable law, especially provisions relating to matters affected with public policy, are deemed written into the appear to restric
contract. 11 Put a little differently, the governing principle is that parties may not contract away applicable provisions with his employ
of law especially peremptory provisions dealing with matters heavily impressed with public interest. The law relating interpretation sh
to labor and employment is clearly such an area and parties are not at liberty to insulate themselves and their to preclude abs
relationships from the impact of labor laws and regulations by simply contracting with each other. It is thus necessary subverting to bo
to appraise the contractual provisions invoked by petitioner PIA in terms of their consistency with applicable as a means to p
Philippine law and regulations. nose to spite th

As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of that
employment contract was inconsistent with Articles 280 and 281 of the Labor Code as they existed at the time the
contract of employment was entered into, and hence refused to give effect to said paragraph 5. These Articles read
Accordingly, an
as follows:
the present Arti
prevent circumv
Art. 280. Security of Tenure. — In cases of regular employment, the employer shall not article indiscrim
terminate the services of an employee except for a just cause or when authorized by this Title the concept of r
An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss substantive evil
of seniority rights and to his backwages computed from the time his compensation was withheld circumvent secu
from him up to the time his reinstatement. employment wa
or improper pre
circumstances v
Art. 281. Regular and Casual Employment. The provisions of written agreement to the contrary
employee dealt
notwithstanding and regardless of the oral agreements of the parties, an employment shall be
being exercised
deemed to be regular where the employee has been engaged to perform activities which are
made to apply t
usually necessary or desirable in the usual business or trade of the employer, except where the
pointless and ar
employment has been fixed for a specific project or undertaking the completion or termination of
consequences.
which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the
season. It is apparent from Brent S
indication that the period s
of tenure of regular emplo
An employment shall be deemed to be casual if it is not covered by the preceding paragraph:
indication must ordinarily r
provided, that, any employee who has rendered at least one year of service, whether such
fixed term of the ernploym
service is continuous or broken, shall be considered as regular employee with respect to the
activity in which he is employed and his employment shall continue while such actually exists.
(Emphasis supplied) Examining the provisions of paragra
respondents, we consider that those
years specified in paragraph 5 will b
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to examine in detail the
that agreement. Paragraph 6 in effe
question of whether employment for a fixed term has been outlawed under the above quoted provisions of the Labor
by paragraph 5 by rendering such p
Code. After an extensive examination of the history and development of Articles 280 and 281, the Court reached the
PIA claims to be authorized to short
conclusion that a contract providing for employment with a fixed period was not necessarily unlawful:
period, or even less by simply payin
of the agreement here involved is to
There can of course be no quarrel with the proposition that where from the circumstances it is employment at the pleasure of petiti
apparent that periods have been imposed to preclude acquisition of tenurial security by the any security of tenure from accruing
employee, they should be struck down or disregarded as contrary to public policy, morals, etc. years,13 and thus to escape complet
But where no such intent to circumvent the law is shown, or stated otherwise, where the reason
for the law does not exist e.g. where it is indeed the employee himself who insists upon a period
Petitioner PIA cannot take refuge in
or where the nature of the engagement is such that, without being seasonal or for a specific
Pakistan as the applicable law of the
project, a definite date of termination is a sine qua non would an agreement fixing a period be
out of or in connection with the agre
essentially evil or illicit, therefore anathema Would such an agreement come within the scope of
cannot be invoked to prevent the ap
Article 280 which admittedly was enacted "to prevent the circumvention of the right of the
case, i.e., the employer-employee re
employee to be secured in . . . (his) employment?"
pointed out that the relationship is m
laws and regulations cannot be rend

relationship. Neither may petitioner invoke the second clause of paragraph 10, specifying the Karachi courts as the Respondent is a Canadian citizen an
sole venue for the settlement of dispute; between the contracting parties. Even a cursory scrutiny of the relevant a consultant in the field of environme
circumstances of this case will show the multiple and substantive contacts between Philippine law and Philippine is a corporation duly established and
courts, on the one hand, and the relationship between the parties, upon the other: the contract was not only executed purpose of PPI was to engage in the
in the Philippines, it was also performed here, at least partially; private respondents are Philippine citizens and Philippines.2 It is a subsidiary of Pac
respondents, while petitioner, although a foreign corporation, is licensed to do business (and actually doing business) Henrichsen, who was also the direct
and hence resident in the Philippines; lastly, private respondents were based in the Philippines in between their Manila and vice versa, as well as in
assigned flights to the Middle East and Europe. All the above contacts point to the Philippine courts and
administrative agencies as a proper forum for the resolution of contractual disputes between the parties. Under these
In 1997, PCIJ decided to engage in
circumstances, paragraph 10 of the employment agreement cannot be given effect so as to oust Philippine agencies
respondent was employed by PCIJ,
and courts of the jurisdiction vested upon them by Philippine law. Finally, and in any event, the petitioner PIA did not
Department. However, PCIJ assigne
undertake to plead and prove the contents of Pakistan law on the matter; it must therefore be presumed that the
by PPI and PCIJ.
applicable provisions of the law of Pakistan are the same as the applicable provisions of Philippine law.14

On January 7, 1998, Henrichsen tra

We conclude that private respondents Farrales and Mamasig were illegally dismissed and that public respondent
accept the same and affix his confor
Deputy Minister, MOLE, had not committed any grave abuse of discretion nor any act without or in excess of
signed the contract.3 He then sent a
jurisdiction in ordering their reinstatement with backwages. Private respondents are entitled to three (3) years
backwages without qualification or deduction. Should their reinstatement to their former or other substantially
equivalent positions not be feasible in view of the length of time which has gone by since their services were Mr. Klaus K. Schonfeld
unlawfully terminated, petitioner should be required to pay separation pay to private respondents amounting to one II-365 Ginger Drive
(1) month's salary for every year of service rendered by them, including the three (3) years service putatively New Westminster, B.C.
rendered. Canada V3L 5L5
Tokyo 7
ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order dated 12 August
1982 of public respondent is hereby AFFIRMED, except that (1) private respondents are entitled to three (3) years
backwages, without deduction or qualification; and (2) should reinstatement of private respondents to their former
positions or to substantially equivalent positions not be feasible, then petitioner shall, in lieu thereof, pay to private
respondents separation pay amounting to one (1)-month's salary for every year of service actually rendered by them Dear Mr. Schonfeld,
and for the three (3) years putative service by private respondents. The Temporary Restraining Order issued on 13
September 1982 is hereby LIFTED. Costs against petitioner.

SO ORDERED. This Letter of Employment with the a

which you will be engaged by our Co
discrepancies or contradictions betw
G.R. No. 166920 February 19, 2007 Letter of Employment will prevail.

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS PETER HENRICHSEN, Petitioners, You will, from the date of commence
vs. hereinafter referred as Pacicon. Pac
KLAUS K. SCHONFELD, Respondent. present terms and conditions for wh
between the present Letter of Emplo
DECISION should not live up to its obligations,

CALLEJO, SR., J.: 1. Project Country: The Ph

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the Decision1 of the 2. Duty Station: Manila, th
Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the Resolution of the National Labor
Relations Commission (NLRC) in NLRC NCR CA No. 029319-01, which, in turn, affirmed the Decision of the Labor 3. Family Status: Married.
Arbiter in NLRC NCR Case No. 30-12-04787-00 dismissing the complaint of respondent Klaus K. Schonfeld.

4. Position: Sector Manag

The antecedent facts are as follows:

5. Commencement: 1st O

 6. Remuneration: US$7,000.00 per month. The amount will be paid partly as a local salary (US$2,100.00 Respondent arrived in the Philippine
per month) by Pacicon and partly as an offshore salary (US$4,900.00) by PCI to bank accounts to be of a resident alien.
nominated by you.
As required by Rule XIV (Employme
A performance related component corresponding to 17.6% of the total annual remuneration, subject to an Alien Employment Permit (Permi
satisfactory performance against agreed tasks and targets, paid offshore. appended respondent’s contract of e

7. Accommodation: The company will provide partly furnished accommodation to a rent including On February 26, 1999, the DOLE gr
association fees, taxes and VAT not exceeding the Pesos equivalent of US$2,900.00 per month.

8. Transportation: Included for in the remuneration.

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

10. Shipment of Personal

ISSUED TO: SCHONFELD, KLAUS
Effects: The maximum allowance is US$4,000.00.
DATE OF BIRTH: January 11, 1942
11. Mobilization
POSITION: VP – WATER & SANITA
Travel: Mobilization travel will be from New Westminster, B.C., Canada.
EMPLOYER: PACICON PHILIPPIN
This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.
ADDRESS: 27/F Rufino Pacific Tow
Yours sincerely,

Pacific Consultants International

Jens Peter Henrichsen ISSUED ON: February 26, 1999 SIG

Above terms and conditions accepted VALID UNTIL: January 7, 2000 (Sgd

Date: 2 March 1998 APPROVED: BIENVENIDO S. LAG

(Sgd.) By: MAXIMO B. ANITO

Klaus Schonfeld REGIONAL DIRECTOR

as annotated and initialed4 (Emphasis supplied)6

Section 21 of the General Conditions of Employment appended to the letter of employment reads: Respondent received his compensa
December 1998, and January to Au
connection with his work as sector m
21 Arbitration
abroad, and received instructions fro

Any question of interpretation, understanding or fulfillment of the conditions of employment, as well as any question
On May 5, 1999, respondent receive
arising between the Employee and the Company which is in consequence of or connected with his employment with
terminated effective August 4, 1999
the Company and which can not be settled amicably, is to be finally settled, binding to both parties through written
sanitation sector in the Philippines.8
submissions, by the Court of Arbitration in London.5
respondent to stay put in his job afte

projects and discuss all the opportunities he had developed.10 Respondent continued his work with PPI until the end Mr. Klaus K. Schonfeld
of business hours on October 1, 1999.
II-365 Ginger Drive
Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from Manila to Canada, New Westminster, B.C.
and cost of shipment of goods to Canada. PPI partially settled some of his claims (US$5,635.99), but refused to pay Canada V3L 5L5
the rest.
Manila 9 January, 1998
On December 5, 2000, respondent filed a Complaint11 for Illegal Dismissal against petitioners PPI and Henrichsen
with the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-04787-00.
Dear Mr. Schonfeld,

In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the DOLE of its decision to
Letter of Employment
close one of its departments, which resulted in his dismissal; and they failed to notify him that his employment was
terminated after August 4, 1999. Respondent also claimed for separation pay and other unpaid benefits. He alleged
that the company acted in bad faith and disregarded his rights. He prayed for the following reliefs: This Letter of Employment with the a
which you will be engaged by Pacico
1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to his former
position without loss of seniority and other privileges and benefits, and to pay his full backwages from the 1. Project Country: The Ph
time compensation was with held (sic) from him up to the time of his actual reinstatement. In the
alternative, if reinstatement is no longer feasible, respondents must pay the complainant full backwages,
and separation pay equivalent to one month pay for every year of service, or in the amount of 2. Duty Station: Manila, th
US$16,400.00 as separation pay;
3. Family Status: Married.
2. Judgment be rendered ordering the respondents to pay the outstanding monetary obligation to
complainant in the amount of US$10,131.76 representing the balance of unpaid salaries, leave pay, cost of 4. Position: Sector Manag
his air travel and shipment of goods from Manila to Canada; and
5. Commencement: 1 Jan
3. Judgment be rendered ordering the respondent company to pay the complainant damages in the
amount of no less than US $10,000.00 and to pay 10% of the total monetary award as attorney’s fees, and
costs. 6. Remuneration: US$3,1

Other reliefs just and equitable under the premises are, likewise, prayed for.12 1awphi1.net 7. Accommodation: The c
association fees, taxes an

Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter had no jurisdiction
over the subject matter; and (2) venue was improperly laid. It averred that respondent was a Canadian citizen, a 8. Transportation: Include
transient expatriate who had left the Philippines. He was employed and dismissed by PCIJ, a foreign corporation with
principal office in Tokyo, Japan. Since respondent’s cause of action was based on his letter of employment executed 9. Shipment of Personal T
in Tokyo, Japan dated January 7, 1998, under the principle of lex loci contractus, the complaint should have been shipment of personal effec
filed in Tokyo, Japan. Petitioners claimed that respondent did not offer any justification for filing his complaint against
PPI before the NLRC in the Philippines. Moreover, under Section 12 of the General Conditions of Employment
appended to the letter of employment dated January 7, 1998, complainant and PCIJ had agreed that any 10. Mobilization Travel: M
employment-related dispute should be brought before the London Court of Arbitration. Since even the Supreme
Court had already ruled that such an agreement on venue is valid, Philippine courts have no jurisdiction.13 This letter is send (sic) to you in dup

Respondent opposed the Motion, contending that he was employed by PPI to work in the Philippines under contract Yours sincerely,
separate from his January 7, 1998 contract of employment with PCIJ. He insisted that his employer was PPI, a
Philippine-registered corporation; it is inconsequential that PPI is a wholly-owned subsidiary of PCIJ because the two
corporations have separate and distinct personalities; and he received orders and instructions from Henrichsen who Pacicon Philippines, Inc.
was the president of PPI. He further insisted that the principles of forum non conveniens and lex loci contractus do Jens Peter Henrichsen
not apply, and that although he is a Canadian citizen, Philippine Labor Laws apply in this case. President14

Respondent adduced in evidence the following contract of employment dated January 9, 1998 which he had entered According to respondent, the materi
into with Henrichsen: judicial body has jurisdiction. Section

provide for an exclusive venue where the complaint against PPI for violation of the Philippine Labor Laws may be A. THE CLOSURE OF RE
filed. Respondent pointed out that PPI had adopted two inconsistent positions: it was first alleged that he should BONA FIDE.
have filed his complaint in Tokyo, Japan; and it later insisted that the complaint should have been filed in the London
Court of Arbitration.15
B. ASSUMING ARGUEND
SANITATION SECTOR W
In their reply, petitioners claimed that respondent’s employer was PCIJ, which had exercised supervision and control DEPARTMENT OF LABO
over him, and not PPI. Respondent was dismissed by PPI via a letter of Henrichsen under the letterhead of PCIJ in THIRTY (30) DAYS BEFO
Japan.16 The letter of employment dated January 9, 1998 which respondent relies upon did not bear his
(respondent’s) signature nor that of Henrichsen.
Respondent averred that the absenc
is an employee of PPI. He maintaine
On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners’ Motion to Dismiss. The dispositive Manager of PPI; proof of this was hi
portion reads: consultancy services for the Constru
Bank-Assisted LGU Urban Water an
Permit (AEP) No. M-029908-5017 is
WHEREFORE, finding merit in respondents’ Motion to Dismiss, the same is hereby granted. The instant complaint
PPI president Henrichsen who termi
filed by the complainant is dismissed for lack of merit.
related to transactions abroad. That
corporations have separate and dist
SO ORDERED.17
The CA found the petition meritoriou
The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between respondent and relationship, the CA declared that re
PCIJ was controlling; the Philippines was only the "duty station" where Schonfeld was required to work under the declared that, even under the Janua
General Conditions of Employment. PCIJ remained respondent’s employer despite his having been sent to the a case related thereto in other venue
Philippines. Since the parties had agreed that any differences regarding employer-employee relationship should be to be resolved in the London Court o
submitted to the jurisdiction of the court of arbitration in London, this agreement is controlling. complaint cannot be filed in any othe

On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latter’s decision in toto.18 On November 25, 2004, the CA rend

Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the following arguments: WHEREFORE, the petition is GRAN
SET ASIDE. Let this case be REMA
I
SO ORDERED.22
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY
ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE A motion for the reconsideration of t
LABOR ARBITER’S DECISION CONSIDERING THAT: denied for lack of merit.23

A. PETITIONER’S TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS INTERNATIONAL OF JAPAN BUT In the present recourse, PPI and He
RESPONDENT COMPANY, AND THEREFORE, THE LABOR ARBITER HAS JURISDICTION OVER THE INSTANT
CASE; AND

B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION BRANCH OF THE NLRC AND
THE COURT OF APPEALS GRAVE
NOT THE COURT OF ARBITRATION IN LONDON.
BETWEEN PETITIONERS AND RE
FOREIGN NATIONAL, WAS HIRED
II CONTRACT ABROAD, AND WAS M
WAS IN MANILA.
WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY
ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE
DISMISSAL OF THE COMPLAINT CONSIDERING THAT PETITIONER’S TERMINATION FROM EMPLOYMENT IS
ILLEGAL:
THE COURT OF APPEALS GRAVE
JURISDICTION OVER RESPONDE
FOREIGN NATIONAL, WAS HIRED

CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE BETWEEN THEM "SHALL BE FINALLY The petition is denied for lack of me
SETTLED BY THE COURT OF ARBITRATION IN LONDON."24
It must be stressed that in resolving
Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners aver that the findings record. Under Section 9 of Batas Pa
of the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA. They maintain that it is not within the upon the evidence, if and when nece
province of the appellate court in a petition for certiorari to review the facts and evidence on record since there was NLRC misappreciated the evidence
no conflict in the factual findings and conclusions of the lower tribunals. Petitioners assert that such findings and properly appreciated, the factual find
conclusions, having been made by agencies with expertise on the subject matter, should be deemed binding and
conclusive. They contend that it was the PCIJ which employed respondent as an employee; it merely seconded him
Inexplicably, the Labor Arbiter and th
to petitioner PPI in the Philippines, and assigned him to work in Manila as Sector Manager. Petitioner PPI, being a
pleadings showing that he was an e
wholly-owned subsidiary of PCIJ, was never the employer of respondent.
employment and Section 21 of the G

Petitioners assert that the January 9, 1998 letter of employment which respondent presented to prove his
Petitioner PPI applied for the issuan
employment with petitioner PPI is of doubtful authenticity since it was unsigned by the purported parties. They insist
that respondent is its employee. To
that PCIJ paid respondent’s salaries and only coursed the same through petitioner PPI. PPI, being its subsidiary, had
contract. The DOLE then granted th
supervision and control over respondent’s work, and had the responsibilities of monitoring the "daily administration"
of respondent. Respondent cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda to
prove that he was an employee of petitioner PPI because these documents are of doubtful authenticity. It bears stressing that under the Om
issuance of an employment permit is
Omnibus Rules provides:
Petitioners further contend that, although Henrichsen was both a director of PCIJ and president of PPI, it was he who
signed the termination letter of respondent upon instructions of PCIJ. This is buttressed by the fact that PCIJ’s
letterhead was used to inform him that his employment was terminated. Petitioners further assert that all work SECTION 1. Coverage. – This rule s
instructions came from PCIJ and that petitioner PPI only served as a "conduit." Respondent’s Alien Employment the present or prospective employer
Permit stating that petitioner PPI was his employer is but a necessary consequence of his being "seconded" thereto.
It is not sufficient proof that petitioner PPI is respondent’s employer. The entry was only made to comply with the
SECTION 2. Submission of list. – Al
DOLE requirements.
submit a list of nationals to the Bure
employment and status of stay in the
There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has no jurisdiction over
respondent’s complaint.
SECTION 3. Registration of residen
guidelines as may be issued by it.
Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim that the principlesof
forum non conveniens and lex loci contractus are applicable. They also point out that the principal office, officers and
SECTION 4. Employment permit req
staff of PCIJ are stationed in Tokyo, Japan; and the contract of employment of respondent was executed in Tokyo,
resident, may enter the Philippines w
Japan.
the country under a non-working vis
upon presentation of a duly approve
Moreover, under Section 21 of the General Conditions for Employment incorporated in respondent’s January 7, 1998
letter of employment, the dispute between respondent and PCIJ should be settled by the court of arbitration of
London. Petitioners claim that the words used therein are sufficient to show the exclusive and restrictive nature of the SECTION 5. Requirements for empl
accompanied by the following:
stipulation on venue.

Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and employers, while the Labor (a) Curriculum vitae duly s
Code of the Philippines applies only to Filipino employers and Philippine-based employers and their employees, not experience and other data
to PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter do not extend to foreign workers who executed
employment agreements with foreign employers abroad, although "seconded" to the Philippines.25 (b) Contract of employmen
among others:
In his Comment,26 respondent maintains that petitioners raised factual issues in their petition which are proscribed
under Section 1, Rule 45 of the Rules of Court. The finding of the CA that he had been an employee of petitioner PPI 1. That the non-
and not of PCIJ is buttressed by his documentary evidence which both the Labor Arbiter and the NLRC ignored; they regulations of th
erroneously opted to dismiss his complaint on the basis of the letter of employment and Section 21 of the General
Conditions of Employment. In contrast, the CA took into account the evidence on record and applied case law
correctly. 2. That the non-
two (2) Filipino u

 3. That he shall not engage in any gainful employment other than that for which he was issued a venue to the specified place. They a
permit. restrict venue, there must be accom
that actions between them be litigate
(c) A designation by the employer of at least two (2) understudies for every alien worker. Such
understudies must be the most ranking regular employees in the section or department for which the In the instant case, no restrictive wo
expatriates are being hired to insure the actual transfer of technology. "particularly," "nowhere else but/exc
that the court of arbitration in Londo
employment contract.
Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the following:

Petitioners contend that respondent

(a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;
the PCIJ holds its principal office, at
their contract. By enumerating possi
(b) Report of the Bureau Director as to the availability or non-availability of any person in the Philippines petitioners themselves admitted that
who is competent and willing to do the job for which the services of the applicant are desired;
Petitioners’ insistence on the applica
(c) His assessment as to whether or not the employment of the applicant will redound to the national that respondent is a Canadian citize
interest; following reasons:

(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation; First. The Labor Code of t
dismissal of the complaint
(e) The recommendation of the Board of Investments or other appropriate government agencies if the
applicant will be employed in preferred areas of investments or in accordance with the imperative of Second. The propriety of d
economic development. it is properly considered a

Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise, petitioner PPI would Third. In Bank of America
not have filed an application for a Permit with the DOLE. Petitioners are thus estopped from alleging that the PCIJ, held that:
not petitioner PPI, had been the employer of respondent all along.
x x x [a] Philippine Court may assum
We agree with the conclusion of the CA that there was an employer-employee relationship between petitioner PPI requisites are met: (1) that the Philip
and respondent using the four-fold test. Jurisprudence is firmly settled that whenever the existence of an Philippine Court is in a position to m
employment relationship is in dispute, four elements constitute the reliable yardstick: (a) the selection and Court has or is likely to have power
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to
control the employee’s conduct. It is the so-called "control test" which constitutes the most important index of the
Admittedly, all the foregoing requisit
existence of the employer-employee relationship–that is, whether the employer controls or has reserved the right to
control the employee not only as to the result of the work to be done but also as to the means and methods by which
the same is to be accomplished. Stated otherwise, an employer-employee relationship exists where the person for WHEREFORE, the petition is DENIE
whom the services are performed reserves the right to control not only the end to be achieved but also the means to AFFIRMED. This case is REMANDE
be used in reaching such end.29 We quote with approval the following ruling of the CA: petitioners.

[T]here is, indeed, substantial evidence on record which would erase any doubt that the respondent company is the SO ORDERED.
true employer of petitioner. In the case at bar, the power to control and supervise petitioner’s work performance
devolved upon the respondent company. Likewise, the power to terminate the employment relationship was
exercised by the President of the respondent company. It is not the letterhead used by the company in the G.R. No. 120077 October 1
termination letter which controls, but the person who exercised the power to terminate the employee. It is also
inconsequential if the second letter of employment executed in the Philippines was not signed by the petitioner. An THE MANILA HOTEL CORP. AND
employer-employee relationship may indeed exist even in the absence of a written contract, so long as the four vs.
elements mentioned in the Mafinco case are all present.30 NATIONAL LABOR RELATIONS C
SANTOS, respondents.
The settled rule on stipulations regarding venue, as held by this Court in the vintage case of Philippine Banking
Corporation v. Tensuan,31 is that while they are considered valid and enforceable, venue stipulations in a contract do PARDO, J.:
not, as a rule, supersede the general rule set forth in Rule 4 of the Revised Rules of Court in the absence of
qualifying or restrictive words. They should be considered merely as an agreement or additional forum, not as limiting

The case before the Court is a petition for certiorari1 to annul the following orders of the National Labor Relations On May 30, 1988, respondent Santo
Commission (hereinafter referred to as "NLRC") for having been issued without or with excess jurisdiction and with pretext that he was needed at home
grave abuse of discretion:2
On June 4, 1988, respondent Santo
(1) Order of May 31, 1993.3 Reversing and setting aside its earlier resolution of August 28, 1992.4 The Santos enclosed four (4) signed cop
questioned order declared that the NLRC, not the Philippine Overseas Employment Administration was going to arrive in Manila during
(hereinafter referred to as "POEA"), had jurisdiction over private respondent's complaint;
The employment contract of June 4,
(2) Decision of December 15, 1994.5 Directing petitioners to jointly and severally pay private respondent period of two years.12 It provided for
twelve thousand and six hundred dollars (US$ 12,600.00) representing salaries for the unexpired portion of fourteen (14) times a year.13
his contract; three thousand six hundred dollars (US$3,600.00) as extra four months salary for the two (2)
year period of his contract, three thousand six hundred dollars (US$3,600.00) as "14th month pay" or a
On June 30, 1988, respondent Sant
total of nineteen thousand and eight hundred dollars (US$19,800.00) or its peso equivalent and attorney's
fees amounting to ten percent (10%) of the total award; and
On July 1, 1988, respondent Santos
(3) Order of March 30, 1995.6 Denying the motion for reconsideration of the petitioners.
On November 5, 1988, respondent S
In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an overseas worker
employed as a printer at the Mazoon Printing Press, Sultanate of Oman. Subsequently, in June 1988, he was directly Subsequently, respondent Santos s
hired by the Palace Hotel, Beijing, People's Republic of China and later terminated due to retrenchment. November 5, 1988. In the contract, M
Development) of petitioner MHICL M
Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila Hotel International
Company, Limited (hereinafter referred to as "MHICL"). From June 8 to 29, 1989, responden
reassumed his post on July 17, 1989
When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly organized and
existing under the laws of the Philippines. On July 22, 1989, Mr. Shmidt's Exec
respondent Santos be given one (1)
MHICL is a corporation duly organized and existing under the laws of Hong Kong.7 MHC is an "incorporator" of
MHICL, owning 50% of its capital stock.8 On August 10, 1989, the Palace Hot
employment at the Palace Hotel prin
political upheaval in China.15 We quo
By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu Company Limited), MHICL10 trained the
personnel and staff of the Palace Hotel at Beijing, China.
"After the unfortunate hap
incidents), our business h
Now the facts.
printshop for the time bein

During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent Santos received a
"We sincerely regret that a
letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr. Schmidt
your past performance wh
informed respondent Santos that he was recommended by one Nestor Buenio, a friend of his.

"Should a turnaround in th
Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary and increased
assignment."
benefits. The position was slated to open on October 1, 1988.11

On September 5, 1989, the Palace H

On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.
him, including his plane fare back to

On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment contract to
On October 3, 1989, respondent Sa
respondent Santos. Mr. Henk advised respondent Santos that if the contract was acceptable, to return the same to
Mr. Henk in Manila, together with his passport and two additional pictures for his visa to China.
On October 24, 1989, respondent S
compensation pursuant to the emplo

On November 11, 1989, Mr. Shmidt replied, to wit:17 "SO ORDERED."

His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the one-month On September 18, 1992, responden
notice clause and Mr. Santos received all benefits due him. that the case was not cognizable by

"For your information the Print Shop at the Palace Hotel is still not operational and with a low business On May 31, 1993, the NLRC granted
outlook, retrenchment in various departments of the hotel is going on which is a normal management Tumanon to hear the case on the qu
practice to control costs.
On January 13, 1994, Labor Arbiter
"When going through the latest performance ratings, please also be advised that his performance was evidence presented to and heard by
below average and a Chinese National who is doing his job now shows a better approach.
Subsequently, Labor Arbiter Tuman
"In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but still enjoyed Branch, and the case was transferre
free accommodation/laundry/meals up to the day of his departure."
On November 25, 1994, Labor Arbit
On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the Arbitration Branch, National dismissed from employment and rec
Capital Region, National Labor Relations Commission (NLRC). He prayed for an award of nineteen thousand nine unexpired portion of his contract.26
hundred and twenty three dollars (US$19,923.00) as actual damages, forty thousand pesos (P40,000.00) as
exemplary damages and attorney's fees equivalent to 20% of the damages prayed for. The complaint named MHC,
On December 15, 1994, the NLRC r
MHICL, the Palace Hotel and Mr. Shmidt as respondents.

"WHEREFORE, finding th
The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the proceedings before
substantial evidence, judg
the Labor Arbiter.18
complainant the following
portion of the parties' cont
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus:19 (sic) of the parties' contrac
stipulated by the parties o
of complainant's total awa
"WHEREFORE, judgment is hereby rendered:

"SO ORDERED."
"1. directing all the respondents to pay complainant jointly and severally;

On February 2, 1995, petitioners file

"a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;
recommendation had no basis in law

"b) P50,000.00 as moral damages;

On March 30, 1995, the NLRC denie

"c) P40,000.00 as exemplary damages; and

Hence, this petition.30

"d) Ten (10) percent of the total award as attorney's fees.

On October 9, 1995, petitioners filed
order and/or writ of preliminary injun
"SO ORDERED." July 31, 1995.31

On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had jurisdiction over the On November 20, 1995, the Court d
case. respective comments, without giving

On August 28, 1992, the NLRC promulgated a resolution, stating:20 On March 8, 1996, the Solicitor Gen
annexes, they can not defend and s
Solicitor General prayed that he be e
"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want of jurisdiction.
Complainant is hereby enjoined to file his complaint with the POEA.
On April 30,1996, private responden

On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the NLRC to file its own This is not to say that Philippine cou
comment to the petition.35 employers. Neither are we saying th
country. If Santos were an "oversea
would protect him.39 He is not an "ov
On January 7, 1997, the NLRC filed its comment.

Even assuming that the NLRC was

The petition is meritorious.

I. Forum Non-Conveniens

Even if we assume two things: (1) th

The NLRC was a seriously inconvenient forum.
Santos' retrenchment, still MHC, as

We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves purely foreign
True, MHC is an incorporator of MH
elements. The only link that the Philippines has with the case is that respondent Santos is a Filipino citizen. The
to pierce the veil of corporate fiction
Palace Hotel and MHICL are foreign corporations. Not all cases involving our citizens can be tried here.

Piercing the veil of corporate entity i

The employment contract. — Respondent Santos was hired directly by the Palace Hotel, a foreign employer, through
defeat public convenience, justify wr
correspondence sent to the Sultanate of Oman, where respondent Santos was then employed. He was hired without
mere alter ego or business conduit o
the intervention of the POEA or any authorized recruitment agency of the government.36

In Traders Royal Bank v. Court of A

Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if it
corporation of all or nearly all of the
chooses to do so provided: (1) that the Philippine court is one to which the parties may conveniently resort to; (2) that
the fiction of separate corporate per
the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3) that the
Philippine court has or is likely to have power to enforce its decision.37 The conditions are unavailing in the case at
bar. The tests in determining whether the
complete domination of the other co
attacked. There must be proof that t
Not Convenient. — We fail to see how the NLRC is a convenient forum given that all the incidents of the case —
complained of. Second, control mus
from the time of recruitment, to employment to dismissal occurred outside the Philippines. The inconvenience is
or breach of duty must be the proxim
compounded by the fact that the proper defendants, the Palace Hotel and MHICL are not nationals of the Philippines.
elements prevents the piercing of th
Neither .are they "doing business in the Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are
non-residents of the Philippines.
It is basic that a corporation has a p
any other legal entity to which it may
No power to determine applicable law. — Neither can an intelligent decision be made as to the law governing the
corporate fiction.45 In this case, we fi
employment contract as such was perfected in foreign soil. This calls to fore the application of the principle of lex loci
contractus (the law of the place where the contract was made).38

The employment contract was not perfected in the Philippines. Respondent Santos signified his acceptance by
writing a letter while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the People's Respondent Santos predicates MHI
Republic of China. Palace Hotel. This fact fails to persu

No power to determine the facts. — Neither can the NLRC determine the facts surrounding the alleged illegal First, we note that the Vice Presiden
dismissal as all acts complained of took place in Beijing, People's Republic of China. The NLRC was not in a position employment contract as a mere witn
to determine whether the Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to
justify respondent Santos' retrenchment.
When one "notes" a contract, one is
Board of Commissioners of Immigra
Principle of effectiveness, no power to execute decision. — Even assuming that a proper decision could be reached noting has merely taken cognizance
by the NLRC, such would not have any binding effect against the employer, the Palace Hotel. The Palace Hotel is a deliberation or rendering a decision
corporation incorporated under the laws of China and was not even served with summons. Jurisdiction over its
person was not acquired.
Mr. Cergueda merely signed the "wi
which, "in a deed or other formal ins
recitals, after the parties (emphasis

present, personally sees or perceives a thing; a beholder, a spectator, or eyewitness."49 One who "notes" something "5. Cases arising from any
just makes a "brief written statement"50 a memorandum or observation. strikes and lockouts; and

Second, and more importantly, there was no existing employer-employee relationship between Santos and MHICL. "6. Except claims for Emp
In determining the existence of an employer-employee relationship, the following elements are considered:51 claims, arising from emplo
service, involving an amou
accompanied with a claim
"(1) the selection and engagement of the employee;

In all these cases, an employer-emp

"(2) the payment of wages;

The jurisdiction of labor arbiters and

"(3) the power to dismiss; and
an employer-employee relationship
their collective bargaining agreemen
"(4) the power to control employee's conduct."
"To determine which body has jurisd
MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent Santos as jurisdiction over the subject matter is
an employee for the Palace Hotel. He was referred to the Palace Hotel by his friend, Nestor Buenio. MHICL did not irrespective of whether the plaintiff is
engage respondent Santos to work. The terms of employment were negotiated and finalized through
correspondence between respondent Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of
The lack of jurisdiction of the Labor
the Palace Hotel and not MHICL. Neither did respondent Santos adduce any proof that MHICL had the power to
the case amounts to grave abuse of
control his conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent
Santos' services.

