LABOR ARBITER – JURISDICTION

NATIVIDAD PONDOC , petitioner, vs . NLRC (Fifth Division, Cagayan de Oro City)

FACTS:
Private respondent Eulalio Pondoc is the owner-proprietor of Melleonor General Merchandise and
Hardware Supply located at Poblacion, Sindangan, Zamboanga del Norte. Respondent is engaged, among
others, in the business of buying and selling copra, rice, corn, "binangkol," junk iron and empty bottles.
He has in his employ more than twenty (20) regular workers (Records, pp. 9-11).

Records disclose that Andres Pondoc was employed by Eulalio Pondoc as a laborer from October 1990 up
to December 1991, receiving a wage rate of P20.00 per day. He was required to work 12 hours a day from
7:00 AM to 8:00 PM, Monday to Sunday. Despite working on his rest days and holidays, he was not paid
his premium pay as required by law (Ibid.).

Consequently, on May 14, 1992, Natividad Pondoc, on behalf of her husband, =led a complaint for salary
differential, overtime pay, 13th month pay, holiday pay and other money claims before the Sub-Regional
Arbitration Branch No. 9 of the NLRC, docketed as Sub-RAB Case No. 09-05-10102-92 (Records, p. 1).

In his position paper, private respondent questioned, among others, the existence of [an] employer-
employee relationship between them. He further averred that Melleonor General Merchandise and
Hardware Supply is a fictitious establishment.

On June 17, 1993, Labor Arbiter Esteban Abecia rendered a Decision finding the existence of [an]
employer-employee relationship between the parties. The dispositive portion of the Decision reads:

WHEREFORE, judgment is hereby rendered: (a) ordering respondent Eulalio Pondoc to pay complainant
the following claims: total amount of P44,118.00.

On his last day to perfect an appeal, private respondent filed a Manifestation before the Labor Arbiter
praying that his liabilities be set-off against petitioner's alleged indebtedness to him. The Labor Arbiter
denied, however, the compensation, and instead, issued a writ of execution as prayed for by petitioner.

Before the execution order could be implemented, however, private respondent was able to obtain a
restraining order from the NLRC, where he filed a Petition for "Injunction and Damages,"

On February 28, 1994, public respondent NLRC allowed compensation between petitioner's monetary
award and her alleged indebtedness to private respondent. It disposed:
Accordingly, respondent Eulalio Pondoc is hereby directed to pay complainant Natividad Pondoc
the amount of P3,066.65.

The Temporary restraining order issued herein is hereby made permanent.

Her motion for reconsideration of the judgment having been denied by the NLRC, the petitioner instituted
this special civil action for certiorari under Rule 65 of the Rules of Court wherein she prays this Court annul
the challenged decision of the NLRC, on the ground that the NLRC, Fifth Division, acted without or in

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excess of jurisdiction or with grave abuse of discretion when it proceeded to determine the alleged
indebtedness of the petitioner and set-off the same against the liabilities of the private respondent.
Moreover, the indebtedness "did not evolve out [sic] employer-employee relationship, hence, purely civil
in aspect."

The Office of the Solicitor General agreed with the petitioner and stressed further that the asserted
indebtedness was never proven to have arisen out of or in connection with the employer-employee
relationship between the private respondent and the late Andres Pondoc, or to have any causal
connection thereto. Accordingly, both the Labor Arbiter and the NLRC did not have jurisdiction over the
private respondent's claim.

ISSUE:
WON NLRC) can validly defeat a final judgment of the Labor Arbiter in favor of the complainant in a labor
case by: (a) entertaining a petition for injunction and damages, and an appeal from the Labor Arbiter's
denial of a claim for setoff based on an alleged indebtedness of the laborer and order of execution of the
final judgment; and, (b) thereafter, by receiving evidence and adjudging recovery on such indebtedness
and authorizing it to offset the Labor Arbiter's final award. NO

HELD:
We rule for the petitioner. In the first place, the NLRC should not have entertained the private
respondent's separate or independent petition for "Injunction and Damages”. It was obvious that the
petition was a scheme to defeat or obstruct the enforcement of the judgment in NLRC where, in fact, a
writ of execution had been issued. Article 218(e) of the Labor Code does not provide blanket authority to
the NLRC or any of its divisions to issue writs of injunction, while Rule XI of the New Rules of Procedure of
the NLRC makes injunction only an ancillary remedy in ordinary labor disputes such as the one brought by
the petitioner in NLRC CASE. This is clear from Section 1 of the said Rule which pertinently provides as
follows:

Section 1. Injunction in Ordinary Labor Disputed. — A preliminary injunction or a restraining order

may be granted by the Commission through its divisions pursuant to the provisions of paragraph
(e) of Article 218 of the Labor Code, as amended, when it is established on the bases of the sworn
allegations in the petition that the acts complained of, involving or arising from any labor dispute
before the Commission, which, if not restrained or performed forthwith, may cause grave or
irreparable damage to any party or render ineffectual any decision in favor of such party.

xxx xxx xxx

The foregoing ancillary power may be exercised by the Labor Arbiters only as an incident to the
cases pending before them in order to preserve the rights of the parties during the pendency of
the case, but excluding labor disputes involving strike or lockout.
Hence, a petition or motion for preliminary injunction should have been filed in the appeal interposed by
the private respondent, i.e., in NLRC Case. This matter, however, became academic when the NLRC
consolidated the two cases

Secondly, the appeal of the private respondent in NLRC Case was not from the decision therein, but from
the order of the Labor Arbiter denying the set-off insisted upon by the private respondent and directing

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the execution of the judgment. Therefore, the private respondent admitted the final and executory
character of the judgment.

The Labor Arbiter, in denying the set-off, reasoned "[i]t could have been considered if it was presented
before the decision of this case." While this is correct, there are stronger reasons why the set-off should,
indeed, be denied. As correctly contended by the Office of the Solicitor General, there is a complete want
of evidence that the indebtedness asserted by the private respondent against Andres Pondoc arose out
of or was incurred in connection with the employer-employee relationship between them. The Labor
Arbiter did not then have jurisdiction over the claim as under paragraph (a) of Article 217 of the Labor
Code

On the other hand, under paragraph (b) thereof, the NLRC has exclusive appellate jurisdiction over all
cases decided by the Labor Arbiters. This simply means that the NLRC does not have original jurisdiction
over the cases enumerated in paragraph (a) and that if a claim does not fall within the exclusive original
jurisdiction of the Labor Arbiter, the NLRC cannot have appellate jurisdiction thereon.

The conclusion then is inevitable that the NLRC was without jurisdiction, either original or appellate, to
receive evidence on the alleged indebtedness, render judgment thereon, and direct that its award be set-
off against the final judgment of the Labor Arbiter.

Finally, even assuming arguendo that the claim for the alleged indebtedness fell within the exclusive
original jurisdiction of the Labor Arbiter, it was deemed waived for not having been pleaded as an
affirrmative defense or barred for not having been set up as a counterclaim before the Labor Arbiter at
any appropriate time prior to the rendition of the decision in NLRC Case. Under the Rules of Court, which
is applicable in a suppletory character in labor cases before the Labor Arbiters or the NLRC pursuant to
Section 3, Rule I of the New Rules of Procedure of the NLRC, defenses which are not raised either in a
motion to dismiss or in the answer are deemed waived 5 and counterclaims not set up in the answer are
barred. Set-off or compensation is one of the modes of extinguishing obligations and extinguishment is
an affirmative defense and a ground for a motion to dismiss.

VILLAMARIA VS CA

FACTS:
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole proprietorship engaged in
assembling passenger jeepneys with a public utility franchise to operate along the Baclaran-Sucat route.
By 1995, Villamaria stopped assembling jeepneys and retained only nine, four of which he operated by
employing drivers on a "boundary basis." One of those drivers was respondent Bustamante who drove
the jeepney with Plate No. PVU-660. Bustamante remitted P450.00 a day to Villamaria as boundary and
kept the residue of his daily earnings as compensation for driving the vehicle. In August 1997, Villamaria
verbally agreed to sell the jeepney to Bustamante under the "boundary-hulog scheme," where
Bustamante would remit to Villarama P550.00 a day for a period of four years; Bustamante would then
become the owner of the vehicle and continue to drive the same under Villamaria's franchise. It was also
agreed that Bustamante would make a downpayment of P10,000.00.

On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan ng Sasakyan sa

Pamamagitan ng Boundary-Hulog. The parties agreed that if Bustamante failed to pay the boundary-hulog

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for three days, Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears, including
a penalty of P50.00 a day; in case Bustamante failed to remit the daily boundary-hulog for a period of one
week, the Kasunduan would cease to have legal effect and Bustamante would have to return the vehicle
to Villamaria Motors.
Bustamante continued driving the jeepney under the supervision and control of Villamaria.

In 1999, Bustamante and other drivers who also had the same arrangement with Villamaria Motors failed
to pay their respective boundary-hulog . This prompted Villamaria to serve a "Paalala," reminding them
that under the Kasunduan, failure to pay the daily boundary-hulog for one week, would mean their
respective jeepneys would be returned to him without any complaints.

On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and barred the latter from
driving the vehicle.

On August 15, 2000, Bustamante Hled a Complaint 7 for Illegal Dismissal against Villamaria and his wife
Teresita.

Citing the cases of Cathedral School of Technology v. NLRC 11 and Canlubang Security Agency Corporation
v. NLRC , the spouses Villamaria argued that Bustamante was not illegally dismissed since the Kasunduan
executed on August 7, 1997 transformed the employer-employee relationship into that of vendor-vendee.
Hence, the spouses concluded, there was no legal basis to hold them liable for illegal dismissal. They
prayed that the case be dismissed for lack of jurisdiction and patent lack of merit.

In his Reply, Bustamante claimed that Villamaria exercised control and supervision over the conduct of
his employment. He maintained that the rulings of the Court in National Labor Union v. Dinglasan ,
Magboo v. Bernardo , and Citizen's League of Free Workers v. Abbas are germane to the issue as they
deHne the nature of the owner/operator-driver relationship under the boundary system. He further
reiterated that it was the Villamaria spouses who presented the Kasunduan to him and that he conformed
thereto only upon their representation that he would own the vehicle after four years.

Labor Arbiter rendered judgment in favor of the spouses Villamaria and ordered the complaint dismissed
on the following ratiocination:

Respondents presented the contract of Boundary-Hulog, as well as the PAALALA, to prove their
claim that complainant violated the terms of their contract and afterwards abandoned the vehicle
assigned to him. As against the foregoing, [the] complaint's (sic) mere allegations to the contrary
cannot prevail.

Not having been illegally dismissed, complainant is not entitled to damages and attorney's fees.

Bustamante appealed the decision to the NLRC, insisting that the Kasunduan did not extinguish the
employer-employee relationship between him and Villamaria. Bustamante maintained that he remained
an employee because he was engaged to perform activities which were necessary or desirable to
Villamaria's trade or business.

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The NLRC rendered judgment and dismissing the appeal for lack of merit. The NLRC ruled that under the
Kasunduan, the juridical relationship between Bustamante and Villamaria was that of vendor and vendee,
hence, the Labor Arbiter had no jurisdiction over the complaint.

Bustamante elevated the matter to the CA via Petition for Certiorari. CA reversed and set aside the NLRC
decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS , the impugned resolutions of the NLRC must be,
as they are hereby are, REVERSED AND SET ASIDE , and judgment entered in favor of petitioner:
Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner Jerry Bustamante separation
pay and back wages computed from the time of his dismissal up to March 2001 based on the
prevailing minimum wage at the time of his dismissal.

The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamante's complaint. Under the
Kasunduan, the relationship between him and Villamaria was dual: that of vendor-vendee and employer-
employee. The CA ratiocinated that Villamaria's exercise of control over Bustamante's conduct in
operating the jeepney is inconsistent with the former's claim that he was not engaged in the
transportation business.

The CA further held that, while the power to dismiss was not mentioned in the Kasunduan, it did not mean
that Villamaria could not exercise it. It explained that the existence of an employment relationship did not
depend on how the worker was paid but on the presence or absence of control over the means and
method of the employee's work. In this case, Villamaria's directives (to drive carefully, wear an
identification card, don decent attire, park the vehicle in his garage, and to inform him about provincial
trips, etc.) was a means to control the way in which Bustamante was to go about his work. In view of
Villamaria's supervision and control as employer, the fact that the "boundary" represented installment
payments of the purchase price on the jeepney did not remove the parties' employer-employee
relationship.

Hence the petition.

ISSUE:
WON existence of a boundary-hulog agreement negates the employer-employee relationship between
the vendor and vendee. NO

HELD:
In the foregoing cases, an employer-employee relationship is an indispensable jurisdictional requisite. The
jurisdiction of Labor Arbiters and the NLRC under Article 217 of the Labor Code is limited to disputes
arising from an employer-employee relationship which can only be resolved by reference to the Labor
Code, other labor statutes or their collective bargaining agreement. Not every dispute between an
employer and employee involves matters that only the Labor Arbiter and the NLRC can resolve in the
exercise of their adjudicatory or quasi-judicial powers. Actions between employers and employees where
the employer-employee relationship is merely incidental is within the exclusive original jurisdiction of the
regular courts. When the principal relief is to be granted under labor legislation or a collective bargaining
agreement, the case falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even though
a claim for damages might be asserted as an incident to such claim.

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We agree with the ruling of the CA that, under the boundary-hulog scheme incorporated in the
Kasunduan, a dual juridical relationship was created between petitioner and respondent: that of
employer-employee and vendor-vendee. The Kasunduan did not extinguish the employer-employee
relationship of the parties extant before the execution of said deed.

As early as 1956, the Court ruled in National Labor Union v. Dinglasan that the jeepney owner/operator-
driver relationship under the boundary system is that of employer-employee and not lessor-lessee. This
doctrine was a<rmed, under similar factual settings, in Magboo v. Bernardo and Lantaco, Sr. v. Llamas ,
and was analogously applied to govern the relationships between auto-calesa owner/operator and driver,
bus owner/operator and conductor, and taxi owner/operator and driver.

The boundary system is a scheme by an owner/operator engaged in transporting passengers as a common

carrier to primarily govern the compensation of the driver, that is, the latter's daily earnings are remitted
to the owner/operator less the excess of the boundary which represents the driver's compensation. Under
this system, the owner/operator exercises control and supervision over the driver. It is unlike in lease of
chattels where the lessor loses complete control over the chattel leased but the lessee is still ultimately
responsible for the consequences of its use. The management of the business is still in the hands of the
owner/operator, who, being the holder of the certificate of public convenience, must see to it that the
driver follows the route prescribed by the franchising and regulatory authority, and the rules promulgated
with regard to the business operations. The fact that the driver does not receive fixed wages but only the
excess of the "boundary" given to the owner/operator is not sufficient to change the relationship between
them. Indubitably, the driver performs activities which are usually necessary or desirable in the usual
business or trade of the owner/operator.

Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner, an amount which
represented the boundary of petitioner as well as respondent's partial payment ( hulog ) of the purchase
price of the jeepney. Respondent was entitled to keep the excess of his daily earnings as his daily wage.
Thus, the daily remittances also had a dual purpose: that of petitioner's boundary and respondent's partial
payment (hulog ) for the vehicle. This dual purpose was expressly stated in the Kasunduan. The well-
settled rule is that an obligation is not novated by an instrument that expressly recognizes the old one,
changes only the terms of payment, and adds other obligations not incompatible with the old provisions
or where the new contract merely supplements the previous one. The two obligations of the respondent
to remit to petitioner the boundary-hulog can stand together.