Neither is there evidence to suggest that MHICL was a "labor-only contractor."52 There is no proof that MHICL
"supplied" respondent Santos or even referred him for employment to the Palace Hotel. WHEREFORE, the Court hereby GR
National Labor Relations Commissio
CA No. 002101-91 (NLRC NCR Cas
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact that
the Palace Hotel is a member of the "Manila Hotel Group" is not enough to pierce the corporate veil between MHICL
and the Palace Hotel. No costs.

IV. Grave Abuse of Discretion SO ORDERED.

Considering that the NLRC was forum non-conveniens and considering further that no employer-employee G.R. No. 157038 Decembe
relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had no
jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-90.
GOVERNMENT SERVICE INSURA
vs.
Labor Arbiters have exclusive and original jurisdiction only over the following:53 JEAN E. RAOET, Respondent.

"1. Unfair labor practice cases;

"2. Termination disputes; BRION, J.:

"3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates In this Petition for Review on Certior
of pay, hours of work and other terms and conditions of employment; the Court of Appeals (CA) Decision2
aside the July 24, 2002 decision3 of
"4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee 302, and granted respondent Jean R
relations;

The respondent’s husband, Francisco M. Raoet (Francisco), entered government service on July 16, 1974 as an The GSIS, this time, appealed throu
Engineer Trainee at the National Irrigation Administration (NIA). On July 5, 1978, he was appointed as Junior Civil
Engineer, and on April 22, 1981, he rose to the rank of Irrigation Engineer B. On August 1, 1998, he was promoted to
I. Whether or not the CA w
the position of Engineer A – the position he held until his death on May 5, 2001. As Engineer A, Francisco
respondent’s claim for inc
supervised the implementation of construction activities of Lateral E and E-1. He was also tasked to review and
Francisco.
check the structural plan and the facilities.4

II. Whether or not the ailm

In 2000, Francisco was diagnosed with Hypertension, Severe, Stage III, Coronary Artery Disease, and he was
the death of the late Franc
confined at the Region I Medical Center from July 16 to July 25, 2000.5 As the GSIS considered this a work-related
contracting the same was
condition, Francisco was awarded 30 days Temporary Total Disability benefits, plus reimbursement of medical
expenses incurred during treatment.
The GSIS reasons out that since the
occupational diseases listed in Anne
On May 5, 2001, Francisco was rushed to the Dr. Marcelo M. Chan Memorial Hospital because he was vomiting
shown that the risk of contracting the
blood.6 He was pronounced dead on arrival at the hospital. His death certificate listed the causes of his death as
present any such evidence to suppo
follows:
disclose that he did not consult his d
cause of death, no assurance exists
CAUSES OF DEATH
The GSIS further argues that Franci
Immediate cause: Cardiac Arrest already been awarded the maximum
days Temporary Total Disability ben
illnesses. Thus, no death benefit for
Antecedent cause: Acute Massive Hemorrhage

The GSIS also points out that the em

Underlying cause: T/C Bleeding Peptic Ulcer Disease7
are being paid by the GSIS from adv
fund would suffer if benefits are paid
The respondent, as widow, filed with the GSIS on May 24, 2001 a claim for income benefits accruing from the death
of her husband, pursuant to Presidential Decree No. 626 (P.D. 626), as amended. On August 31, 2001, the GSIS
In contrast, the respondent claims th
denied the claim on the ground that the respondent did not submit any supporting documents to show that
now barred from resolving in a petiti
Francisco’s death was due to peptic ulcer.

On appeal, the ECC affirmed the findings of the GSIS in its decision of July 24, 2002. According to the ECC, it could
not determine if Francisco’s death was compensable due to the absence of documents supporting the respondent’s
claim. Since Francisco had no prior history of consultation relating to peptic ulcer and no autopsy was performed to We deny the petition for lack of m
ascertain the cause of his death, the ECC could not conclude that Bleeding Peptic Ulcer Disease was the reason for
his demise.
The Procedural issue

The respondent elevated the case to the CA through a Petition for Review. She cited the following supporting
A petition for review under Rule 45 o
grounds:
questions of fact. A question of law e
question of fact exists when the dou
1. Employees’ Compensation Commission failed to consider that peptic ulcer is an on and off disease
which does not need confinement in a hospital or clinic or submission to a Doctor of Medicine because it
In raising questions regarding Franc
can be cured by self-medication.
be raising a basic question of fact –
or falsity of the claimed cause of dea
2. The Employees’ Compensation Commission failed to consider also that there were medical treatment of Posed in this manner, the question i
Francisco Raoet of occupational and compensable diseases other than peptic ulcer as shown by the viewed, and whether such evidence
medical findings of certificates, Xerox copies of which are attached to this petition. upon in this petition.

The CA reversed8 the ECC decision. The appellate court held that while the Amended Rules on Employees’ From the perspective of the CA deci
Compensation does not list peptic ulcer as an occupational disease, Francisco’s death should be compensable since cause of death from the point of view
its immediate cause was cardiac arrest. Thus, the CA ordered the GSIS to pay the respondent’s claim for death issue of compensability. Hence, it is
benefits under P.D. 626, as amended.

Factors determining Peptic Ulcer is defined as:
compensability of death
[A]n ulceration of the mucous memb
P.D. 626, as amended, defines compensable sickness as "any illness definitely accepted as an occupational disease gastric juice.
listed by the Commission, or any illness caused by employment subject to proof by the employee that the risk of
contracting the same is increased by the working conditions."
Peptic ulcer is most common amon
from mental tension. It occurs abo
Section 1 (b), Rule III of the Amended Rules on Employees' Compensation implements P.D. 626 and requires that gnawing sensation in the epigastric
for sickness and the resulting disability or death to be compensable, it must be an "occupational disease" included in eating or taking an antacid drug. Vo
the list provided (Annex "A"), with the conditions attached to the listed sickness duly satisfied; otherwise, the claimant
must show proof that the risk of contracting the illness is increased by his working conditions. In plainer terms, to be
COMPLICATIONS. If ulcers are untr
entitled to compensation, a claimant must show that the sickness is either: (1) a result of an occupational
impaired health. Blood may be vom
disease listed under Annex "A" of the Amended Rules on Employees' Compensation under the conditions
digestive effect of gastric secretions
Annex "A" sets forth; or (2) if not so listed, that the risk of contracting the disease is increased by the working
color. In acute cases sudden hemo
conditions.10

Based on Francisco’s death certificate, the immediate cause of his death was cardiac arrest; the antecedent cause
was acute massive hemorrhage, and the underlying cause was bleeding peptic ulcer disease.
Worry and anxiety can contribute
tensions persist, an ulcer that has be
The GSIS maintains that the respondent’s claim for income benefits should be denied because she failed to present
help the patient relax. Sometimes co
any proof, documentary or otherwise, that peptic ulcer was the underlying cause for Francisco’s death.
supplied.]

We disagree with this position, as we find that the respondent submitted sufficient proof of the cause of her
Based on the Annex "A" list and the
husband’s death when she presented his death certificate. In Philippine American Life Insurance Company v.
confronts us is: did Francisco’s occu
CA,11we held that death certificates and the notes by a municipal health officer prepared in the regular performance
peptic ulcer compensable?
of his duties are prima facie evidence of facts therein stated. A duly-registered death certificate is considered
a public document and the entries found therein are presumed correct, unless the party who contests its
accuracy can produce positive evidence establishing a contrary conclusion. We also ruled in People v. Datun12 that a A significant point to appreciate in co
death certificate establishes the fact of death and its immediate, antecedent, and underlying causes. diagnosed with Hypertension, Sever
Center in July 2000. The GSIS foun
Disability benefits. This finding assu
Since neither the GSIS nor the ECC presented any evidence to refute that cardiac arrest was the immediate cause,
of the combination of these diseases
and peptic ulcer was the underlying cause of Francisco’s death, we accept as established, in accordance with the
occupation.[16] This was what the
death certificate, that the underlying cause of Francisco’s demise was peptic ulcer.

As already mentioned, Francisco wo

The CA decision and Peptic Ulcer
supervise the construction activities
as Compensable Illness
these responsibilities carried did not
occupied the same position without
In the assailed decision, the CA focused on Francisco’s immediate cause of death – cardiac arrest – and ignored the continuous exposure to prolonged e
underlying cause of death – peptic ulcer. According to the CA, Francisco’s death is compensable even if peptic ulcer compensable cause of death.
is not a listed occupational disease, since Francisco died due to a listed cause – cardiac arrest.
In arriving at this conclusion, we stre
The CA is apparently wrong in its conclusion as it viewed in isolation the immediate cause of death (cardiac arrest), employment be the sole factor in the
disregarding that what brought about the cardiac arrest was the ultimate underlying cause – peptic ulcer. This error, benefits provided for. It is enough th
however, does not signify that Francisco’s death is not compensable because peptic ulcer itself, under specific development of the disease.18 In the
conditions, is a compensable illness.
It is well-settled that the degree of p
Contrary to the CA’s conclusion, peptic ulcer is a compensable cause of death, pursuant to ECC Resolution No. "such relevant evidence as a reason
1676 dated January 29, 1981, which unmistakably provides that peptic ulcer is a compensable disease listed requires is a reasonable work-con
under Annex "A," provided the claimant is in an occupation that involves prolonged emotional or physical which the workman’s claim is based
stress, as among professional people, transport workers and the like.13 there is some basis in the facts for in
not required that the employment

claimant’s illness to entitle him to the benefits provided for. It is enough that his employment contributed, The GSIS, therefore, cannot use the
even if to a small degree, to the development of the disease. [Emphasis supplied.] income benefits to the respondent, w
death was caused by an ailment agg
In this case, the chain of causation that led to the peptic ulcer is too obvious to be disregarded. The pressures of
Francisco’s work – constant, continuing and consistent at his level of responsibility – inevitably manifested their WHEREFORE, premises considered
physical effects on Francisco’s health and body; the initial and most obvious were the hypertension and coronary
artery disease that the GSIS itself recognized. Less obvious, but nevertheless arising from the same pressures and
SO ORDERED.
stresses, were the silent killers, like peptic ulcer, that might not have attracted Francisco’s attention to the point of
driving him to seek immediate and active medical intervention. Ultimately, when the ulcer-producing stresses did not
end, his ulcer bled profusely, affecting his heart and causing its arrest. In this manner, Francisco died. That his
widow should now be granted benefits for Francisco’s death is a conclusion we cannot avoid and is, in fact, one that
we should gladly make as a matter of law and social justice.

Purpose of P.D. 626

Understandably, the GSIS may accuse us of leniency in the grant of compensation benefits in light of the
jurisprudential trends in this area of law. Our leniency, however, is not due to our individual predilections or liberal
leanings; it proceeds mainly from the character of P.D. 626 as a social legislation whose primordial purpose is to
provide meaningful protection to the working class against the hazards of disability, illness, and other contingencies G.R. No. 170734 May 14, 20
resulting in loss of income. In employee compensation, persons charged by law to carry out the Constitution’s social
justice objectives should adopt a liberal attitude in deciding compensability claims and should not hesitate to grant
ARCO METAL PRODUCTS, CO., IN
compensability where a reasonable measure of work-connection can be inferred. Only this kind of interpretation can
vs.
give meaning and substance to the law’s compassionate spirit as expressed in Article 4 of the Labor Code – that all
SAMAHAN NG MGA MANGGAGA
doubts in the implementation and interpretation of the provisions of the Labor Code, including their implementing
rules and regulations, should be resolved in favor of labor.20 When the implementors fail to reach up to these
standards, this Court, as guardian of the Constitution, necessarily has to take up the slack and order what we must,
to ensure that the constitutional objectives are achieved. This is simply what we are doing in this case.1avvphi1
TINGA, J.:
Acting on this same role, we remind the GSIS that when it is called upon to determine the compensability of an
employee’s disease or death, the present state of the State Insurance Fund cannot be an excuse to avoid the
This treats of the Petition for Review
payment of compensation. If the State Insurance Fund lacks the financial capacity, it is not the responsibility of the
insured civil servant, but rather of the State to fill in the deficiency and ensure the solvency of the State Insurance 2005 and 29 September 2005, respe
Fund. This is the clear mandate of Article 184 of the Labor Code, which reads:
Samahan ng mga Manggagawa sa
Article 184. Government guarantee. – The Republic of the Philippines guarantees the benefits prescribed under this Mr. Salvador Uy/Accredited Volunta
leave and sick leave conversion to c
Title, and accepts general responsibility for the solvency of the State Insurance Fund. In case of deficiency, the same
service they rendered within a year.
shall be covered by supplemental appropriations from the national government.

Petitioner is a company engaged in

In Biscarra v. Republic, we explicitly said:21
petitioner’s rank and file employees.
leave encashment of three union me
The fear that this humane, liberal and progressive view will swamp the Government with claims for continuing which is less than a full twelve (12) m
medical, hospital and surgical services and as a consequence unduly drain the National Treasury, is no argument
against it; because the Republic of the Philippines as a welfare State, in providing for the social justice
guarantee in our Constitution, assumes such risk. This assumption of such a noble responsibility is, as 1. Rante Lamadrid
heretofore stated, only just and equitable since the employees to be benefited thereby precisely became
permanently injured or sick while invariably devoting the greater portion of their lives to the service of our country and 2. Alberto Gamban
people. Human beings constitute the most valuable natural resources of the nation and therefore should
merit the highest solicitude and the greatest protection from the State to relieve them from unbearable 3. Rodelio Collantes
agony. They have a right to entertain the hope that during the few remaining years of their life some dedicated
institution or gifted individual may produce a remedy or cure to relieve them from the painful or crippling or
debilitating or humiliating effects of their injury or ailment, to fully and completely rehabilitate them and develop their Respondent protested the prorated
"mental, vocational and social potential," so that they will remain useful and productive citizens. [Emphasis supplied] payment of the same benefits to sev
made in 1992, 1993, 1994, 1996, 19

rule against diminution of benefits under Article 100 of the Labor Code. Thus, they filed a complaint before the Section 2. In case of resig
National Conciliation and Mediation Board (NCMB). The parties submitted the case for voluntary arbitration. proportionately to his days

The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving of the contested
benefits in full, irrespective of the actual service rendered within one year has not ripened into a practice. He noted
the affidavit of Joselito Baingan, manufacturing group head of petitioner, which states that the giving in full of the
Section 1. Employees/wor
benefit was a mere error. He also interpreted the phrase "for each year of service" found in the pertinent CBA
service shall be entitled to
provisions to mean that an employee must have rendered one year of service in order to be entitled to the full
leave shall not be cumula
benefits provided in the CBA.5
payable every 1st Saturda

Unsatisfied, respondent filed a Petition for Review6 under Rule 43 before the Court of Appeals, imputing serious error
Section 2. Sick Leave will
to Mangabat’s conclusion. The Court of Appeals ruled that the CBA did not intend to foreclose the application of
a licensed physician.
prorated payments of leave benefits to covered employees. The appellate court found that petitioner, however, had
an existing voluntary practice of paying the aforesaid benefits in full to its employees, thereby rejecting the claim that
petitioner erred in paying full benefits to its seven employees. The appellate court noted that aside from the affidavit Section 3. All commutable
of petitioner’s officer, it has not presented any evidence in support of its position that it has no voluntary practice of
granting the contested benefits in full and without regard to the service actually rendered within the year. It also
questioned why it took petitioner eleven (11) years before it was able to discover the alleged error. The dispositive
portion of the court’s decision reads:
Section 1. The Company
agreement and if unused
WHEREFORE, premises considered, the instant petition is hereby GRANTED and the Decision of
Accredited Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June 18, December each year.
2004 is hereby AFFIRMED WITH MODIFICATION in that the 13th month pay, bonus, vacation leave and
sick leave conversions to cash shall be paid to the employees in full, irrespective of the actual service Section 2. Employees/wor
rendered within a year.7 service shall be entitled to
legitimate spouse gave bi
deemed in compliance wit
Petitioner moved for the reconsideration of the decision but its motion was denied, hence this petition.