The parties expressly agreed that petitioner, as vendor, and respondent, as vendee, entered into a
contract to sell the jeepney on a daily installment basis of P550.00 payable in four years and that petitioner
would thereafter become its owner. A contract is one of conditional sale, oftentimes referred to as
contract to sell, if the ownership or title over the property sold is retained by the vendor, and is not passed
to the vendee unless and until there is full payment of the purchase price and/or upon faithful compliance
with the other terms and conditions that may lawfully be stipulated. Such payment or satisfaction of other
preconditions, as the case may be, is a positive suspensive condition, the failure of which is not a breach
of contract, casual or serious, but simply an event that would prevent the obligation of the vendor to
convey title from acquiring binding force. Stated differently, the efficacy or obligatory force of the
vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event so
that if the suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed. The vendor may extrajudicially terminate the operation of the contract,

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refuse conveyance, and retain the sums or installments already received, where such rights are expressly
provided for.

Under the boundary-hulog scheme, petitioner retained ownership of the jeepney although its material
possession was vested in respondent as its driver. In case respondent failed to make his P550.00 daily
installment payment for a week, the agreement would be of no force and effect and respondent would
have to return the jeepney to petitioner; the employer-employee relationship would likewise be
terminated unless petitioner would allow respondent to continue driving the jeepney on a boundary basis
of P550.00 daily despite the termination of their vendor-vendee relationship.

The juridical relationship of employer-employee between petitioner and respondent was not negated by
the foregoing stipulation in the Kasunduan, considering that petitioner retained control of respondent's
conduct as driver of the vehicle.

Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is entitled to exercise
supervision and control over the respondent, by seeing to it that the route provided in his franchise, and
the rules and regulations of the Land Transportation Regulatory Board are duly complied with. Moreover,
in a business establishment, an identification card is usually provided not just as a security measure but
to mainly identify the holder thereof as a bona fide employee of the firm who issues it.

As respondent's employer, it was the burden of petitioner to prove that respondent's termination from
employment was for a lawful or just cause, or, at the very least, that respondent failed to make his daily
remittances of P550.00 as boundary. However, petitioner failed to do so. As correctly ruled by the
appellate court:

It is basic of course that termination of employment must be effected in accordance with law.

Parenthetically, given the peculiarity of the situation of the parties here, the default in the
remittance of the boundary hulog for one week or longer may be considered an additional cause
for termination of employment. The reason is because the Kasunduan would be of no force and
effect in the event that the purchaser failed to remit the boundary hulog for one week.

Moreover, well-settled is the rule that, the employer has the burden of proving that the dismissal
of an employee is for a just cause. The failure of the employer to discharge this burden means
that the dismissal is not justified and that the employee is entitled to reinstatement and back
wages.

NOTE:
In his Comment on the petition, respondent avers that the appropriate remedy of petitioner was an
appeal via a petition for review on certiorari under Rule 45 of the Rules of Court and not a special civil
action of certiorari under Rule 65. He argues that petitioner failed to establish that the CA committed
grave abuse of its discretion amounting to excess or lack of jurisdiction in its decision, as the said ruling is
in accord with law and the evidence on record.

We agree with respondent's contention that the remedy of petitioner from the CA decision was to file a
petition for review on certiorari under Rule 45 of the Rules of Court and not the independent action of

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certiorari under Rule 65. Petitioner had 15 days from receipt of the CA resolution denying his motion for
the reconsideration within which to file the petition under Rule 45. 28 But instead of doing so, he filed a
petition for certiorari under Rule 65 on November 22, 2004, which did not, however, suspend the running
of the 15-day reglementary period; consequently, the CA decision became final and executory upon the
lapse of the reglementary period for appeal. Thus, on this procedural lapse, the instant petition stands to
be dismissed.

However, we have also ruled that a petition for certiorari under Rule 65 may be considered as filed under
Rule 45, conformably with the principle that rules of procedure are to be construed liberally, provided
that the petition is filed within the reglementary period under Section 2, Rule 45 of the Rules of Court,
and where valid and compelling circumstances warrant that the petition be resolved on its merits. 32 In
this case, the petition was filed within the reglementary period and petitioner has raised an issue of
substance.

SAN JOSE VS NLRC

FACTS:
Complainant, in his position paper (Record, pages 11 to 14) states that he was hired sometime in July 1980
as a stevedore continuously until he was advised in April 1991 to retire from service considering that he
already reached 65 years old (sic); that accordingly, he did apply for retirement and was paid P3,156.39
for retirement pay.

"Respondents, in their Reply to complainant's position paper, allege that complainant's latest basic salary
was P120.34 per day; that he only worked on rotation basis and not seven days a week due to numerous
stevedores who can not all be given assignments at the same time; that all stevedores only for paid every
time they were assigned or actually performed stevedoring; that the computation used in arriving at the
amount of P3,156.30 was the same computation applied to the other stevedores; that the use of divisor
303 is not applicable because complainant performed stevedoring job only on call, so while he was
connected with the company for the past 11 years, he did not actually render 11 years of service; that the
burden of proving that complainant's latest salary was P200.00 rests upon him; that he already voluntarily
signed a waiver of quitclaim; that if indeed respondent took advantage of his illiteracy into signing his
quitclaim, he would have immediately 9led this complaint but nay, for it took him two (2) years to do so.

Ruling of LA
The issue faced by the Labor Arbiter is whether or not complainant is entitled to the claimed differential
of separation pay. We find for the complainant. He is entitled to differential.

The late filing has no bearing. The prescription period is three years. It is suffice (sic) that the filing falls
within the period.

Whether or not complainant worked on rotation basis is a burden which lies upon the employer. The
presumption is that the normal working period is eight (8) hours a day and six (6) days a week, or 26 days
a month, unless proven otherwise.

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Also, the burden of proving the amount of salaries paid to employees rests upon the employer not on the
employee. It can be easily proven by payrolls, vouchers, etc. which the employers are likewise duty bound
to keep and present. There being non, we have to sustain complainant's assertion that his latest salary
rate was P200 a day or P5,200 a month. Therefore, his retrenchment pay differential is P25,443.70The
late 9ling has no bearing. The prescription period is three years. It is suffice (sic) that the filing falls within
the period.

Whether or not complainant worked on rotation basis is a burden which lies upon the employer. The
presumption is that the normal working period is eight (8) hours a day and six (6) days a week, or 26 days
a month, unless proven otherwise.

Also, the burden of proving the amount of salaries paid to employees rests upon the employer not on the
employee. It can be easily proven by payrolls, vouchers, etc. which the employers are likewise duty bound
to keep and present. There being non, we have to sustain complainant's assertion that his latest salary
rate was P200 a day or P5,200 a month. Therefore, his retrenchment pay differential is P25,443.70

NLRC RULING
The National Labor Relations Commission reversed on jurisdictional ground the aforesaid Decision of the
Labor Arbiter; ruling, as follows:

". . . His claim for separation pay differential is based on the Collective Bargaining Agreement
(CBA) between his union and the respondent company, the pertinent portion of which reads:

. . . ANY UNION member shall be compulsory retired (sic) by the company upon reaching the age
of sixty (60) years, unless otherwise extended by the company for justifiable reason.
. . . The company agrees that in case of casual employees and/or workers who work on rotation
basis the criterion for determining their retirement pay shall be 303 rotation calls or work days as
equivalent to one (1) year and shall be paid their retirement pay equivalent to one half (½) month
for every year of service.

xxx xxx xxx

Since the instant case arises from interpretation or implementation of a collective bargaining
agreement, the Labor Arbiter should have dismissed it for lack of jurisdiction in accordance with
Article 217 (c) of the Labor Code. which reads: (Emphasis supplied)

Art. 217. Jurisdiction of Labor Arbiter and the Commission.

xxx xxx xxx

(c) Cases arising from the interpretation or implementation of collective bargaining agreement
and those arising from the interpretation or enforcement of company procedure/policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitrator as may be provided in said agreements."

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ISSUE:
1. WON the labor has jurisdiction over the case. NO

HELD:
The jurisdiction of Labor Arbiters and Voluntary Arbitrator or Panel of Voluntary Arbitrators is clearly
de9ned and specifically delineated in the Labor Code. The pertinent provisions of the Labor Code, read:

"A. Jurisdiction of Labor Arbiters

Art. 217. Jurisdiction of Labor Arbiter and the Commission. — (a) Except as otherwise provided
under this Code the Labor Arbiter shall have original and exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may 9le
involving wages, rates of pay, hours of work and other terms and conditions of
employment;
4. claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving
the legality of strikes and lockouts; and,
6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding 9ve thousand
pesos (P5,000) regardless of whether accompanied with a claim for reinstatement.

xxx xxx xxx

(c) Cases arising from the interpretation or implementation of collective bargaining agreement
and those arising from the interpretation or enforcement of company procedure/policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitrator so maybe provided in said agreement.

B. Jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators

Art. 261. Jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators. — The Voluntary
Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear
and decide all unresolved grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding article. Accordingly,
violations of a Collective Bargaining Agreement, except those which are gross in character, shall
no longer be treated as unfair labor practice and shall be resolved as grievances under the
collective bargaining agreement. For purposes of this Article, gross violations of Collective
Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with the economic
provisions of such agreement.

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 The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original
jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary Arbitration provided in the
Collective Bargaining Agreement.

Art. 262. Jurisdiction over other labor disputes. — The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks."

The aforecited provisions of law cannot be read in isolation or separately. They must be read as a whole
and each Article of the Code reconciled one with the other. An analysis of the provisions of Articles 217,
261, and 262 indicates, that:

1. The jurisdiction of the Labor Arbiter and Voluntary Arbitrator or Panel of Voluntary Arbitrators over the
cases enumerated in Articles 217, 261 and 262, can possibly include money claims in one form or another.

2. The cases where the Labor Arbiters have original and exclusive jurisdiction are enumerated in Article
217, and that of the Voluntary Arbitrator or Panel of Voluntary Arbitrators in Article 261.

3. The original and exclusive jurisdiction of Labor Arbiters is qualified by an exception as indicated in the
introductory sentence of Article 217 (a), to wit:

Art. 217. Jurisdiction of Labor Arbiters . . . (a) Except as otherwise provided under this Code the
Labor Arbiter shall have original and exclusive jurisdiction to hear and decide . . . the following
cases involving all workers . . ."

The phrase "Except as otherwise provided under this Code" refers to the following exceptions:

A. Art. 217. Jurisdiction of Labor Arbiters . . .

xxx xxx xxx
(c) Cases arising from the interpretation or implementation of collective bargaining agreement
and those arising from the interpretation or enforcement of company procedure/policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitrator as may be provided in said agreement.

B. Art. 262. Jurisdiction over other labor disputes. — The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other labor
disputes including unfair labor practices and bargaining deadlocks.

Parenthetically, the original and exclusive jurisdiction of the Labor Arbiter under Article 217 (c), for money
claims is limited only to those arising from statutes or contracts other than a Collective Bargaining
Agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators will have original and exclusive
jurisdiction over money claims "arising from the interpretation or implementation of the Collective
Bargaining Agreement and, those arising from the interpretation or enforcement of company personnel
policies", under Article 261.

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4. The jurisdiction of Voluntary Arbitrator or Panel of Voluntary Arbitrators is provided for in Arts. 261 and
262 of the Labor Code as indicated above.

**
1. A close reading of Article 261 indicates that the original and exclusive jurisdiction of Voluntary Arbitrator
or Panel of Voluntary Arbitrators is limited only to:

". . . unresolved grievances arising from the interpretation or implementation of the Collective
Bargaining Agreement and those arising from the interpretation or enforcement of company
personnel policies . . . Accordingly, violations of a collective bargaining agreement, except those
which are gross in character, shall no longer be treated as unfair labor practice and shall be
resolved as grievances under the Collective Bargaining Agreement.. . ."

2. Voluntary Arbitrators or Panel of Voluntary Arbitrators, however, can exercise jurisdiction over any and
all disputes between an employer and a union and/or individual worker as provided for in Article 262.

Art. 262. Jurisdiction over other labor disputes. — The voluntary arbitrator or panel of voluntary
arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks."

It must be emphasized that the jurisdiction of the Voluntary Arbitrator or Panel of Voluntary Arbitrators
under Article 262 must be voluntarily conferred upon by both labor and management. The labor disputes
referred to in the same Article 262 can include all those disputes mentioned in Article 217 over which the
Labor Arbiter has original and exclusive jurisdiction.

As shown in the above contextual and wholistic analysis of Articles 217, 261, and 262 of the Labor Code,
the National Labor Relations Commission correctly ruled that the Labor Arbiter had no jurisdiction to hear
and decide petitioner's money-claim-underpayment of retirement benefits , as the controversy between
the parties involved an issue arising from the interpretation or implementation" of a provision of the
collective bargaining agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators has original
and exclusive jurisdiction over the controversy under Article 261 of the Labor Code, and not the Labor
Arbiter.

THE COURT HEREBY RULES That the National Labor Relations Commission correctly ruled that the Labor
Arbiter had no jurisdiction over the case, because the case involved an issue "arising from the
interpretation or implementation" of a Collective Bargaining Agreement

NOTES:
Labor Arbiter Decision
Labor Arbiters should exert all efforts to cite statutory provisions and/or judicial decision to buttress their
dispositions. An Arbiter cannot rely on simplistic statements, generalizations, and assumptions. These are
not substitutes for reasoned judgment. Had the Labor Arbiter exerted more research efforts, support for
the Decision could have been found in pertinent provisions of the Labor Code, its Implementing Rules,
and germane decisions of the Supreme Court. As this Court said in Juan Saballa, et al. v. NLRC, G.R. No.
102472-84, August 22, 1996:

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 ". . . This Court has previously held that judges and arbiters should draw up their decisions and
resolutions with due care, and make certain that they truly and accurately reflect their conclusions
and their final dispositions. A decision should faithfully comply with Section 14, Article VIII of the
Constitution which provides that no decision shall be rendered by any court without expressing
therein clearly and distinctly the facts of the case and the law on which it is based.

Timeliness of Appeal and Filling of Bond

The Court rules that the appeal of the respondent corporation was interposed within the reglementary
period, in accordance with the Rules of the National Labor Relations Commission, and an appeal bond was
duly posted. We adopt the following Comment dated August 14, 1996, submitted by the National Labor
Relations Commission, to wit:

". . . While it is true that private respondent company received a copy of the decision dated
January 19, 1994 of the Labor Arbiter . . . and 9led its appeal on February 14, 1994, it is undisputed
that the tenth day within which to 9le an appeal fell on a Saturday, the last day to perfect an
appeal shall be the next working day.

Thus, the amendments to the New Rules of Procedure of the NLRC, Resolution No. 11-01-91 which
took effect on January 14, 1992, provides in part:
xxx xxx xxx
1. Rule VI, Sections 1 and 6 are hereby amended to read as follows:
Section 1. Period of Appeal — Decisions, awards or orders of the Labor Arbiter . . . shall
be final and executory unless appealed to the Commission by any or both parties within
ten (10) calendar days from receipt of such decisions, awards or orders of the Labor
Arbiter . . . If the 10th day . . . falls on a Saturday, Sunday or a Holiday, the last day to
perfect the decision shall be the next working day.