Section 3. Maternity leave

Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay, bonus, and leave
encashment in full regardless of actual service rendered constitutes voluntary employer practice and, consequently, cash grant of P1,500.00 p
the prorated payment of the said benefits does not constitute diminution of benefits under Article 100 of the Labor
Code.8 xxx

The petition ultimately fails.

First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of service actually Section 1. The Company
rendered by an employee to the company. According to petitioner, there is a one-year cutoff in the entitlement to the basis of computing such p
benefits provided in the CBA which is evident from the wording of its pertinent provisions as well as of the existing become due and payable
law.
Section 2. The Company
We agree with petitioner on the first issue. The applicable CBA provisions read: the 2ndSaturday of Decem

ARTICLE XIV-VACATION LEAVE Section 3. That the Comp

(P2,500.00) as signing bo
Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of
service shall be entitled to sixteen (16) days vacation leave with pay for each year of service. Unused There is no doubt that in order to be
leaves shall not be cumulative but shall be converted into its cash equivalent and shall become due and one must have rendered at least one
payable every 1st Saturday of December of each year. interpretation. Anent the 13th month
did not give any meaning different fr
compensation which an employee re
However, if the 1st Saturday of December falls in December 1, November 30 (Friday) being a holiday, the
of the 13th month pay given, or in pro
management will give the cash conversion of leaves in November 29.

On the second issue, however, petitioner founders. computation of the 13th month pay w
peremptorily withdrawn. Meanwhile
the payment of the cash equivalent
As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not normally
said workers had received these ben
embark on a re-examination of the evidence presented by the contending parties during the trial of the case
interpretation of the CBA provisions.
considering that the findings of facts of the Court of Appeals are conclusive and binding on the Court.10 The rule,
commutation or conversion to cash
however, admits of several exceptions, one of which is when the findings of the Court of Appeals are contrary to that
and paid said cash equivalent of the
of the lower tribunals. Such is the case here, as the factual conclusions of the Court of Appeals differ from that of the
voluntary arbitrator.
In the years 1992, 1993, 1994, 1999
consistently granting full benefits to
Petitioner granted, in several instances, full benefits to employees who have not served a full year, thus:
a total of seven employees who ben
Jurisprudence has not laid down any
must be exercised in order to consti
Name Reason Duration
years,22 or even as short as two (2)
1. Percival Bernas Sickness July 1992 to November 1992 that it was a mistake or an error, sup
read:
2. Cezar Montero Sickness 21 Dec. 1992 to February 1993
5. 13th month pay, bonus,
3. Wilson Sayod Sickness May 1994 to July 1994 emergency leave are com
4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996 the entire year and propor
less than one (1) year or t
5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999
6. It was never the intentio
6. Guilbert Villaruel Sickness 23 Aug. 2002 to 4 Feb. 2003 employees in full regardle
entire year, otherwise, it w
7. Melandro Moque Sickness 29 Aug. 2003 to 30 Sept. 200311
as well.24

Petitioner claims that its full payment of benefits regardless of the length of service to the company does not In cases involving money claims of e
constitute voluntary employer practice. It points out that the payments had been erroneously made and they occurred receive the wages and benefits and
in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it was only in 2003
that the accounting department discovered the error "when there were already three (3) employees involved with
Indeed, if petitioner wants to prove t
prolonged absences and the error was corrected by implementing the pro-rata payment of benefits pursuant to law
and their existing CBA."12 It adds that the seven earlier cases of full payment of benefits went unnoticed considering proofs, such as the names of other e
benefits. Experientially, a perfect att
the proportion of one employee concerned (per year) vis à vis the 170 employees of the company. Petitioner
must have been other employees w
describes the situation as a "clear oversight" which should not be taken against it.13 To further bolster its case,
petitioner argues that for a grant of a benefit to be considered a practice, it should have been practiced over a long received only prorated benefits. This
period of time and must be shown to be consistent, deliberate and intentional, which is not what happened in this evidence to that effect was presente
case. Petitioner tries to make a case out of the fact that the CBA has not been modified to incorporate the giving of
full benefits regardless of the length of service, proof that the grant has not ripened into company practice. IN VIEW HEREOF, the petition is DE
September 2005 is and its Resolutio
We disagree.
SO ORDERED.
Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or eliminated
by the employer.14 The principle of non-diminution of benefits is founded on the Constitutional mandate to "protect
the rights of workers and promote their welfare,"15 and "to afford labor full protection."16 Said mandate in turn is the
basis of Article 4 of the Labor Code which states that "all doubts in the implementation and interpretation of this
Code, including its implementing rules and regulations shall be rendered in favor of labor." Jurisprudence is replete G.R. No. 177114 January
with cases which recognize the right of employees to benefits which were voluntarily given by the employer and
which ripened into company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.17 where an
MANOLO A. PEÑAFLOR, Petitione
employer had freely and continuously included in the computation of the 13th month pay those items that were
expressly excluded by the law, we held that the act which was favorable to the employees though not conforming to vs.
OUTDOOR CLOTHING MANUFAC
law had thus ripened into a practice and could not be withdrawn, reduced, diminished, discontinued or eliminated.
In Sevilla Trading Company v. Semana,18we ruled that the employer’s act of including non-basic benefits in the DEMOGENA, Finance Manager, an

BRION, J.; working for the company until his res
that Peñaflor himself prepared and s
Petitioner Manolo A. Peñaflor (Peñaflor) seeks the reversal of the Court of Appeals (CA) decision1 dated December
29, 2006 and its resolution2 dated March 14, 2007, through the present petition for review on certiorari filed under Outdoor Clothing disclaimed liability
Rule 45 of the Rules of Court. The assailed CA decision affirmed the September 24, 2002 decision3 of the National Outdoor Clothing alleged that he wa
Labor Relations Commission (NLRC) that in turn reversed the August 15, 2001 decision4 of the Labor Arbiter.5 making any illegal deduction from Pe
to report for work during the dates th
any leave credit that would offset his
THE FACTUAL ANTECEDENTS

In his August 15, 2001 decision, the

Peñaflor was hired on September 2, 1999 as probationary Human Resource Department (HRD) Manager of
was consequently ordered to reinsta
respondent Outdoor Clothing Manufacturing Corporation (Outdoor Clothing or the company). As HRD head, Peñaflor
deducted salary for six days, propor
was expected to (1) secure and maintain the right quality and quantity of people needed by the company; (2)
maintain the harmonious relationship between the employees and management in a role that supports organizational
goals and individual aspirations; and (3) represent the company in labor cases or proceedings. Two staff members Outdoor Clothing appealed the labo
were assigned to work with him to assist him in undertaking these functions. constructively dismissed, claiming th
with the corporation due to its dire fi
concurrent HRD Manager through a
Peñaflor claimed that his relationship with Outdoor Clothing went well during the first few months of his employment;
soon vacate.11 The appointment was
he designed and created the company’s Policy Manual, Personnel Handbook, Job Expectations, and Organizational
Peñaflor was on unauthorized leave
Set-Up during this period. His woes began when the company’s Vice President for Operations, Edgar Lee (Lee), left
notices, on March 6 and 11, 2000 (a
the company after a big fight between Lee and Chief Corporate Officer Nathaniel Syfu (Syfu). Because of his close
unauthorized absences. In a memor
association with Lee, Peñaflor claimed that he was among those who bore Syfu’s ire.
appointment.12

When Outdoor Clothing began undertaking its alleged downsizing program due to negative business returns,
Peñaflor contested Syfu’s March 1,
Peñaflor alleged that his department had been singled out. On the pretext of retrenchment, Peñaflor’s two staff
memoranda, claiming these pieces o
members were dismissed, leaving him as the only member of Outdoor Clothing’s HRD and compelling him to
He pointed out that nothing in this re
perform all personnel-related work. He worked as a one-man department, carrying out all clerical, administrative and
1, 2000. He claimed that it was subm
liaison work; he personally went to various government offices to process the company’s papers.
AWOL memoranda could not be reli
prolonged absence without official le
When an Outdoor Clothing employee, Lynn Padilla (Padilla), suffered injuries in a bombing incident, the company
required Peñaflor to attend to her hospitalization needs; he had to work outside office premises to undertake this
The NLRC apparently found Outdoo
task. As he was acting on the company’s orders, Peñaflor considered himself to be on official business, but was
decision.13 It characterized Peñaflor’
surprised when the company deducted six days’ salary corresponding to the time he assisted Padilla. According to
that he was subjected to by Syfu, bu
Finance Manager Medylene Demogena (Demogena), he failed to submit his trip ticket, but Peñaflor belied this claim
made only after Peñaflor had submit
as a trip ticket was required only when a company vehicle was used and he did not use any company vehicle when
resignation would create. Thus, Peñ
he attended to his off-premises work.6
was present in the company’s decis
management prerogative to address
After Peñaflor returned from his field work on March 13, 2000, his officemates informed him that while he was away, his staff members. In the absence o
Syfu had appointed Nathaniel Buenaobra (Buenaobra) as the new HRD Manager. This information was confirmed by granted.
Syfu’s memorandum of March 10, 2000 to the entire office stating that Buenaobra was the concurrent HRD and
Accounting Manager.7 Peñaflor was surprised by the news; he also felt betrayed and discouraged. He tried to talk to
Peñaflor anchored his certiorari peti
Syfu to clarify the matter, but was unable to do so. Peñaflor claimed that under these circumstances, he had no
abuse of discretion, although he ess
option but to resign. He submitted a letter to Syfu declaring his irrevocable resignation from his employment with
the NLRC.
Outdoor Clothing effective at the close of office hours on March 15, 2000.8

In a decision dated December 29, 2

Peñaflor then filed a complaint for illegal dismissal with the labor arbiter, claiming that he had been constructively
present sufficient evidence supportin
dismissed. He included in his complaint a prayer for reinstatement and payment of backwages, illegally deducted
Peñaflor’s resignation was knowingl
salaries, damages, attorney’s fees, and other monetary claims.
likewise denied the motion for recon
Peñaflor filed with us the present pe
Outdoor Clothing denied Peñaflor’s allegation of constructive dismissal. It posited instead that Peñaflor had
voluntarily resigned from his work. Contrary to Peñaflor’s statement that he had been dismissed from employment
upon Syfu’s appointment of Buenaobra as the new HRD Manager on March 10, 2000, Peñaflor had in fact continued

Peñaflor insists that, contrary to the findings of the NLRC and the CA, he had been constructively dismissed from his Several reasons arising directly from
employment with Outdoor Clothing. He alleges that the dismissal of his two staff members, the demeaning liaison his resignation letter on March, 15, 2
work he had to perform as HRD Manager, the salary deduction for his alleged unauthorized absences, and the
appointment of Buenaobra as the new HRD manager even before he tendered his resignation, were clear acts of
First, we regard the Syfu memorand
discrimination that made his continued employment with the Outdoor Clothing unbearable. He was thus forced to
accepting the position of HRD Head
resign.
constitute conclusive evidence of the
informed about these memoranda w
Outdoor Clothing claims that Peñaflor voluntarily resigned from his work and his contrary allegations were all Buenaobra if indeed Peñaflor had re
unsubstantiated. The HRD was not singled out for retrenchment, but was simply the first to lose its staff members Even the recipients of these commu
because the company had to downsize. Thus, all HRD work had to be performed by Peñaflor. Instead of being memoranda, to be sure, should have
grateful that he was not among those immediately dismissed due to the company’s retrenchment program, Peñaflor Peñaflor.
unreasonably felt humiliated in performing work that logically fell under his department; insisted on having a full staff
complement; absented himself from work without official leave; and demanded payment for his unauthorized
Second,we find it surprising that the
absences.
Syfu’s March 1, 2000 memorandum
acknowledgment and acceptance –
THE ISSUE and THE COURT’S RULING matter was not even mentioned in th
of evidence at the NLRC level on ap
adduced to explain why this irregula
The Court finds the petition meritorious.
to explain the reason for its omission
that allowed the NLRC to justify the
A preliminary contentious issue is Outdoor Clothing’s argument that we should dismiss the petition outright because
it raises questions of facts, not the legal questions that should be raised in a Rule 45 petition.16
Third, the circumstances and other e
practically compelled to resign from
We see no merit in this argument as the rule that a Rule 45 petition deals only with legal issues is not an absolute
rule; it admits of exceptions. In the labor law setting, we wade into factual issues when conflict of factual findings
Foremost among these is the memo
exists among the labor arbiter, the NLRC, and the CA. This is the exact situation that obtains in the present case
concerned") about the designation o
since the labor arbiter found facts supporting the conclusion that there had been constructive dismissal, while the
suspect memoranda we discussed a
NLRC’s and the CA’s factual findings contradicted the labor arbiter’s findings.17 Under this situation, the conflicting
dates of receipt by at least five comp
factual findings below are not binding on us, and we retain the authority to pass on the evidence presented and draw
Agbayani; three of them acknowledg
conclusions therefrom.18
the appointment of Buenaobra to the
position that it was only in the aftern
The petition turns on the question of whether Peñaflor’s undisputed resignation was a voluntary or a forced one, in taken over his position. It explains a
the latter case making it a constructive dismissal equivalent to an illegal dismissal. A critical fact necessary in security report,22 and is fully consiste
resolving this issue is whether Peñaflor filed his letter of resignation before or after the appointment of Buenaobra as certain sales personnel of the comp
the new/concurrent HRD manager. This question also gives rise to the side issue of when Buenaobra’s appointment
was made. If the resignation letter was submitted before Syfu’s appointment of Buenaobra as new HRD manager,
We note that the company only bela
little support exists for Peñaflor’s allegation that he had been forced to resign due to the prevailing abusive and
treatment, i.e., that he was caught in
hostile working environment. Buenaobra’s appointment would then be simply intended to cover the vacancy created
led the latter to leave the company.2
by Peñaflor’s resignation. On the other hand, if the resignation letter was submitted after the appointment of
for adverse treatment, citing in this r
Buenaobra, then factual basis exists indicating that Peñaflor had been constructively dismissed as his resignation
resulted in his one-man HRD operat
was a response to the unacceptable appointment of another person to a position he still occupied.
despite Penaflor’s claim of discrimin
legitimate downsizing. Other than its
The question of when Peñaflor submitted his resignation letter arises because this letter – undisputably made – was presented any evidence to prove bo
undated. Despite Peñaflor’s claim of having impressive intellectual and academic credentials,19 his resignation letter, evidence was ever offered to rebut P
for some reason, was undated. Thus, the parties have directly opposing claims on the matter. Peñaflor claims that he Head difficult. To be sure, Peñaflor’s
wrote and filed the letter on the same date he made his resignation effective – March 15, 2000. Outdoor Clothing, on used against him, as the termination
the other hand, contends that the letter was submitted on March 1, 2000, for which reason Syfu issued a have effectively contested without p
memorandum of the same date appointing Buenaobra as the concurrent HRD manager; Syfu’s memorandum cited
Peñaflor’s intention to resign so he could devote his time to teaching. The company further cites in support of its case
Peñaflor’s own service with the com
Buenaobra’s March 3, 2000 memorandum accepting his appointment. Another piece of evidence is the Syfu
2, 1999 so that by March 1, 2000, hi
memorandum of March 10, 2000, which informed the office of the appointment of Buenaobra as the concurrent Head
employee. We find it highly unlikely
of HRD – the position that Peñaflor occupied. Two other memoranda are alleged to exist, namely, the AWOL
his undisputed record of having succ
memoranda of March 6 and 11, 2000, allegedly sent to Penaflor.
Personnel Handbook, Job Expectati
an employee would tender his resign