Hence, it is crystal clear that the appeal was 9led within the prescriptive period to perfect
an appeal. Likewise, the petitioner's contention that private respondent did not post the
required surety bond, deserves scant consideration, for the simple reason that a surety
bond was issued by BF General Insurance Company, Inc., in the amount of P25, 443.70

Merits of the Case

The Court will not remand the case to the Voluntary Arbitrator or Panel of Voluntary Arbitrators for
hearing. This case has dragged on far too long — eight (8) years. Any further delay would be a denial of
speedy justice to an aged retired stevedore. There is further the possibility that any Decision by the
Voluntary Arbitrator or Panel of Voluntary Arbitrators will be appealed to the Court of Appeals, and finally
to this Court. Hence, the Court will rule on the merits of the case.

We adopt as our own the retirement benefit computation formula of the Labor Arbiter, and the reasons
therefor as stated in the decision abovequoted.

The respondent-employer was afforded the opportunity to show proof of the petitioner's length of service
and pay records. In both instances, the respondent-employer failed. By its own folly, it must therefore
suffer the consequences of such failure. ( South Motorists Enterprises v. Tosoc, 181 SCRA 386, [1990])
From the very beginning — by the provision of the retirement provision of the Collective Bargaining

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Agreement, i.e., the length of service as requirement for retirement, and salary as a basis for bene9t
computation the employer was forewarned of the need for accurate record keeping. This is precisely the
basis of retirement, and the computation of benefits based on years of service and monthly wage.

That we adopt the computation formula for the retirement benefits by the Labor Arbiter, and the basis
thereof. The respondent must therefore pay the petitioner the additional amount of Twenty-Five
Thousand Four Hundred Forty-Three and Seventy Centavos (P25,443.70) Pesos.

DEL MONTE PHIL, INC VS SALDIVAR

FACTS:
The Associated Labor Union (ALU) is the exclusive bargaining agent of plantation workers of petitioner Del
Monte Philippines, Inc. (Del Monte) in Bukidnon. Respondent Nena Timbal (Timbal), as a rank-and-file
employee of Del Monte plantation in Bukidnon, is also a member of ALU. Del Monte and ALU entered into
a Collective Bargaining Agreement (CBA) with an effective term of 5 years from 1 September 1988 to 31
August 1993.

Timbal, along with four other employees (collectively, co-employees), were charged by ALU for disloyalty
to the union, particularly for encouraging defections to a rival union, the National Federation of Labor
(NFL).

The charge against Timbal was supported by an a5davit executed on 23 March 1993 by Gemma Artajo
(Artajo), also an employee of Del Monte. Artajo alleged that she was personally informed by Timbal on 13
July 1991 that a seminar was to be conducted by the NFL on the following day.

Timbal 8led an Answer before the Disloyalty Board, denying the allegations in the complaint and the
averments in Artajo's A5davit. She further alleged that her husband, Modesto Timbal, had 8led a
complaint against Artajo for collection of a sum of money on 17 March 1993, or just six (6) days before
Artajo executed her a5davit. She noted that the allegations against her were purportedly committed
nearly two (2) years earlier, and that Artajo's act was motivated by hate and revenge owing to the 8ling
of the aforementioned civil action.

Nevertheless, the ALU Disloyalty Board concluded that Timbal was guilty of acts or conduct inimical to the
interests of ALU, through a Resolution dated 7 May 1993. It found that the acts imputed to Timbal were
partisan activities, prohibited since the "freedom period" had not yet commenced as of that time. Thus,
the Disloyalty Board recommended the expulsion of Timbal from membership in ALU, and likewise her
dismissal from Del Monte in accordance with the Union Security Clause in the existing CBA between ALU
and Del Monte. The Disloyalty Board also reached the same conclusions as to the co-employees,
expressed in separate resolutions also recommending their expulsion from ALU.

On 17 June 1993, Del Monte terminated Timbal and her co-employees effective 19 June 1993, noting that
the termination was "upon demand of [ALU] pursuant to Sections 4 and 5 of Article III of the current
Collective Bargaining Agreement."

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Timbal and her co-employees 8led separate complaints against Del Monte and/or its Personnel Manager
Warfredo C. Balandra and ALU with the Regional Arbitration Branch (RAB) of the National Labor Relations
Commission (NLRC) for illegal dismissal, unfair labor practice and damages.

The Labor Arbiter affirmed that all 5 were illegally dismissed and ordered Del Monte to reinstate
complainants, including Timbal, to their former positions and to pay their full backwages and other
allowances, though the other claims and charges were dismissed for want of basis.

Only Del Monte interposed an appeal with the NLRC. The NLRC reversed the Labor Arbiter and ruled that
all the complainants were validly dismissed. On review, the Court of Appeals ruled that only Timbal was
illegally dismissed.

The reason offered by the Court of Appeals in exculpating Timbal revolves around the problematic
relationship between her and Artajo, the complaining witness against her. As explained by the appellate
court: “We find it hard to believe that Timbal would so willingly render herself vulnerable to expulsion
from the Union by revealing to an estranged colleague her desire to shift loyalty. The strained relationship
between Timbal and Artajo renders doubtful the charge against the former that she attempted to recruit
Artajo to join a rival union. Inasmuch as the respondents failed to justify the termination of Timbal's
employment, We hold that her reinstatement to her former position in accordance with the September
27, 1996 decision of the Labor Arbiter is appropriate

ISSUE:
1. WON Timbal was illegally dismissed. Yes
2. WON the CA erred when it did not rule on Del Monte’s claim for reimbursement against ALU. NO

HELD:
1. ILLEGALLY DISMISSED
It bears elaboration that Timbal's dismissal is not predicated on any of the just or authorized causes for
dismissal under Book Six, Title I of the Labor Code, but on the union security clause in the CBA between
Del Monte and ALU. Stipulations in the CBA authorizing the dismissal of employees are of equal import as
the statutory provisions on dismissal under the Labor Code, since "[a] CBA is the law between the
company and the union and compliance therewith is mandated by the express policy to give protection
to labor." The CBA, which covers all regular hourly paid employees at the pineapple plantation in
Bukidnon, stipulates that all present and subsequent employees shall be required to become a member
of ALU as a condition of continued employment.

The CBA obviously adopts a closed-shop policy which mandates, as a condition of employment,
membership in the exclusive bargaining agent. A "closed-shop" may be defined as an enterprise in which,
by agreement between the employer and his employees or their representatives, no person may be
employed in any or certain agreed departments of the enterprise unless he or she is, becomes, and, for
the duration of the agreement, remains a member in good standing of a union entirely comprised of or of
which the employees in interest are a part. A CBA provision for a closed-shop is a valid form of union
security and it is not a restriction on the right or freedom of association guaranteed by the Constitution.

Timbal's expulsion from ALU was premised on the ground of disloyalty to the union, which under Section
4(3), Article II of the CBA, also stands as a ground for her dismissal from Del Monte. Indeed, Section 5,

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Article II of the CBA enjoins Del Monte to dismiss from employment those employees expelled from ALU
for disloyalty, albeit with the qualification "in accordance with law."

Article 279 of the Labor Code ordains that "in cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by [Title I, Book Six of
the Labor Code]." Admittedly, the enforcement of a closed-shop or union security provision in the CBA as
a ground for termination findnds no extension within any of the provisions under Title I, Book Six of the
Labor Code. Yet jurisprudence has consistently recognized, thus: "It is State policy to promote unionism
to enable workers to negotiate with management on an even playing field and with more persuasiveness
than if they were to individually and separately bargain with the employer. For this reason, the law has
allowed stipulations for 'union shop' and 'closed shop' as means of encouraging workers to join and
support the union of their choice in the protection of their rights and interests vis-a-vis the employer.

In Agabon v. NLRC, it was rules that “it should be understood that in the matter of determining whether
cause exists for termination, whether under Book Six, Title I of the Labor Code or under a valid CBA,
substantive due process must be observed as a means of ensuring that security of tenure is not infringed.”

Agabon observed that due process under the Labor Code comprised of two aspects: "substantive, i.e., the
valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the
manner of dismissal. The controversy in Agabon centered on whether the failure to observe procedural
due process, through the nonobservance of the two-notice rule, should lead to the invalidation of the
dismissals. The Court ruled, over the dissents of some Justices, that the failure by the employer to observe
procedural due process did not invalidate the dismissals for just cause of the petitioners therein. However,
Agabon did not do away with the requirement of substantive due process, which is essentially the
existence of just cause provided by law for a valid dismissal.

Substantive due process, as it applies to all forms of dismissals, encompasses the proper presentation and
appreciation of evidence to establish that cause under law exists for the dismissal of an employee. This
holds true even if the dismissal is predicated on particular causes for dismissal established not by the
Labor Code, but by the CBA. Further, in order that any CBA-mandated dismissal may receive the warrant
of the courts and labor tribunals, the causes for dismissal as provided for in the CBA must satisfy to the
evidentiary threshold of the NLRC and the courts.

The fact that the CBA may provide for additional grounds for dismissal other than those established under
the Labor Code does not detract from the necessity to duly establish the existence of such grounds before
the dismissal may be validated. And even if the employer or, in this case, the collective bargaining agent,
is satis8ed that cause has been established to warrant the dismissal, such satisfaction will be of no
consequence if, upon legal challenge, they are unable to establish before the NLRC or the courts the
presence of such causes.

In the matter at bar, the Labor Arbiter — the proximate trier of facts — and the Court of Appeals both
duly appreciated that the testimony of Artajo against Timbal could not be given credence, especially in
proving Timbal's disloyalty to ALU. This is due to the prior animosity between the two engendered by the
pending civil complaint 8led by Timbal's husband against Artajo. Considering that the civil complaint was
8led just six (6) days prior to the execution of Artajo's a5davit against Timbal, it would be plainly injudicious
to presume that Artajo possessed an unbiased state of mind as she executed that a5davit. Such
circumstance was considered by the Labor Arbiter, and especially the Court of Appeals, as they rendered

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a favorable ruling to Timbal. The NLRC may have decided against Artajo, but in doing so, it failed to provide
any basis as to why Artajo's testimony should be believed, instead of disbelieved. No credible disputation
was offered by the NLRC to the claim that Artajo was biased against Timbal; hence, we should adjudge
the findings of the Labor Arbiter and the Court of Appeals as more cogent on that point.

Before this Court, Del Monte does not even present any serious argument that Artajo's testimony against
Timbal was free from prejudice. Instead, it posits that Piquero's alleged testimony against Timbal before
the Disloyalty Board should be given credence, and that taken with Artajo's testimony, should sufficiently
establish the ground of disloyalty for which Timbal should be dismissed.

There are evident problems on our part, at this late stage, in appreciating these raw stenographic notes
adverting to the purported testimony of Piquero, especially as a means of definitively concluding that
Timbal was guilty of disloyalty. Certainly, these notes cannot be appreciated as entries in the official
record, which are presumed prima facie evidence of the facts therein stated, 38 as such records can only
be made by a public officer of the Philippines or by a person in the performance of a duty specially
enjoined by law. These transcripts were not taken during a hearing conducted by any public office in the
Philippines, but they were committed in the course of an internal disciplinary mechanism devised by a
privately organized labor union. Unless the authenticity of these notes is duly proven before, and
appreciated by the triers of fact, we cannot accord them any presumptive or conclusive value.

Indeed, we are inclined to agree with Timbal's observation in her Comment on the present petition that
from the time the complaint was 8led with the NLRC-RAB, Piquero's name and testimony were invoked
for the first time only in Del Monte's motion for reconsideration before the Court of Appeals.

The Disloyalty Board may have appreciated Piquero's testimony in its own finding that Timbal was guilty,
yet the said board cannot be considered as a wholly neutral or dispassionate tribunal since it was
constituted by the very organization that stood as the offended party in the disloyalty charge. Without
impugning the integrity of ALU and the mechanisms it has employed for the internal discipline of its
members, we nonetheless hold that in order that the dismissal of an employee may be validated by this
Court, it is necessary that the grounds for dismissal are justified by substantial evidence as duly
appreciated by an impartial trier of facts. The existence of Piquero's testimony was appreciated only by
the Disloyalty Board, but not by any of the impartial tribunals which heard Timbal's case. The appreciation
of such testimony by the Disloyalty Board without any similar affirmation or concurrence by the NLRC-
RAB, the NLRC, or the Court of Appeals, cannot satisfy the substantive due process requirement as a
means of upholding Timbal's dismissal.

2. Voluntary Arbitration has the jurisdiction over Claim against ALU based on CBA
We do observe that Section 5 of the CBA stipulated that "[ALU] assumes full responsibility of any such
termination [of any member of the bargaining unit who loses his membership in ALU] and hereby agrees
to hold [Del Monte] free from any liability by judgment of a competent authority for claims arising out of
dismissals made upon demand of [ALU], and latter shall reimburse the former of such sums as it shall have
paid therefore."

We have examined Article 217 of the Labor Code, 48 which sets forth the original jurisdiction of the Labor
Arbiters. Article 217(c) states:

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 Cases arising from the interpretation or implementation of collective bargaining agreements and
those arising from the interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements.

In contrast, Article 261 of the Labor Code indubitably vests on the Voluntary Arbitrator or panel of
Voluntary Arbitrators the "original and exclusive jurisdiction to hear and decide all unresolved grievances
arising from the interpretation or implementation of the Collective Bargaining Agreement." Among those
areas of conflict traditionally within the jurisdiction of Voluntary Arbitrators are contract-interpretation
and contract-implementation, the questions precisely involved in Del Monte's claim seeking enforcement
of the CBA provision mandating restitution by ALU should the company be held financially liable for
dismissals pursuant to the union security clause.

In reconciling the grants of jurisdiction vested under Articles 261 and 217 of the Labor Code, the Court
has pronounced that "the original and exclusive jurisdiction of the Labor Arbiter under Article 217(c) for
money claims is limited only to those arising from statutes or contracts other than a Collective Bargaining
Agreement. The Voluntary Arbitrator or Panel of Voluntary Arbitrators will have original and exclusive
jurisdiction over money claims 'arising from the interpretation or implementation of the Collective
Bargaining Agreement and, those arising from the interpretation or enforcement of company personnel
policies', under Article 261."

Our conclusion that the Labor Arbiter in the instant case could not properly pass judgment on the cross-
claim is further strengthened by the fact that Del Monte and ALU expressly recognized the jurisdiction of
Voluntary Arbitrators in the CBA. Section 2, Article XXXI of the CBA provides:

Section 2. In the event a dispute arises concerning the application of, or interpretation of this
Agreement which cannot be settled pursuant to the [grievance procedure set forth in the]
preceding Section, the dispute shall be submitted to an arbitrator agreed to by [Del Monte] and
[ALU].

Thus, as the law indubitably precludes the Labor Arbiter from enforcing money claims arising from the
implementation of the CBA, the CBA herein complementarily recognizes that it is the Voluntary Arbitrators
which have jurisdiction to hear the claim. The Labor Arbiter correctly refused to exercise jurisdiction over
Del Monte's crossclaim, and the Court of Appeals would have no basis had it acted differently. At the same
time, even as we affirm the award of backwages against Del Monte, our ruling should not operate to
prejudice in any way whatever causes of action Del Monte may have against ALU, in accordance with the
CBA.

7K CORPORATION , petitioner, vs . EDDIE ALBARICO , respondent.