employee, especially when a downsizing was taking place and he could have availed of its benefits if he would be G.R. No. 182626 Decembe
separated from the service as a regular employee. It was strange, too, that he would submit his resignation on March
1, 2000 and keep completely quiet about this development until its effective date on March 15, 2000. In the usual
HILARIO S. RAMIREZ, Petitioner,
course, the turnover alone of responsibilities and work loads to the successor in a small company would have
vs.
prevented the matter from being completely under wraps for 10 days before any announcement was ever made.
HON. COURT OF APPEALS, Cebu
That Peñaflor was caught by surprise by the turnover of his post to Buenaobra is in fact indicated by the company’s
VALCUEBA,Respondents.
own evidence that Peñaflor still submitted a security report on March 13, 2000. On the whole, Peñaflor’s record with
the company is not that of a company official who would simply and voluntarily tender a precipitate resignation on the
excuse that he would devote his time to teaching – a lame excuse at best considering that March is the month the
semester usually ends and is two or three months away from the start of another school year.
CHICO-NAZARIO, J.:
In our view, it is more consistent with human experience that Peñaflor indeed learned of the appointment of
Buenaobra only on March 13, 2000 and reacted to this development through his resignation letter after realizing that
he would only face hostility and frustration in his working environment. Three very basic labor law principles support This is a Petition for Review under R
Court of Appeals which dismissed th
this conclusion and militate against the company’s case.
failure to properly verify his petition a
court denying petitioner’s Motion for
The first is the settled rule that in employee termination disputes, the employer bears the burden of proving that the
employee’s dismissal was for just and valid cause.25 That Peñaflor did indeed file a letter of resignation does not help
the company’s case as, other than the fact of resignation, the company must still prove that the employee voluntarily The facts are:
resigned.26 There can be no valid resignation where the act was made under compulsion or under circumstances
approximating compulsion, such as when an employee’s act of handing in his resignation was a reaction to Respondent Mario Valcueba (Valcue
circumstances leaving him no alternative but to resign.27 In sum, the evidence does not support the existence of 13th month pay differential, holiday
voluntariness in Peñaflor’s resignation.1 a vv p h i 1 claims for moral and exemplary dam
that Ramirez hired him as mechanic
increased to ₱165.00 a day in 2003
Another basic principle is that expressed in Article 4 of the Labor Code – that all doubts in the interpretation and
implementation of the Labor Code should be interpreted in favor of the workingman. This principle has been also paid the complete amount of hi
Ramirez, informed Valcueba that he
extended by jurisprudence to cover doubts in the evidence presented by the employer and the employee.28 As shown
above, Peñaflor has, at very least, shown serious doubts about the merits of the company’s case, particularly in the basis.4 Aggrieved, he filed this case.
appreciation of the clinching evidence on which the NLRC and CA decisions were based. In such contest of
evidence, the cited Article 4 compels us to rule in Peñaflor’s favor. Thus, we find that Peñaflor was constructively Ramirez, on the other hand, present
dismissed given the hostile and discriminatory working environment he found himself in, particularly evidenced by the as construction worker, then as help
escalating acts of unfairness against him that culminated in the appointment of another HRD manager without any mechanics at the workplace. First w
prior notice to him. Where no less than the company’s chief corporate officer was against him, Peñaflor had no paid on pakyaw basis; and finally, th
alternative but to resign from his employment.29 the last category. As emergency/res
emergency/rescue work. On 26 Feb
proceed to Calawisan, Lapu-lapu Ci
Last but not the least, we have repeatedly given significance in abandonment and constructive dismissal cases to the
area was absent. Valcueba did not r
employee’s reaction to the termination of his employment and have asked the question: is the complaint against the
employer merely a convenient afterthought subsequent to an abandonment or a voluntary resignation? We find from allegedly intended to return to Minda
the records that Peñaflor sought almost immediate official recourse to contest his separation from service through a
complaint for illegal dismissal.30 This is not the act of one who voluntarily resigned; his immediate complaints Further, Ramirez insisted that Valcu
characterize him as one who deeply felt that he had been wronged. who abandoned his job. On 26 Febr
at Babag Station, did not report at C
call, which required him to fix Ramir
WHEREFORE, we GRANT the petitioner’s petition for review on certiorari, and REVERSE the decision and
resolution of the Court of Appeals in CA-G.R. SP No. 87865 promulgated on December 29, 2006 and March 14, that time. The refusal of Valcueba to
the following day, 27 February 2006
2007, respectively. We REINSTATE the decision of the labor arbiter dated August 15, 2001, with the
MODIFICATION that, due to the strained relations between the parties, respondents are additionally ordered to pay call of duty, nor did he file an applica
separation pay equivalent to the petitioner’s one month’s salary.
After hearing, the Labor Arbiter rend
Costs against the respondents.
The allegation of complainant that h
dismiss him from the service is not s
SO ORDERED.
affiant attesting to the credibility of c
clearly indicate that complainant wa

reason for Us to doubt complainant’s submission that he was dismissed from his employment grounded on Resolving the motion, the NLRC iss
disobedience to the lawful order of respondent.
Upon a careful perusal of the motion
On the side of respondent Ramirez, he insisted that complainant was never terminated from his employment. On the comply with Section 6, Rule VI of the
contrary, he alleged that it was complainant who abandoned his job. As rescue or emergency mechanic temporarily
assigned at Babag Station, on February 26, 2006, complainant did not report at Calawisan, Lapu-Lapu City when
xxxx
respondent Ramirez ordered him to answer an emergency call, which required him to fix the respondent’s troubled
taxi unit. The mechanic assigned in the area was then absent at that time. The refusal of complainant to obey the
lawful order of respondent Ramirez is bolstered by his failure to report for work the following day, February 27, 2006. Respondent has not offered a merito
Complainant advanced no reason as to why he failed to answer an emergency call of duty nor did he file an he posted is not a reasonable amou
application for a leave of absence when he failed to report for work that day. reduce appeal bond shall not be ent
bond.
Nonetheless, as the records are bereft of any evidence that respondent sent complainant a letter which advised the
latter to report for work, We do not rule out a case of abandonment because the overt act of not answering an The NLRC then held:
emergency call is not insufficient to constitute abandonment.
WHEREFORE, premises considered
Consequently, there being no dismissal nor abandonment involved in this case, it is best that the parties to this case of an appeal bond.10
should be restored to their previous employment relations. Complainant must go back to work within ten (10) days
from receipt of this judgment, while respondent must accept complainant back to work, also within ten (10) days from
Ramirez filed a Motion for Reconsid
receipt of this decision.6
this wise:

In the end, the Labor Arbiter decreed:

The mere filing of a motion to reduce
of a bond in a reasonable amount in
WHEREFORE, VIEWED FROM THE FOREGOING, judgment is hereby rendered declaring respondent HILARIO an appeal. Thus, respondent’s failur
RAMIREZ, OWNER OF H.R. TAXI, NOT GUILTY of illegally dismissing complainant from the service, it appearing since the assailed Decision of the La
that there is no dismissal to speak of in this case. Consequently, complainant is ordered to report back for work respondent to post the required bon
within ten (10) days from receipt hereof, and respondent Hilario Ramirez must complainant (sic) back to work as
soon as the latter would express his intention to report for work or within the same period of ten (10) days from
receipt hereof, whichever comes first. Proof of compliance hereof, must be submitted within the same period (sic), While the filing of a motion to reduce
same holds true only when such mo
complainant would be guilty of abandonment and respondent of illegal dismissal.
motion to reduce bond which missed
given a preferred resolution.
In addition, respondent HILARIO RAMIREZ, owner of H.R. Taxi, is hereby ordered to pay complainant MARIO S.
VALCUEBA the following:
WHEREFORE, premises considered
merit.11
a. Wage Differential - P30,538.00
The decision of the Labor Arbiter be
b. 13th Month Pay - 15,287.98 Entries of Judgment on 4 May 2007

Ramirez went up to the Court of App

Total Award - P45,825.98 13 July 2007,13 the Court of Appeals
petition and to state material dates.

Philippine currency, within ten (10) days from receipt hereof, through the Cashier of this Arbitration Branch. Ramirez’s Motion for Reconsideratio
2008;14hence, this petition where Ra
Other claims are DISMISSED for failure to substantiate.7 aside and in its stead to give due co
for being highly speculative, with no

Records show that Ramirez received the Labor Arbiter’s decision on 5 June 2006. He filed a Motion for
Reconsideration and/or Memorandum of Appeal with Urgent Motion to Reduce Appeal Bond8 on the 9th day of the The issues are:
reglementary period or on 14 June 2006 before the National Labor Relations Commission (NLRC).

PUBLIC RESPONDENT COURT OF APPEALS ERRED IN NOT CONSIDERING THE SUBSTANTIAL SECTION 6. Bond. — In case the de
COMPLIANCE OF THE FILED PETITION. an appeal by the employer may be p
cash deposit or surety bond equivale
II
xxxx
THE DISMISSAL RESOLUTION (ANNEX "A") HAS NOT RESOLVED THE LEGAL ISSUES RAISED IN CA-G.R. SP
NO. 02614.16 No motion to reduce bond shall be e
a reasonable amount in relation to th
The case presents no novel issue.
The mere filing of a motion to reduce
not stop the running of the period to
We first resolve the propriety of dismissal by the NLRC.

Under the Rules, appeals involving m

At the outset, it should be stressed that the right to appeal is not a natural right or a part of due process; it is merely a
mandatory requisites, namely: (1) pa
statutory privilege, and may be exercised only in the manner prescribed by and in accordance with the provisions of
payment of the required cash or sur
law. The party who seeks to avail himself of the same must comply with the requirements of the rules. Failing to do
so, he loses the right to appeal.17
The posting of a bond is indispensab
decision of the labor arbiter. The inte
Article 223 of the Labor Code provides for the procedure in case of appeal to the NLRC:
perfection of an appeal by the emplo
perfected "only upon the posting of a
Art. 223. Appeal. - Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the it unmistakably plain that the lawmak
Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. essential and exclusive means by w
Such appeal may be entertained only on any of the following grounds: perfection of an appeal as optional o
bond, if he desires to appeal. The m
determined from the language empl
a. If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter; for construction.19

b. If the decision, order or award was secured through fraud or coercion, including graft and corruption; Clearly, the filing of the bond is not o
order to confer jurisdiction upon the
c. If made purely on questions of law; and Arbiter final and executory. This req
will receive the money judgment in t
d. If serious errors in the finding of facts are raised which would cause grave or irreparable damage or
injury to the appellant. It is intended to discourage employe
employees’ just and lawful claims.20
In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the In this case, although Ramirez poste
amount equivalent to the monetary award in the judgment appealed from. (Emphasis supplied.) monetary award of the Labor Arbiter
the bond was excessive and basele
Sections 4(a) and 6 of Rule VI of the New Rules of Procedure of the NLRC, as amended, reaffirms the explicit
jurisdictional principle in Article 223 even as it allows in justifiable cases the reduction of the appeal bond. The Colby Construction and Managemen
relevant provision states: that an employer who files a motion
surety bond within the ten-day regle
SECTION 4. Requisites for Perfection of Appeal. - (a) The appeal shall be: 1) filed within the reglementary period
provided in Section 1 of this Rule; 2) verified by the appellant himself in accordance with Section 4, Rule 7 of the Very recently, in Mcburnie v. Guanz
Rules of Court, as amended; 3) in the form of a memorandum of appeal which shall state the grounds relied upon reduce bond on the 10th or last day
and the arguments in support thereof, the relief prayed for, and with a statement of the date the appellant received same was inadequate compared to
the appealed decision, resolution or order; for in three (3) legibly type written or printed copies; and 5) accompanied contention that the awards of the La
by i) proof payment of the required appeal fee; ii) posting of a cash or surety bond as provided in Section 6 of this behooves the Court to give utmost r
Rule; iii) a certificate of non-forum shopping; and iv) proof of service upon the other parties. post a cash or surety bond securing
Nothing in the Labor Code or the NL
monetary award in the judgment, or
xxxx

By stating that the bond is excessive and baseless without more, and without proof that he is incapable of raising the We have always stressed that Articl
amount of the bond, Ramirez did not even come near to substantially complying with the requirements of Art. 223 of not of procedure. There is little leew
the Labor Code and NLRC Rule of Procedure. Given that Ramirez is involved in taxi business, he has not shown that the ground that its requirements are
he had difficulty raising the amount of the bond or was unable to raise the amount specified in the award of the Labor appeal in a labor case, as it arises s
Arbiter.
For the same reason, we have repe
All given, the NLRC justifiably denied the motion to reduce bond, as it had no basis upon which it could actually and procedural but jurisdictional and can
completely determine Ramirez’s motion to reduce bond. We have consistently enucleated that a mere claim of the effect of rendering the judgment
excessive bond without more does not suffice. Thus, in Ong v. Court of Appeals,24 this Court held that the NLRC did
not act with grave abuse of discretion when it denied petitioner’s motion, for the same failed to elucidate why the
That settled, we next resolve the iss
amount of the bond was either unjustified or prohibitive.
Ramirez. The Court of Appeals foun

In Calabash Garments, Inc. v. National Labor Relations Commission,25 it was held that "a substantial monetary
1. Failure of petitioner to p
award, even if it runs into millions, does not necessarily give the employer-appellant a `meritorious case’ and does
Section 4, Rule 7 in relatio
not automatically warrant a reduction of the appeal bond."
must be verified by an affi
and correct of his persona
It is clear from both the Labor Code and the NLRC Rules of Procedure that there is legislative and administrative petition is treated as an un
intent to strictly apply the appeal bond requirement, and the Court should give utmost regard to this intention. There no legal effect.
is a concession to the employer, in excluding damages and attorney's fees from the computation of the appeal bond.
Not even the filing of a motion to reduce bond is deemed to stay the period for requiring an appeal. Nothing in the
2. Petitioner failed to indic
Labor Code or the NLRC Rules of Procedure authorizes the posting of a bond that is less than the monetary award
subject hereof was receiv
in the judgment, or would deem such insufficient postage as sufficient to perfect the appeal.
Rule 46 of the Rules of Co

On the other hand, Article 223 indubitably requires that the appeal be perfected only upon the posting of the cash or
On Ramirez’s failure to verify his pe
surety bond which is equivalent to the monetary award in the judgment appealed from. The clear intent of both
an assurance that matters that are a
statutory and procedural law is to require the employer to post a cash or surety bond securing the full amount of the
unverified pleadings or act on them
monetary award within the ten (10)-day reglementary period. While the bond may be reduced upon motion by the
sustains the Court of Appeals’ dismi
employer, there is that proviso in Rule VI, Section [6] that the filing of such motion does not stay the reglementary
considerations of equity and substan
period. The qualification effectively requires that unless the NLRC grants the reduction of the cash bond within the
v. National Labor Relations Commis
ten (10)-day reglementary period, the employer is still expected to post the cash or surety bond securing the full
amount within the said ten (10)-day period. If the NLRC does eventually grant the motion for reduction after the
reglementary period has elapsed, the correct relief would be to reduce the cash or surety bond already posted by the Rules of procedure are tools design
employer within the ten (10)-day period.26 (Emphases supplied.) justice, such that strict adherence th
would result in a defeat of equity and
this Court to be liberal, even pro hac
While in certain instances, we allow a relaxation in the application of the rules to set right an arrant injustice, we
technical grounds.
never intend to forge a weapon for erring litigants to violate the rules with impunity. The liberal interpretation and
application of rules apply only to proper cases of demonstrable merit and under justifiable causes and
circumstances, but none obtains in this case. The NLRC had, therefore, the full discretion to grant or deny Ramirez’s Again as in the NLRC, Ramirez has
motion to reduce the amount of the appeal bond. The finding of the labor tribunal that Ramirez did not present comply with the requirement regardi
sufficient justification for the reduction thereof cannot be said to have been done with grave abuse of discretion.27
For the same reasons above, we als
While Section 6, Rule VI of the NLRC’s New Rules of Procedure allows the Commission to reduce the amount of the dismissing Ramirez’s petition on the
bond, the exercise of the authority is not a matter of right on the part of the movant, but lies within the sound for certiorari without indicating the re
discretion of the NLRC upon a showing of meritorious grounds.28 particularly Rule 65 of the Rules of C

It is daylight-clear from the foregoing that while the bond may be reduced upon motion by the employer, this is SECTION 1. Petition for certiorari. –
subject to the conditions that (1) the motion to reduce the bond shall be based on meritorious grounds; and (2) a
reasonable amount in relation to the monetary award is posted by the appellant; otherwise, the filing of the motion to
reduce bond shall not stop the running of the period to perfect an appeal. The qualification effectively requires that xxxx
unless the NLRC grants the reduction of the cash bond within the 10-day reglementary period, the employer is still
expected to post the cash or surety bond securing the full amount within the said 10-day period. The petition shall be accompanied b
of all pleadings and documents relev
provided in the third paragraph of Se

On the other hand, the pertinent provision under Rule 46 is explicit: leniency cannot be accorded, absen
saw no compelling need meriting the
Sec. 3. Contents and filing of petition; effect of non-compliance with requirements. – x x x .
Wherefore, premises considered, th
dated 13 July 2007 and 7 March 200
In actions filed under Rule 65, the petition shall further indicate the material dates showing when notice of the
2006 are AFFIRMED. Costs against
judgment or final order or resolution subject thereof was received, when a motion for new trial or reconsideration, if
any, was filed and when notice of the denial thereof was received.
SO ORDERED.
xxxx
G.R. No. 160302 Septemb
The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the
dismissal of the petition. JAILE OLISA, ISIDRO SANCHEZ,
GAGAL, ROBERTO MARTIZANO,
There are three material dates that must be stated in a petition for certiorari brought under Rule 65. First, the date AND MALAYANG SAMAHAN NG M
when notice of the judgment or final order or resolution was received; second, the date when a motion for new trial or vs.
for reconsideration was filed; and third, the date when notice of the denial thereof was received. In the case before DANILO ESCARIO, PANFILO AGA
us, the petition filed with the Court of Appeals failed to indicate when the notice of the NLRC Resolution was received DOMINADOR AGUILO, OLYMPIO
and when the Motion for Reconsideration was filed, in violation of Rule 65, Section 1 (2nd par.) and Rule 46, Section GILBERT VIBAR, THOMAS MANC
3 (2nd par.). 1avvphi1 RELATIONS COMMISSION (THIRD
DOMINGO TAN, Respondents.