FACTS:
When he was dismissed on 5 April 1993, respondent Eddie Albarico (Albarico) was a regular employee of
petitioner 7K Corporation, a company selling water purifiers. He started working for the company in 1990
as a salesman. 4 Because of his good performance, his employment was regularized. He was also
promoted several times: from salesman, he was promoted to senior sales representative and then to

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acting team 1eld supervisor. In 1992, he was awarded the President's Trophy for being one of the
company's top water purifier specialist distributors.

In April of 1993, the chief operating officer of petitioner 7K Corporation terminated Albarico's
employment allegedly for his poor sales performance. Respondent had to stop reporting for work, and he
subsequently submitted his money claims against petitioner for arbitration before the National
Conciliation and Mediation Board (NCMB). The issue for voluntary arbitration before the NCMB, according
to the parties' Submission Agreement dated 19 April 1993, was whether respondent Albarico was entitled
to the payment of separation pay and the sales commission reserved for him by the corporation.

While the NCMB arbitration case was pending, respondent Albarico filed a Complaint against petitioner
corporation with the Arbitration Branch of the National Labor Relations Commission (NLRC) for illegal
dismissal with money claims for overtime pay, holiday compensation, commission, and food and traveling
allowances. 7 The Complaint was decided by the labor arbiter in favor of respondent Albarico, who was
awarded separation pay in lieu of reinstatement, backwages and attorney's fees.

On appeal by petitioner, the labor arbiter's Decision was vacated by the NLRC for forum shopping on the
part of respondent Albarico, because the NCMB arbitration case was still pending. The NLRC Decision,
which explicitly stated that the dismissal was without prejudice to the pending NCMB arbitration case, 10
became final after no appeal was taken.

petitioner corporation filed its Position Paper in the NCMB arbitration case. It denied that respondent was
terminated from work, much less illegally dismissed. The corporation claimed that he had voluntarily
stopped reporting for work after receiving a verbal reprimand for his sales performance; hence, it was he
who was guilty of abandonment of employment. Respondent made an oral manifestation that he was
adopting the position paper he submitted to the labor arbiter, a position paper in which the former
claimed that he had been illegally dismissed.

On 12 January 2005, almost 12 years after the 1ling of the NCMB case, both parties appeared in a hearing
before the NCMB. Respondent manifested that he was willing to settle the case amicably with petitioner
based on the decision of the labor arbiter ordering the payment of separation pay in lieu of reinstatement,
backwages and attorney's fees. On its part, petitioner made a counter-manifestation that it was likewise
amenable to settling the dispute. However, it was willing to pay only the separation pay and the sales
commission according to the Submission Agreement dated 19 April 1993.

On 18 November 2005, the NCMB voluntary arbitrator rendered a Decision finding petitioner corporation
liable for illegal dismissal. The termination of respondent Albarico, by reason of alleged poor performance,
was found invalid. The arbitrator explained that the promotions, increases in salary, and awards received
by respondent belied the claim that the latter was performing poorly. It was also found that Albarico could
not have abandoned his job, as the abandonment should have been clearly shown.

However, it was found that reinstatement was no longer possible because of the strained relationship of
the parties. 18 Thus, in lieu of reinstatement, the voluntary arbitrator ordered the corporation to pay
separation pay for two years at P4,456 for each year, or a total amount of P8,912.

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Additionally, in view of the finding that Albarico had been illegally dismissed, the voluntary arbitrator also
ruled that the former was entitled to backwages in the amount of P90,804. Finally, the arbitrator awarded
attorney's fees in respondent's favor, because he had been compelled to file an action for illegal dismissal.

Petitioner corporation subsequently appealed to the CA. The CA affirmed the Decision of the voluntary
arbitrator, but eliminated the award of attorney's fees

ISSUE:
1. WON the voluntary arbitrator properly assumed jurisdiction to decide the issue of the legality of
the dismissal of respondent as well as the latter's entitlement to backwages, even if neither the
legality nor the entitlement was expressly claimed in the Submission Agreement of the parties.
YES
a. WON LA has jurisdiction. NO (haha ang redundant)

HELD:
Preliminarily, we address petitioner's claim that under Article 217 of the Labor Code, original and exclusive
jurisdiction over termination disputes, such as the present case, is lodged only with the labor arbiter of
the NLRC.

although the general rule under the Labor Code gives the labor arbiter exclusive and original jurisdiction
over termination disputes, it also recognizes exceptions. One of the exceptions is provided in Article 262
of the Labor Code. In San Jose v. NLRC, 25 we said:

The phrase "Except as otherwise provided under this Code" refers to the following exceptions:

A. Art. 217. Jurisdiction of Labor Arbiters. — . . . xxx xxx xxx

(c) Cases arising from the interpretation or implementation of collective bargaining
agreement and those arising from the interpretation or enforcement of company
procedure/policies shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitrator as may be provided in said agreement.

B. Art. 262. Jurisdiction over other labor disputes. — The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall also hear and decide all other labor
disputes including unfair labor practices and bargaining deadlocks.

We also said in the same case that "[t]he labor disputes referred to in the same Article 262 [of the Labor
Code] can include all those disputes mentioned in Article 217 over which the Labor Arbiter has original
and exclusive jurisdiction."

From the above discussion, it is clear that voluntary arbitrators may, by agreement of the parties, assume
jurisdiction over a termination dispute such as the present case, contrary to the assertion of petitioner
that they may not.

Petitioner argues that, assuming that the voluntary arbitrator has jurisdiction over the present
termination dispute, the latter should have limited his decision to the issue contained in the Submission
Agreement of the parties the issue of whether respondent Albarico was entitled to separation pay and to
the sales commission the latter earned before being terminated. Petitioner asserts that under Article 262

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of the Labor Code, the jurisdiction of a voluntary arbitrator is strictly limited to the issues that the parties
agree to submit.

We rule that although petitioner correctly contends that separation pay may in fact be awarded for
reasons other than illegal dismissal, the circumstances of the instant case lead to no other conclusion than
that the claim of respondent Albarico for separation pay was premised on his allegation of illegal dismissal.
Thus, the voluntary arbitrator properly assumed jurisdiction over the issue of the legality of his dismissal.

True, under the Labor Code, separation pay may be given not only when there is illegal dismissal. In fact,
it is also given to employees who are terminated for authorized causes, such as redundancy, retrenchment
or installation of labor-saving devices under Article 283 29 of the Labor Code. Additionally, jurisprudence
holds that separation pay may also be awarded for considerations of social justice, even if an employee
has been terminated for a just cause other than serious misconduct or an act reflecting on moral
character. 30 The Court has also ruled that separation pay may be awarded if it has become an established
practice of the company to pay the said bene1t to voluntarily resigning employees or to those validly
dismissed for non-membership in a union as required in a closed-shop agreement.

The foregoing findings indisputably prove that the issue of separation pay emanates solely from
respondent's allegation of illegal dismissal. In fact, petitioner itself acknowledged the issue of illegal
dismissal in its position paper submitted to the NCMB.

Moreover, we note that even the NLRC was of the understanding that the NCMB arbitration case sought
to resolve the issue of the legality of the dismissal of the respondent. In fact, the identity of the issue of
the legality of his dismissal, which was previously submitted to the NCMB, and later submitted to the
NLRC, was the basis of the latter's finding of forum shopping and the consequent dismissal of the case
before it. In fact, petitioner also implicitly acknowledged this when it 1led before the NLRC its Motion to
Dismiss respondent's Complaint on the ground of forum shopping. Thus, it is now estopped from claiming
that the issue before the NCMB does not include the issue of the legality of the dismissal of respondent.
Besides, there has to be a reason for deciding the issue of respondent's entitlement to separation pay. To
think otherwise would lead to absurdity, because the voluntary arbitrator would then be deciding that
issue in a vacuum. The arbitrator would have no basis whatsoever for saying that Albarico was entitled to
separation pay or not if the issue of the legality of respondent's dismissal was not resolve first.