As explicitly stated in the aforementioned Rule, failure to comply with any of the requirements shall be sufficient
ground for the dismissal of the petition.

The rationale for this strict provision of the Rules of Court is not difficult to appreciate. In Santos v. Court of BERSAMIN, J.:
Appeals,33 the court explains that the requirement is for purpose of determining the timeliness of the petition, thus:
Conformably with the long honored
The requirement of setting forth the three (3) dates in a petition for certiorari under Rule 65 is for the purpose of joining an illegal strike are not entitle
determining its timeliness. Such a petition is required to be filed not later than sixty (60) days from notice of the their being merely members of the s
judgment, order or Resolution sought to be assailed. Therefore, that the petition for certiorari was filed forty-one (41)
days from receipt of the denial of the motion for reconsideration is hardly relevant. The Court of Appeals was not in We apply this principle in resolving t
any position to determine when this period commenced to run and whether the motion for reconsideration itself was 2003 of the Court of Appeals (CA),1
filed on time since the material dates were not stated. x x x. Relations Commission (NLRC) direc
backwages, or, in lieu of reinstateme
In the instant case, the petition was bereft of any persuasive explanation as to why Ramirez failed to observe service.2
procedural rules properly. 34

Quite apparent from the foregoing is that the Court of Appeals did not err, much less commit grave abuse of
discretion, in denying due course to and dismissing the petition for certiorari for its procedural defects. Ramirez’s The petitioners were among the reg
failure to verify and state material dates as required under the rules warranted the outright dismissal of his petition. engaged in manufacturing and sellin
Manggagawa sa Balanced Foods (U
We are not unmindful of exceptional cases where this Court has set aside procedural defects to correct a patent
injustice. However, concomitant to a liberal application of the rules of procedure should be an effort on the part of the At 8:30 in the morning of March 13,
party invoking liberality to at least explain its failure to comply with the rules. premises and proceeded to the bara
with oral defamation by Aurora Man
In sum, we find no sufficient justification to set aside the NLRC and Court of Appeals resolutions. Thus, the decision appears that the proceedings in the
of the Labor Arbiter is already final and executory and binding upon this Court.35 returned to work thereafter.

The relaxation of procedural rules cannot be made without any valid reasons proffered for or underpinning it. To As a result of the walkout, PINA pre
merit liberality, Ramirez must show reasonable cause justifying his non-compliance with the rules and must convince incident. PINA terminated the officer
the court that the outright dismissal of the petition would defeat the administration of substantive justice. The desired

On April 14, 1993, PINA filed a complaint for unfair labor practice (ULP) and damages. The complaint was assigned WHEREFORE, premises considered
to then Labor Arbiter Raul Aquino, who ruled in his decision dated July 13, 1994 that the March 13, 1993 incident is directed to reinstate respondents
was an illegal walkout constituting ULP; and that all the Union’s officers, except Cañete, had thereby lost their event that reinstatement is not feasi
employment.4 (1/2) half month per year of service.

On April 28, 1993, the Union filed a notice of strike, claiming that PINA was guilty of union busting through the SO ORDERED.12
constructive dismissal of its officers.5 On May 9, 1993, the Union held a strike vote, at which a majority of 190
members of the Union voted to strike.6 The strike was held in the afternoon of June 15, 1993.7
Following the denial of their motion f
petition for certiorari in the Court of A
PINA retaliated by charging the petitioners with ULP and abandonment of work, stating that they had violated awarding backwages pursuant to Ar
provisions on strike of the collective bargaining agreement (CBA), such as: (a) sabotage by the insertion of foreign strike.
matter in the bottling of company products; (b) decreased production output by slowdown; (c) serious misconduct,
and willful disobedience and insubordination to the orders of the Management and its representatives; (d) disruption
On August 18, 2003, the CA affirme
of the work place by invading the premises and perpetrating commotion and disorder, and by causing fear and
the third paragraph of Article 264(a)
apprehension; (e) abandonment of work since June 28, 1993 despite notices to return to work individually sent to
Article 264 when a dismissed emplo
them; and (f) picketing within the company premises on June 15, 1993 that effectively barred with the use of threat
reason of an illegal lockout; that Arti
and intimidation the ingress and egress of PINA’s officials, employees, suppliers, and customers. 8
lawful strike; and that a reinstatemen
petitioners was not done in accordan
On September 30, 1994, the Third Division of the National Labor Relations Commission (NLRC) issued a temporary authorized causes) of the Labor Cod
restraining order (TRO), enjoining the Union’s officers and members to cease and desist from barricading and
obstructing the entrance to and exit from PINA’s premises, to refrain from committing any and all forms of violence,
The CA disposed thus:14
and to remove all forms of obstructions such as streamers, placards, or human barricade.9

WHEREFORE, premises considered

On November 29, 1994, the NLRC granted the writ of preliminary injunction.10
2001 Decision of respondent Comm

On August 18, 1998, Labor Arbiter Jose G. de Vera (LA) rendered a decision, to wit:
SO ORDERED.15

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the subject
On October 13, 20
strike to be illegal.

Hence, this appeal via petition for re

The complainant’s prayer for decertification of the respondent union being outside of the jurisdiction of this Arbitration
Branch may not be given due course.

And finally, the claims for moral and exemplary damages for want of factual basis are dismissed.
The petitioners posit that they are en
reinstatement due to their not being
SO ORDERED.11
question in a manner contrary to law

On appeal, the NLRC sustained the finding that the strike was illegal, but reversed the LA’s ruling that there was
abandonment, viz:

We sustain the CA, but modify the d

However, we disagree with the conclusion that respondents’ union members should be considered to have
jurisprudence.
abandoned their employment.

Under Article 264 of the Labor Code, as amended, the union officers who knowingly participate in the illegal strike
may be declared to have lost their employment status. However, mere participation of a union member in the illegal
strike does not mean loss of employment status unless he participates in the commission of illegal acts during the Third Pa
strike. While it is true that complainant thru individual memorandum directed the respondents to return to work (pp.
1031-1112, Records) there is no showing that respondents deliberately refused to return to work. A worker who joins
The petitioners contend that they are
a strike does so precisely to assert or improve the terms and conditions of his work. If his purpose is to abandon his
work, he would not go to the trouble of joining a strike (BLTB v. NLRC, 212 SCRA 794). applicable to their situation is Article

We do not agree with the petitioners. The petitioners argue that the finding
Hence, they were entitled to full bac
Article 279 provides:
The petitioners’ argument cannot be
Article 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work The petitioners’ participation in the il
shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, them, as striking employees, to have
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his reinstatement after finding that they
compensation was withheld from him up to the time of his actual reinstatement. only to reinstatement, regardless of
ULP,19considering that a strike was
By its use of the phrase unjustly dismissed, Article 279 refers to a dismissal that is unjustly done, that is, the
employer dismisses the employee without observing due process, either substantive or procedural. Substantive due As a general rule, backwages are gr
process requires the attendance of any of the just or authorized causes for terminating an employee as provided whole period that he is out of his job
under Article 278 (termination by employer), or Article 283 (closure of establishment and reduction of personnel), or employment, he is entitled to all the
Article 284 (disease as ground for termination), all of the Labor Code; while procedural due process demands backwages to him is in furtherance a
compliance with the twin-notice requirement.17 a command to the employer to make
Labor Code.22
In contrast, the third paragraph of Article 264(a) states:
That backwages are not granted to e
they do not render work for the emp
Art. 264. Prohibited activities. – (a) xxx
Corporation v. Infante:24

Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to
With respect to backwages, the prin
reinstatement with full backwages. Any union officer who knowingly participates in an illegal strike and any worker or
determining the award thereof. If the
union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost
course, the laborer was able, willing
his employment status; Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient
otherwise illegally prevented from w
ground for termination of his employment, even if a replacement had been hired by the employer during such lawful
in Philippine Diamond Hotel and Res
strike.
exception to apply, it is required that
supplied)
xxx
The petitioners herein do not deny th
Contemplating two causes for the dismissal of an employee, that is: (a) unlawful lockout; and (b) participation in an of earnings during their absence from
illegal strike, the third paragraph of Article 264(a) authorizes the award of full backwages only when the termination of a fair day’s wage for a fair day’s la
of employment is a consequence of an unlawful lockout. On the consequences of an illegal strike, the provision
distinguishes between a union officer and a union member participating in an illegal strike. A union officer who
Under the principle of a fair day’s wa
knowingly participates in an illegal strike is deemed to have lost his employment status, but a union member who is
period of the strike (even if the strike
merely instigated or induced to participate in the illegal strike is more benignly treated. Part of the explanation for the
neither fair nor just that the dismisse
benign consideration for the union member is the policy of reinstating rank-and-file workers who are misled into
the Court deleted the award of back
supporting illegal strikes, absent any finding that such workers committed illegal acts during the period of the illegal
Philippine Diamond Hotel and Reso
strikes.18
Union,26 considering that the striking

The petitioners were terminated for joining a strike that was later declared to be illegal. The NLRC ordered their
reinstatement or, in lieu of reinstatement, the payment of their separation pay, because they were mere rank-and-file
workers whom the Union’s officers had misled into joining the illegal strike. They were not unjustly dismissed from
work. Based on the text and intent of the two aforequoted provisions of the Labor Code, therefore, it is plain that
Article 264(a) is the applicable one.

II The petitioners were ordered reinsta

participate in the illegal strike. By joi
remained as its employees.
Petitioners not entitled to backwages despite their reinstatement:
A fair day’s wage for a fair day’s labor

The absence from an order of reinstatement of an alternative relief should the employer or a supervening event not DP Mercado & Associates for petitio
within the control of the employee prevent reinstatement negates the very purpose of the order. The judgment
favorable to the employee is thereby reduced to a mere paper victory, for it is all too easy for the employer to simply
Oscar E. Dinopol for private respond
refuse to have the employee back. To safeguard the spirit of social justice that the Court has advocated in favor of
the working man, therefore, the right to reinstatement is to be considered renounced or waived only when the
employee unjustifiably or unreasonably refuses to return to work upon being so ordered or after the employer has
offered to reinstate him.27
REGALADO, J.:
However, separation pay is made an alternative relief in lieu of reinstatement in certain circumstances, like: (a) when
reinstatement can no longer be effected in view of the passage of a long period of time or because of the realities of
the situation; (b) reinstatement is inimical to the employer’s interest; (c) reinstatement is no longer feasible; (d) Assailed in this petition for certiorari
affirmed with modification the decisi
reinstatement does not serve the best interests of the parties involved; (e) the employer is prejudiced by the workers’
continued employment; (f) facts that make execution unjust or inequitable have supervened; or (g) strained relations reads:
between the employer and employee.28
WHEREFORE,
Here, PINA manifested that the reinstatement of the petitioners would not be feasible because: (a) it would "inflict Arbiter's decisio
disruption and oppression upon the employer"; (b) "petitioners [had] stayed away" for more than 15 years; (c) its
machines had depreciated and had been replaced with newer, better ones; and (d) it now sold goods through 1. To reinstate c
independent distributors, thereby abolishing the positions related to sales and distribution.29
2. To pay comp
Under the circumstances, the grant of separation pay in lieu of reinstatement of the petitioners was proper.1awph!1 It
is not disputable that the grant of separation pay or some other financial assistance to an employee is based on
equity, which has been defined as justice outside law, or as being ethical rather than jural and as belonging to the 3. To pay comp
sphere of morals than of law.30 This Court has granted separation pay as a measure of social justice even when an three years star
employee has been validly dismissed, as long as the dismissal has not been due to serious misconduct or reflective
of personal integrity or morality.31 We quote the generative facts of the
respondent commission:
What is the appropriate amount for separation pay?
Complainant wa
32
In G & S Transport, the Court awarded separation pay equivalent to one month salary per year of service General Santos
considering that 17 years had passed from the time when the striking employees were refused reinstatement. In operator. On Au
Association of Independent Unions in the Philippines v. NLRC,33 the Court allowed separation pay equivalent to one (with) the vodex
month salary per year of service considering that eight years had elapsed since the employees had staged their original copy iss
illegal strike.
Complainant all
Here, we note that this case has dragged for almost 17 years from the time of the illegal strike. Bearing in mind discrepancy of t
PINA’s manifestation that the positions that the petitioners used to hold had ceased to exist for various reasons, we by inadvertence
hold that separation pay equivalent to one month per year of service in lieu of reinstatement fully aligns with the contended that
aforecited rulings of the Court on the matter. customers who
determine the a
addition, there w
WHEREFORE, we affirm the decision dated August 18, 2003 of the Court of Appeals, subject to the modification to them (to) furnish
the effect that in lieu of reinstatement the petitioners are granted backwages equivalent of one month for every year this process tha
of service. customer who w
but he failed to
receipts issued
SO ORDERED.
particulars. Con
in the original, th
G.R. No. 80600 March 21, 1990 Complainant no
the respondent
1985 which was
PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, petitioner, pay.
vs.
NATIONAL LABOR RELATIONS COMMISSION and BOBBY TORIBIANO, respondents.

 Respondent, on the other hand, alleged that a regular audit was conducted at their PT & T While an employer has its own intere
General Santos City branch on August 14 to 19, 1985, by its Internal Auditor; that, it was cause, such prerogative to dismiss o
discovered during the audit that complainant on July 26, 1985 had accepted and receipted a tempered with compassion and und
long distance call in the amount of P113.25 under TOR No. 324698 (Annex "A" of respondent) prerogative, what is at stake is not o
but what was reflected in the duplicate copy was only P41.15, with a difference of P72.10 which
was used for his own personal comfort. Respondent argued that while this fact has been
This ruling is only in keeping with the
admitted by the complainant, his explanation was flimsy and shallow; that the fact that there was
when conflicting interests of labor an
no carbon placed for the duplicate is enough evidence for (sic) his illegal interest and that his
of the latter should be counterbalanc
intention to tamper (with) and malverse company funds is very glaring to be ignored. It was
worker. 9
further argued that the acts of the complainant reflect that he is morally deprived and, therefore,
could not be trusted considering that he violated the trust and confidence reposed upon him
which constitutes a valid reason for his termination.3 (Corrections in parentheses supplied). Parenthetically, petitioner's claim tha
justify outright dismissal, is of no mo
this Court to rule upon in the presen
After a careful review of the records, Labor Arbiter Sayon rendered his decision, with the following dispositive part:

It is not to be misconstrued, howeve

WHEREFORE, responsive to the foregoing, judgment is hereby rendered against the
ratiocinated by respondent Commiss
respondent, Philippine Telegraph and Telephone Corporation PT & T General Santos branch:

However, consi
1. To reinstate complainant, Bobby Toribiano, to his former position without loss of seniority
liability, we belie
rights plus backwages and emergency living allowance equivalent to six (6) months;
reinstatement to
reinstatement is
2. To pay complainant his unpaid wages for the month of July, 1985; and dismissal. 10

3. To pay complainant his entitlement on holiday pay, rest day pay and incentive leave pay for Apropos of the award of unpaid wag
three years starting from August 23, 1982 to August 23, 1985.4 his salary corresponding to the mon
upheld.
As earlier stated, respondent commission affirmed said decision with modification, deleting therefrom the award of
backwages. Not satisfied therewith, the employer corporation resorted to the instant petition. A contrario sensu, regarding respon
incentive leave pay for three (3) yea
to the position taken by the Solicitor
Petitioner submits for consideration substantially the same arguments it adduced in the labor arbiter's office and on
uncontracted evidence 13 showing p
appeal to respondent commission on the matter of private respondent's dismissal.
respondent's non-entitlement to ince
Article 95, Chapter III, Title I, Book I
The petition is without merit. commission on the erroneous justific
case was pending with the labor arb
The labor arbiter made a finding that private respondent was indeed alone in the office on July 26, 1985 busily
performing his duties as counter-clerk and long distance operator at the same time, the functions of which dual The belated presentation of the evid
positions precisely caused him to commit a mistake in the entry receipt through negligence. Further, it was found that the same. As correctly pointed out b
private respondent had repeatedly brought to the attention of petitioner his predicament of having to singly perform portion of said decision of responde
manifold duties but the same were ignored by the latter. 5 not binding in labor cases. Labor off
speedily and objectively, without reg
We find no cogent reason to disturb such findings. Well entrenched is the rule that when the conclusions of the labor
arbiter are sufficiently corroborated by the evidence on record, the same should be respected by appellate tribunals Thus, even if the evidence was not s
since he is in a better position to assess and evaluate the credibility of the contending parties. 6 Not even the failure respondent commission is enough b
of petitioner to present witnesses or counter-affidavits will constitute a fatal error as long as the parties were given a falling back on the mere technicality
chance to submit position papers on the basis of which the labor arbiter rendered a decision. 7 course of action would be more con

Considering all the attendant circumstances, even assuming that there may have been a valid ground for dismissal, ON THE FOREGOING PREMISES,
the imposition of such supreme penalty would certainly be very harsh and disproportionate to the infraction MODIFIED in the sense that the awa
committed by private respondent, especially considering that it was private respondent's first offense after having respects, the same is hereby AFFIR
faithfully rendered seven (7) long years of satisfactory service. These, and the fact that the imputed defalcation
involved the sum of only P72.10, bolster the credibility of private respondent's explanation in his defense.

SO ORDERED. In his "Manifestation in lieu of Comm
bases recovery on Article 108 of the
LUPO a bond to answer for the latte
G.R. No. 79004-08 October 4, 1991 correspondingly, be deemed solidar

FRANKLIN BAGUIO AND 15 OTHERS, BONIFACIO IGOT AND 6 OTHERS, ROY MAGALLANES AND 4 In their respective Comments, both
OTHERS, CLAUDIO BONGO, EDUARDO ANDALES and 4 OTHERS, petitioners, case because it is limited to situation
vs. related to the principal business of th
NATIONAL LABOR RELATIONS COMMISSION (3rd DIVISION), GENERAL MILLING CORPORATION and/or finds no application either because G
FELICIANO LUPO, respondents.

Upon the facts and circumstances, w

Public Attorney's Office for petitioners. of employees whom he had earlier e
Joseph M. Baduel & Steve R. Siclot for private respondents.

Recovery, however, should not be b

only" contracting, which is not the se

Article 106 provides:

MELENCIO-HERRERA, J.:

Art. 106. Contractor or sub

The liability of an employer in job contracting, vis-a-vis his contractor's employees, is the sole issue brought to the for the performance of the
fore in this labor dispute. if any, shall be paid in acc

This Petition for certiorari seeks to set aside the Resolution, dated 27 February 1987, of public respondent National In the event that the contr
Labor Relations Commission (NLRC), Third Division, which reversed the Resolution of its First Division, dated 27 with this Code, the employ
December 1985, and absolved private respondent General Milling Corporation (GMC) from any and all liability to such employees to the ex
petitioners. that he is liable to employ

Sometime in 1983, private respondent Feliciano LUPO, a building contractor, entered into a contract with GMC, a
domestic corporation engaged in flour and feeds manufacturing, for the construction of an annex building inside the
latter's plant in Cebu City. In connection with the aforesaid contract, LUPO hired herein petitioners either as
carpenters, masons or laborers. There is "labor-only" contr
substantial capital or inves
others, and the workers re
Subsequently, LUPO terminated petitioners' services, on different dates. As a result, petitioners filed Complaints related to the principal bus
against LUPO and GMC before the NLRC Regional Arbitration Branch No. VII, Cebu City, for unpaid wages, COLA considered merely as an a
differentials, bonus and overtime pay. manner and extent as if th

In a Decision, dated 21 November 1984, the Executive Labor Arbiter, Branch VII, found LUPO and GMC jointly and In other words, a person is deemed
severally liable to petitioners, premised on Article 109 of the Labor Code, infra, and ordered them to pay the to an employer does not have subst
aggregate amount of P95,382.92. Elevated on appeal on 14 December 1984, the NLRC (First Division) denied the premises, among others; and (2) the
same for lack of merit in a Resolution, dated 27 December 1985. are directly related to the principal b
Rules Implementing the Labor Code
Upon Motion for Reconsideration, filed on 27 February 1986, the case was reassigned to the Third Division. In a
Resolution of 27 February 1987, that Division absolved GMC from any liability. It opined that petitioners were only Since the construction of an annex b
hired by LUPO as workers in his construction contract with GMC and were never meant to be employed by the latter. business of flour and feeds manufac

Petitioners now assail that judgment in this Petition for Certiorari. Instead, it is "job contracting," cover

Petitioners contend that GMC is jointly and severally liable with LUPO for the latter's obligations to them. They seek Art. 107. Indirect Employe
recovery from GMC based on Article 106 of the Labor Code, infra, which holds the employer jointly and severally any person, partnership, a
liable with his contractor for unpaid wages of employees of the latter. independent contractor fo

Specifically, there is "job contracting" where (1) the contractor carries on an independent business and undertakes As an indirect employer, and for pur
the contract work on his own account under his own responsibility according to his own manner and method, free employee" of his contractor's employ
from the control and direction of his employer or principal in all matters connected with the performance of the work consequence, GMC can not escape
except as to the results thereof; and (2) the contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in the conduct of his business. It
Further, Article 108 of the Labor Cod
may be that LUPO subsequently ran out of capital and was unable to satisfy the award to petitioners. That was an
pay, thus:
after-the-fact development, however, and does not detract from his status as an independent contractor.

Article 108. Posting of Bon

Based on the foregoing, GMC qualifies as an "indirect employer." It entered into a contract with an independent
subcontractor to furnish a
contractor, LUPO, for the construction of an annex building, a work, task, job or project not directly related to GMC's
answer for the wages due
business of flour and feeds manufacturing. Being an "indirect employer," GMC is solidarily liable with LUPO for any
fails to pay the same.
violation of the Labor Code pursuant to Article 109 thereof, reading:

Having failed to require LUPO to po

Art. 109. Solidary Liability. — The provisions of existing laws to the contrary notwithstanding, every
incurred to his employees. This is w
employer or indirect employer shall be held responsible with a contractor or subcontractor for any violation
will have to pay petitioners.
of any provision of this Code. For purposes of determining the extent of their civil liability under this
Chapter, they shall be considered as direct employers.
WHEREFORE, the Petition for certio
February 1987, is hereby SET ASID
The provision of existing law referred to is Article 1728 of the Civil Code, which states, among others, that "the
REINSTATED.
contractor is liable for all the claims of laborers and others employed by him ..."

SO ORDERED.
The foregoing interpretation finds a precedent in the case o Deferia v. NLRC (G.R. No. 78713, 27 February 1991)
per Sarmiento, J., where Articles 107 and 109 were applied as the statutory basis for the joint and several liability of
the employer with his contractor, in addition to Article 106, since the situation in that case was clearly one of "labor- G.R. Nos. 100376-77 June 17, 199
only" contracting.
DEVELOPMENT BANK OF THE PH
The NLRC submission that Article 107 is not applicable in the instant case for the reason that the coverage thereof is vs.
limited to one "not an employer" whereas GMC is such an employer as defined in Article 97 (b) of the Labor Code,1 is NATIONAL LABOR RELATIONS C
not well-taken. Under the peculiar set-up herein, GMC is, in fact, "not an employer" (in the sense of not being a direct COS and ROGELIO VILLANUEVA,
employer) as understood in Article 106 of the Labor Code, but qualifies as an "indirect employer" under Article 107 of
said Code.
Vicente T. Cuison for petitioner.

The distinction between Articles 106 and 107 was in the fact that Article 106 deals with "labor-only" contracting.
Here, by operation of law, the contractor is merely considered as an agent of the employer, who is deemed Tamondong, Wong, Cos, & Associa
"responsible to the workers to the same extent as if the latter were directly employed by him." On the other hand,
Article 107 deals with "job contracting." In the latter situation, while the contractor himself is the direct employer of the
employees, the employer is deemed, by operation of law, as an indirect employer.

PADILLA, J.:
In other words, the phrase "not an employer" found in Article 107 must be read in conjunction with Article 106. A
contrary interpretation would render the provisions of Article 107 meaningless considering that everytime an
employer engages a contractor, the latter is always acting in the interest of the former, whether directly or indirectly, This petition for review on certiorari
in relation to his employees. reverse and set aside the Resolution
("NLRC") in NLRC NCR Case Nos.
reconsideration, the dispositive part
It should be recalled that a finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is
an employer-employee relationship between the owner of the project and the employees of the "labor-only"
contractor (Associated Anglo-American Tobacco Corp. v. Clave, G.R. No. 50915, 30 August 1990, 189 SCRA 127; Accordingly, the
Industrial Timber Corp. v. NLRC, G.R. No. 83616, 20 January 1989, 169 SCRA 341). This is evidently because, as the Bank and its
heretofore stated, the "labor-only" contractor is considered as a mere agent of an employer. In contrast, in "job their further dela
contracting," no employer-employee relationship exists between the owner and the employees of his contractor. The
owner of the project is not the direct employer but merely an indirect employer, by operation of law, of his contractor's Private respondents Godofredo Mor
employees. guards by Confidential Investigation
January 1985, and 27 November 19

assigned to secure the premises of CISCOR’s clients, among them, the herein petitioner, Development Bank of the the complainan
Philippines ("DBP") which, in turn, assigned private respondents to secure one of its properties or assets, the three (3) years
Riverside Mills Corporation. 1987. Confiden
complainants th
from receipt her
On 11 August 1987, private respondent Villanueva resigned from CISCOR. On 15 August 1987, private respondents
Morillo, Bacea and Cos followed suit in resigning from CISCOR. Thereafter, private respondents claimed from
CISCOR the return of their cash bond and payment of their 13th month pay and service incentive leave pay. For From the above decision, CISCOR a
failure of CISCOR to grant their claims, private respondents Villanueva and Cos filed against CISCOR and its Reconsideration/Appeal and prayed
President/Manager Ernesto Medina NLRC NCR Case No. 00-10-3562-87 on 13 October 1987, while private Medina solely liable for the claims o
respondents Morillo and Bacea filed NLRC NCR Case No. 00-09-3383-87 on 29 September 1987. In said two (2) void.
cases, private respondents sought recovery of their cash bond, payment of 13th month pay, and their five-day
service incentive leave pay. The two (2) cases were consolidated and assigned to Labor Arbiter Crescencio Iniego.
In its Resolution of 24 January 1991
severally liable, the pertinent part of
In their position paper filed on 23 November 1987, private respondents (as complainants) alleged that they tendered
their resignations in August 1987 upon the assurance of CISCOR that they would be paid the cash benefits due
WHEREFORE,
them. For failure of CISCOR to comply, private respondents claimed violations committed by CISCOR and Medina,
Investigation an
specifically, the non-payment of their 13th month pay, five (5) day service incentive leave pay from the date of
Philippines) are
employment to the time of their separation, non-refund of their cash bond, non-payment of legal holiday pay and rest
month pay, 5 da
day pay. On the other hand, CISCOR and Medina in their position paper filed on 3 March 1988 admitted that private
execution is her
respondents were former security guards of CISCOR. They added, however, that sometime in 1987, petitioner
having lawful re
allegedly formed its own security agency and pirated private respondents who tendered their voluntary resignations
from CISCOR. Thereafter, when private respondents sought from CISCOR the return of their cash bond deposit,
payment of 13th month pay and service incentive leave pay, CISCOR explained to private respondents that in view Anent the award
of the claim of petitioner that it incurred losses when private respondents and their other co-security guards secured are hereby rem
the premises of Riverside Mills Corporation, private respondents, prior to the payment of their claims, were asked to it be completed
first secure an individual/agency clearance from petitioner to show that no losses were incurred while they were
guarding Riverside Mills Corporation.
Hence, this petition for review on ce

Instead of getting such clearance from the petitioner, private respondents secured their clearance from CISCOR’s
detachment commander. Hence, for failure to secure the required clearance, private respondents’ cash bond 1. Whether or n
deposit, their proportionate 13th month pay and service incentive leave pay were withheld to answer for liabilities
incurred while private respondents were guarding Riverside Mills Corporation. 2. Whether or n
Code; and
On 10 March 1988, CISCOR filed a motion with leave to implead petitioner bank and averred therein that in view of
its contract with the petitioner whereby, for a certain service fee, CISCOR undertook to guard petitioner’s premises, 3. Whether or n
both CISCOR and petitioner, under the Labor Code, are jointly and severally liable to pay the salaries and other adjudicated in th
statutory benefits due the private respondents, petitioner being an indispensable party to the case. On 11 March
1988, Labor Arbiter Iniego issued an order granting the aforesaid motion and including petitioner as one of the
respondents therein. To this, private respondents filed their opposition and alleged, among others, that petitioner, not The threshold and, in the ultimate an
being an employer of the private respondents, was not a proper, necessary or indispensable party to the case. correctly held jointly and severally lia
salary differentials, 13th month pay,
their cash deposit.
In answer, petitioner filed its position paper alleging therein that it was not made a respondent by the herein private
respondents in their complaint, and that none of the original parties to the case (private respondents and
CISCOR/Medina) interposed any claim against the petitioner. It further stated that it cannot be held liable to the claim Petitioner posits that it is not the em
of private respondents because there was no failure on the part of CISCOR and Medina to pay said claims. If claims. In addition, it avers that it wa
CISCOR had apparently failed to pay private respondents’ claims, it was only due to the failure of private implead petitioner, and not the priva
respondents to secure their individual clearance of accountability or agency clearance that there were no losses countering that, assuming arguendo
incurred while they were guarding Riverside Mills Corporation. Code 4 cannot be applied to the pres
employer, to pay the claims of privat
clearance to pave the way for the pa
On 12 July 1988, the Labor Arbiter rendered a decision, the dispositive part of which reads: Labor Code implies insolvency or un
Medina as they have manifested the
WHEREFORE, judgment is hereby rendered ordering the respondents Confidential Investigation proper clearance from accountability
and Security Corporation, Mr. Ernesto Medina and Development Bank of the Philippines to pay

We are not persuaded by petitioner’s arguments. leave pay for 1989). Private respond
issues (rest and holiday pay) and inc
each individual security guard can b
Petitioner’s interpretation of Article 106 of the Labor Code is quite misplaced. Nothing in said Article 106 indicates
that insolvency or unwillingness to pay by the contractor or direct employer is a prerequisite for the joint and several
liability of the principal or indirect employer. In fact, the rule is that in job contracting, the principal is jointly and WHEREFORE, premises considered
severally liable with the contractor. The statutory basis for this joint and several liability is set forth in Articles the modification that the additional h
107 5and 109 6 in relation to Article 106 of the Labor Code. 7 There is no doubt that private respondents are entitled confined to legal holiday and rest da
to the cash benefits due them. The petitioner is also, no doubt, liable to pay such benefits because the law mandates pay, service incentive leave pay and
the joint and several liability of the principal and the contractor for the protection of labor. In Eagle Security Agency, ORDERED to pay jointly and severa
Inc. vs. NLRC, this Court, explaining the aforesaid liability, held: prejudice to the right of reimburseme

This joint and several liability of the contractor and the principal is mandated by the Labor Code SO ORDERED.
to assure compliance of the provisions therein including the statutory minimum wage [Article 99,
Labor Code]. The contractor is made liable by virtue of his status as direct employer. The
principal, on the other hand, is made the indirect employer of the contractor’s employees for G.R. Nos. 97008-09 July 23, 1993
purposes of paying the employees their wages should the contractor be unable to pay them.
This joint and several liability facilitates, if not guarantees, payment of the workers’ performance VIRGINIA G. NERI and JOSE CAB
of any work, task, job or project, thus giving the workers ample protection as mandated by the vs.
1987 Constitution [See Article II Sec. 18 and Article XIII Sec. 3]. 8 NATIONAL LABOR RELATIONS C
CARE CORPORATION, responden
Neither may petitioner argue that it was not properly impleaded and hence, should not be made liable to the claims of
private respondents. On this matter, petitioner cannot be absolved from responsibility. We sustain respondent R.L. Salcedo & Improso Law Office
Commission’s holding that:

Bengzon, Zarnaga, Narciso, Cudala

Anent the Bank’s first issue, what we actually have here is a "Third-Party Complaint", defined by
Section 12, Rule 6 of the Rules of Court as "a claim that a defending party may, with leave of
court, file against a person not a party to the action, called the third-party defendant, for Bautista, Picaso, Buyco, Tan & Fide
contribution, indemnity, subrogation or any other relief, in respect of his opponent’s claim"
(emphasis ours). Since Rule I, Section 3 of our 1986 Revised NLRC Rules adopts suppletorily
the Rules of Court "in the interest of expeditious labor justice and whenever practicable and
convenient" with the Security Agency’s impleading the Bank for indemnity and subrogation
considering that the complainants worked with the Bank "to safeguard their premises, properties BELLOSILLO, J.:
and their person" (Record, p. 76), such a third-party complaint would therefore be proper. That
the bank has not disputed liability on the admitted claims, but professes merely subsidiary, Respondents are sued by two emplo
instead of solidary liability, we find its position here all the more, untenable. 9 services to various firms, to compel
and be paid the same wages which
Finally, petitioner submits that wage differential, rest day and legal holiday pay should not be adjudicated in this
case. The respondent Commission, however, observed: Building Care Corporation (BCC, for
capitalization of P1 Million or a stock
Regarding the question of wage differential, we note that the complaint (Record, p. 1), as well as job contracting and that consequent
the complainants’ Position Paper (Record, pp. 5-10) do not mention about any wage differential (FEBTC, for brevity). on appeal, this
claim. We do not therefore see any basis with which we may, on sight, affirm the said award. We Commission (NLRC, for brevity). Ne
note though that complainants’ position paper save technical arguments (that after all are not contracting hence, they conclude, th
binding to us in this jurisdiction), sufficiently claims rest day and legal holiday pay, claims that
were not strongly refuted by respondents. Impressed, although not convincingly, that the award Petitioners Virginia G. Neri and Jose
on wage differential could have referred to the complainants’ claim for rest day and legal holiday corporation engaged in providing tec
pay, we therefore see the need to have the said claims subjected to further hearing but for a services to its clientele. They were a
limited period of 20 days. 10 May 1979 and 1 August 1980, respe
promoted to messenger on 1 April 1
We note that in the present case, there is no claim for wage differentials either in the complaints or in the position
paper filed by private respondents before the labor arbiter. Accordingly, no relief may be granted on such matter. We, On 28 June 1989, petitioners institut
however, agree with the respondent Commission in its stand that private respondents are entitled to rest day and 10 of the Department of Labor and E
holiday pay (aside from the refund of their cash bond and the payment of their 13th month pay and service incentive

to pay the differential between the wages being paid them by BCC and those received by FEBTC employees with Be that as it may, the Court has alre
similar length of service. and private institutions and industrie
range from janitorial, 10 security 11 an
petitioners Neri and Cabelin. While t
On 16 November 1989, the Labor Arbiter dismissed the complaint for lack of merit.1 Respondent BCC was
employer, 12 nevertheless, they are n
considered an independent contractor because it proved it had substantial capital. Thus, petitioners were held to be
regular employees of BCC, not FEBTC. The dismissal was appealed to NLRC which on 28 September 1990 affirmed
the decision on appeal.2 On 22 October 1990, NLRC denied reconsideration of its affirmance,3 prompting petitioners In fact, the status of BCC as an inde
to seek redress from this Court. Unions-TUCP v. National Labor Rel

Petitioners vehemently contend that BCC in engaged in "labor-only" contracting because it failed to adduce evidence The public resp
purporting to show that it invested in the form of tools, equipment, machineries, work premises and other materials company contra
which are necessary in the conduct of its business. Moreover, petitioners argue that they perform duties which are among others, a
directly related to the principal business or operation of FEBTC. If the definition of "labor-only" contracting4is to be government age
read in conjunction with job contracting,5 then the only logical conclusion is that BCC is a "labor only" contractor. correctly ruled a
Consequently, they must be deemed employees of respondent bank by operation of law since BCC is merely an
agent of FEBTC following the doctrine laid down in Philippine Bank of Communications v. National Labor Relations
Even assuming ex argumenti that pe
Commission6 where we ruled that where "labor-only" contracting exists, the Labor Code itself establishes an
the bank, under the "right of control"
employer-employee relationship between the employer and the employees of the "labor-only" contractor; hence,
Neri, it is admitted that FEBTC issue
FEBTC should be considered the employer of petitioners who are deemed its employees through its agent, "labor-
However, a cursory reading of the jo
only" contractor BCC.
actually the end-result of the task, e
and relayed by her, respectively, tall
We cannot sustain the petition. the desired end-result was achieved
the Shipside case, 14 we ruled —
Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work
premises, among others, because it has established that it has sufficient capitalization. The Labor Arbiter and the . . . . If in the co
NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for.7 BCC is therefore a occasionally iss
highly capitalized venture and cannot be deemed engaged in "labor-only" contracting. that only STEVE
such instruction
SHIPSIDE and
It is well-settled that there is "labor-only" contracting where: (a) the person supplying workers to an employer does
not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others; and, (b) the workers recruited and placed by such person are performing activities which are directly related Besides, petitioners do not deny tha
to the principal business of the employer.8 Cagayan de Oro Branch of FFBTC.
replete with evidence disclosing that
Housekeeping and Special Services
Article 106 of the Labor Code defines "labor-only" contracting thus —
leaves
of absence were filed directly with B
Art. 106. Contractor or subcontractor. — . . . . There is "labor-only" contracting where the person
supplying workers to an employer does not have substantial capital or investment in the form of
As a matter of fact, Neri even secure
tools, equipment, machineries, work premises, among others, and the workers recruited by such
On the other hand, on 24 May 1988
persons are performing activities which are directly related to the principal business of such
adjustments mandated by Wage Ord
employer . . . . (emphasis supplied).
alone which was provisionally dismis
negligible. 17
Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial capital.
While there may be no evidence that it has investment in the form of tools, equipment, machineries, work premises,
More importantly, under the terms a
among others, it is enough that it has substantial capital, as was established before the Labor Arbiter as well as the
petitioners. Their deployment to FEB
NLRC. In other words, the law does not require both substantial capital and investment in the form of tools,
messenger because the FEBTC bra
equipment, machineries, etc. This is clear from the use of the conjunction "or". If the intention was to require the
the company if the promotion was to
contractor to prove that he has both capital and the requisite investment, then the conjunction "and" should have
situation in Philippine Bank of Comm
been used. But, having established that it has substantial capital, it was no longer necessary for BCC to further
person basis. And, the contract ther
adduce evidence to prove that it does not fall within the purview of "labor-only" contracting. There is even no need for
temporary services. In the case at b
it to refute petitioners' contention that the activities they perform are directly related to the principal business of
petitioners cannot be held to be emp
respondent bank.
performance of its contract with vari
supervision" of its principals in all ma

Indeed, the facts in Philippine Bank of Communications do not square with those of the instant case. Therein, the making music recordings for title mu
Court ruled that CESI was a "labor-only" contractor because upholding the contract between the contractor and the music, without which a motion pictur
bank would in effect permit employers to avoid the necessity of hiring regular or permanent employees and would musical recordings of said companie
enable them to keep their employees indefinitely on a temporary or casual basis, thus denying them security of existence of any other legitimate lab
tenure in their jobs. This of course violates the Labor Code. BCC has not committed any violation. Also, the former allegations, the Guild prayed that it b
case was for illegal dismissal; this case, on the other hand, is for conversion of employment status so that petitioners in the aforementioned companies. In
can receive the same salary being given to regular employees of FEBTC. But, as herein determined, petitioners are employees, and alleged that the mu
not regular employees of FEBTC but of BCC. At any rate, the finding that BCC in a qualified independent contractor contractors. The lower court, howev
precludes us from applying the Philippine Bank of Communications doctrine to the instant petition. already adverted to. A reconsiderati
Pictures, inc., and Sampaguita Pictu
The determination of employer-employee relationship involves factual findings. 21 Absent any grave abuse of
discretion, and we find none in the case before us, we are bound by the findings of the Labor Arbiter as affirmed by Apart from impugning the conclusion
respondent NLRC. the film companies, the LVN Picture
existence of employer-employee rel
out by any legal provision nor suppo
IN VIEW OF THE FOREGOING, the Petition for Certiorari is DISMISSED.
said relationship, as in the case at b

SO ORDERED.
It is next urged that a certification is
evidence was presented that the alle
G.R. No. L-12582 January 28, 1961 unit, and (b) said alleged musicians-
companies constituting a proper bar
LVN PICTURES, INC., petitioner-appellant,
vs. The absence of an express allegatio
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees. proceeding, for the same is not a "lit
investigation of a non-adversary, fac
disinterested investigator seeking m
x---------------------------------------------------------x representation. In connection therew
insure the fair and free choice of bar
G.R. No. L-12598 January 28, 1961 the Guild it a duly registered legitima
for all the musical recordings of the
answer, the LVN Pictures, Inc. denie
SAMPAGUITA PICTURES, INC., petitioner-appellant, the status of the musicians as its em
vs. difference between the work perform
PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, respondents-appellees. of a film, and the peculiar circumstan
to show that they constitute a prope
Nicanor S. Sison for petitioner-appellant. court in deciding upon an appropriat
Jaime E. Ilagan for respondent-appellee Court of Agrarian Relations. Store Co., 66 Sup. Ct. 468. 90 L. ed
Gerardo P. Cabo Chan for respondent-appellee Philippine Musicians Guild. unless its action is arbitrary or capric
far from being so in the cases at bar

CONCEPCION, J.:
Again, the Guild seeks to be, and wa
working in the aforesaid film compan
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order of the not necessary for the Guild to allege
Court of Industrial Relations in Case No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW), petitioner companies, including those who are
therein and respondent herein, as the sole and exclusive bargaining agency of all musicians working with said question are employees of the film c
companies, as well as with the Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures,
Inc., has been docketed as G.R. No. L-12582, whereas G.R. No. L-12598 is the appeal of Sampaguita Pictures, Inc.
Involving as they do the same order, the two cases have been jointly heard in this Court, and will similarly be As a normal and usual co
disposed of. producer invariably choos
film. A price is agreed upo
such musical background
In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that adapted to the picture. He
it is a duly registered legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere musicians under him.
Productions, Inc. are corporations, duly organized under the Philippine laws, engaged in the making of motion
pictures and in the processing and distribution thereof; that said companies employ musicians for the purpose of

 When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the language of the Act's defin
film company (Exh 'D'), which show the name of the musician, his musical instrument, and the date, time situations, by underlying e
and place where he will be picked up by the truck of the film company. The film company provides the classifications. (NLRB vs.
studio for the use of the musicians for that particular recording. The musicians are also provided
transportation to and from the studio by the company. Similarly, the company furnishes them meals at
In other words, the scope
dinner time.
Act and the facts involved
protection, protection oug
During the recording sessions, the motion picture director, who is an employee of the company, supervises
the recording of the musicians and tells what to do in every detail. He solely directs the performance of the
By declaring a worker an
musicians before the camera as director, he supervises the performance of all the action, including the
rights as such, we elimina
musicians who appear in the scenes so that in the actual performance to be shown on the screen, the
because we enable him to
musical director's intervention has stopped.
employment, through the

And even in the recording sessions and during the actual shooting of a scene, the technicians, soundmen
The statutory definition of
and other employees of the company assist in the operation. Hence, the work of the musicians is an
'any employee' that is all e
integral part of the entire motion picture since they not only furnish the music but are also called upon to
by express provision. (Co
appear in the finished picture.

It is the purpose of the po

The question to be determined next is what legal relationship exits between the musicians and the
protecting the exercise of
company in the light of the foregoing facts.
promote sound stable indu
of employers and employe
We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the through the process of co
Wagner Act substantially the same as a Act and the Taft-Hartley Law of the United States. Hence,
reference to decisions of American Courts on these laws on the point-at-issue is called for.
The primary consideration
securing for the individual
Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied. (U.S. conclusively determined b
vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) . employee.

In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United States The work of the musical d
Supreme Court said the Wagner Act was designed to avert the 'substantial obstruction to the free flow of at the same studio substa
commerce which results from strikes and other forms of industrial unrest by eliminating the causes of the
unrest. Strikes and industrial unrest result from the refusal of employers' to bargain collectively and the
In other words, to determi
inability of workers to bargain successfully for improvement in their working conditions. Hence, the
an independent contracto
purposes of the Act are to encourage collective bargaining and to remedy the workers' inability to
an employer-employee re
bargaining power, by protecting the exercise of full freedom of association and designation of
the right to control not onl
representatives of their own choosing, for the purpose of negotiating the terms and conditions of their
the end. (United Insurance
employment.'

Thus, in said similar case

The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to
'employees' within the traditional legal distinctions, separating them from 'independent contractor'. Myriad
forms of service relationship, with infinite and subtle variations in the term of employment, blanket the 'We find that the
nation's economy. Some are within this Act, others beyond its coverage. Large numbers will fall clearly on within the mean
one side or on the other, by whatever test may be applied. Inequality of bargaining power in controversies independent co
of their wages, hours and working conditions may characterize the status of one group as of the other. The immediate supe
former, when acting alone may be as helpless in dealing with the employer as dependent on his daily employees work
wage and as unable to resist arbitrary and unfair treatment as the latter.' contractors.'

To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a 'Notwithstanding that the e
balance of forces in certain types of economic relationship. Congress recognized those economic employees under the Act
relationships cannot be fitted neatly into the containers designated as 'employee' and 'employer'. relationship is in reality on
Employers and employees not in proximate relationship may be drawn into common controversies by Dispute Collective Bargain
economic forces and that the very dispute sought to be avoided might involve 'employees' who are at
times brought into an economic relationship with 'employers', who are not their 'employers'. In this light, the

 The right of control of the film company over the musicians is shown (1) by calling the musicians through therein. Hence, in the Caro case (su
'call slips' in 'the name of the company; (2) by arranging schedules in its studio for recording sessions; (3) indemnity prescribed in the Workme
by furnishing transportation and meals to musicians; and (4) by supervising and directing in detail, through such in one of said buildings even th
the motion picture director, the performance of the musicians before the camera, in order to suit the music contracted with said owner. In other
they are playing to the picture which is being flashed on the screen. said owner. It was a necessary incid

Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the The case of Josefa Vda. de Cruz vs
matter to the facts established in this case, we cannot but conclude that to effectuate the policies of the Act cases. It involved the interpretation o
and by virtue of the 'right of control' test, the members of the Philippine Musicians Guild are employees of Government Service Insurance Syst
the three film companies and, therefore, entitled to right of collective bargaining under Republic Act No. originally heard in the Court of First
875. Supreme Court. The meaning or sco
875), was not touched therein. More
the Manila Hotel, on the one hand, a
In view of the fact that the three (3) film companies did not question the union's majority, the Philippine
services of his orchestra, consisting
Musicians Guild is hereby declared as the sole collective bargaining representative for all the musicians
the language of this court in that cas
employed by the film companies."
directed, the intervals and other deta

We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are
This is not situation obtaining in the
substantially in line with the spirit of our decision in Maligaya Ship Watchmen Agency vs. Associated Watchmen and
the musicians involved in the presen
Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the employers in the Maligaya cases, to the
musicians playing it. The film compa
effect that they had dealt with independent contractors, was stronger than that of the film companies in these cases.
companies, through the musical dire
The third parties with whom the management and the workers contracted in the Maligaya cases were
musical directors, provide the transp
agencies registered with the Bureau of Commerce and duly licensed by the City of Manila to engage in the business
of supplying watchmen to steamship companies, with permits to engage in said business issued by the City
Mayor and the Collector of Customs. In the cases at bar, the musical directors with whom the film companies claim What is more — in the language of t
to have dealt with had nothing comparable to the business standing of said watchmen agencies. In this respect, the director who is an employee of the c
status of said musical directors is analogous to that of the alleged independent contractor in Caro vs. Rilloraza, L- musicians and tells them what to do
9569 (September 30, 1957), with the particularity that the Caro case involved the enforcement of the liability of an directs and performance of the musi
employer under the Workmen's Compensation Act, whereas the cases before us are merely concerned with the right performance of all the actors, includ
of the Guild to represent the musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and be shown in the screen, the musical
technical in these cases, than in the Caro case. movie director tells the musical direc
eliminates the entire music he does
be". The movie director "directly con
Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc vs.
drummer plays more" or "if he wants
CIR(46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968 (November 29,
1954), Viana vs. Al-Lagadan, L-8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off.
Gaz., 8540). Instead of favoring the theory of said petitioners-appellants, the case of the Sunripe Coconut Product It is well settled that "an employer-em
Co., Inc. is authority for herein respondents-appellees. It was held that, although engaged as piece-workers, under performed reserves a right to contro
the "pakiao" system, the "parers" and "shellers" in the case were, not independent contractor, but employees of said end . . . ." (Alabama Highway Expre
company, because "the requirement imposed on the 'parers' to the effect that 'the nuts are pared whole or that there control over the "means to be used"
is not much meat wasted,' in effect limits or controls the means or details by which said workers are to accomplish No. 210, pp. 1197, 1199-1201), in w
their services" — as in the cases before us. exist between the management and
contractor, who had, and exercise, t
means to be used" in reading the de
The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to
in the cases before us.
the Workmen's Compensation Commission for further evidence.

WHEREFORE, the order appealed f

The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who
undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio Geronimo, a laborer, who fell
while painting the tank and died in consequence of the injuries thus sustained by him. Inasmuch as the company was
engaged in the manufacture of soap, vegetable lard, cooking oil and margarine, it was held that the connection
between its business and the painting aforementioned was purely casual; that Eliano Garcia was an independent
contractor; that Geronimo was not an employee of the company; and that the latter was not bound, therefore, to pay
the compensation provided in the Workmen's Compensation Act. Unlike the Philippine Manufacturing case, the
relation between the business of herein petitioners-appellants and the work of the musicians is not casual. As held in
the order appealed from which, in this respect, is not contested by herein petitioners-appellants — "the work of the
musicians is an integral part of the entire motion picture." Indeed, one can hardly find modern films without music