Hence, the voluntary arbitrator correctly assumed that the core issue behind the issue of separation pay
is the legality of the dismissal of respondent.

Having established that the issue of the legality of dismissal of Albarico was in fact necessarily — albeit
not explicitly — included in the Submission Agreement signed by the parties, this Court rules that the
voluntary arbitrator rightly assumed jurisdiction to decide the said issue.

Consequently, we also rule that the voluntary arbitrator may award backwages upon a finding of illegal
dismissal, even though the issue of entitlement thereto is not explicitly claimed in the Submission
Agreement. Backwages, in general, are awarded on the ground of equity as a form of relief that restores
the income lost by the terminated employee by reason of his illegal dismissal.

NOTES:

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In Sime Darby we ruled that although the specific issue presented by the parties to the voluntary arbitrator
was only "the issue of performance bonus," the latter had the authority to determine not only the issue
of whether or not a performance bonus was to be granted, but also the related question of the amount
of the bonus, were it to be granted. We explained that there was no indication at all that the parties to
the arbitration agreement had regarded "the issue of performance bonus" as a two-tiered issue, of which
only one aspect was being submitted to arbitration. Thus, we held that the failure of the parties to limit
the issues specifically to that which was stated allowed the arbitrator to assume jurisdiction over the
related issue.

Similarly, in the present case, there is no indication that the issue of illegal dismissal should be treated as
a two-tiered issue whereupon entitlement to backwages must be determined separately. Besides, "since
arbitration is a final resort for the adjudication of disputes," the voluntary arbitrator in the present case
can assume that he has the necessary power to make a final settlement. Thus, we rule that the voluntary
arbitrator correctly assumed jurisdiction over the issue of entitlement of respondent Albarico to
backwages on the basis of the former's finding of illegal dismissal.

ALLAN M. MENDOZA , petitioner, vs. OFFICERS OF MANILA WATER EMPLOYEES UNION (MWEU)

TOPIC: ULP

FACTS:
Petitioner was a member of the Manila Water Employees Union (MWEU), a Department of Labor and
Employment (DOLE)-registered labor organization consisting of rank-and-file employees within Manila
Water Company (MWC).

In an April 11, 2007 letter, MWEU through Cometa informed petitioner that the union was unable to fully
deduct the increased P200.00 union dues from his salary due to lack of the required December 2006
check-off authorization from him. Petitioner was warned that his failure to pay the union dues would
result in sanctions upon him. Quebral informed Borela, through a May 2, 2007 letter, 6 that for such failure
to pay the union dues, petitioner and several others violated Section 1 (g), Article IX of the MWEU's
Constitution and By-Laws. In turn, Borela referred the charge to the MWEU grievance committee for
investigation.

On May 21, 2007, a notice of hearing was sent to petitioner, who attended the scheduled hearing. On
June 6, 2007, the MWEU grievance committee recommended that petitioner be suspended for 30 days.

In a June 26, 2007 letter 10 to Borela, petitioner and his co-respondents took exception to the imposition
and indicated their intention to appeal the same to the General Membership Assembly in accordance with
Section 2 (g), Article V of the union's Constitution and By-Laws, which grants them the right to appeal any
arbitrary resolution, policy and rule promulgated by the Executive Board to the General Membership
Assembly. In a June 28, 2007 reply, Borela denied petitioner's appeal, stating that the prescribed period
for appeal had expired.

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Petitioner and his co-respondents sent another letter 13 on July 4, 2007, reiterating their arguments and
demanding that the General Membership Assembly be convened in order that their appeal could be taken
up. The letter was not acted upon.

Petitioner was once more charged with non-payment of union dues, and was required to attend an August
3, 2007 hearing. 14 Thereafter, petitioner was again penalized with a 30-day suspension

MWEU scheduled an election of officers on September 14, 2007. Petitioner Bled his certificate of
candidacy for Vice-President, but he was disqualified for not being a member in good standing on account
of his suspension.

On October 2, 2007, petitioner was charged with non-payment of union dues for the third time. He did
not attend the scheduled hearing. This time, he was meted the penalty of expulsion from the union, per
"unanimous approval" of the members of the Executive Board. His pleas for an appeal to the General
Membership Assembly were once more unheeded.

In 2008, during the freedom period and negotiations for a new collective bargaining agreement (CBA) with
MWC, petitioner joined another union, the Workers Association for Transparency, Empowerment and
Reform, All-Filipino Workers Confederation (WATER-AFWC). He was elected union President. Other
MWEU members were inclined to join WATER-AFWC, but MWEU director Torres threatened that they
would not get benefits from the new CBA.

The MWEU leadership submitted a proposed CBA which contained provisions to the effect that in the
event of retrenchment, non-MWEU members shall be removed first, and that upon the signing of the CBA,
only MWEU members shall receive a signing bonus.

Ruling of the Labor Arbiter

On October 13, 2008, petitioner filed a Complaint against respondents for unfair labor practices,
damages, and attorney's fees before the National Labor Relations Commission (NLRC), petitioner accused
the respondents of illegal termination from MWEU in connection with the events relative to his non-
payment of union dues; unlawful interference, coercion, and violation of the rights of MWC employees to
self-organization — in connection with the proposed CBA submitted by MWEU leadership, which
petitioner claims contained provisions that discriminated against non-MWEU members.

Labor Arbiter Virginia T. Luyas-Azarraga issued her Decision which decreed as follows:

Indeed the Bling of the instant case is still premature. Section 5, Article X-Investigation Procedures
and Appeal Process of the Union Constitution and ByLaws provides that:

Section 5. Any dismissed and/or expelled member shall have the rights to appeal to the Executive
Board within seven (7) days from the date of notice of the said dismissal and/or expulsion, which
in [turn] shall be referred to the General Membership Assembly. In case of an appeal, a simple
majority of the decision of the Executive Board is imperative. The same shall be
approved/disapproved by a majority vote of the general membership assembly in a meeting duly
called for the purpose.

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 On the basis of the foregoing, the parties shall exhaust first all the administrative remedies before
resorting to compulsory arbitration. Thus, instant case is referred back to the Union for the
General Assembly to act or deliberate complainant's appeal on the decision of the Executive
Board.

WHEREFORE PREMISES CONSIDERED, instant case is referred back to the Union level for the
General Assembly to act on complainant's appeal.

Ruling of the National Labor Relations

Commission Petitioner appealed before the NLRC. NLRC issued its decision states that:

After a careful look at all the documents submitted and a meticulous review of the facts, We find
that this Commission lacks the jurisdictional competence to act on this case.

Article 217 of the Labor Code, 32 as amended, specifically enumerates the cases over which the
Labor Arbiters and the Commission have original and exclusive jurisdiction. A perusal of the record
reveals that the causes of action invoked by complainant do not fall under any of the
enumerations therein. Clearly, We have no jurisdiction over the same.

The above-mentioned disputes and conPict fall under the jurisdiction of the Bureau of Labor
Relations, as these are inter/intra-union disputes.

WHEREFORE, the decision of the Labor Arbiter a quo dated May 29, 2009is hereby declared NULL
and VOID for being rendered without jurisdiction and the instant complaint is DISMISSED.

Ruling of the Court of Appeals

In a Petition for Certiorari 36 Bled with the CA. the CA issued the assailed Decision containing the
following pronouncement:

Petitioner's causes of action against MWEU are inter/intra-union disputes cognizable by the BLR
whose functions and jurisdiction are largely confined to union matters, collective bargaining
registry, and labor education. Section 1, Rule XI of Department Order (D.O.) No. 40-03, Series of
2003, of the Department of Labor and Employment enumerates instances of inter/intra-union
disputes.

Section 1. Coverage. — Inter/intra-union disputes shall include:

xxx xxx xxx

(b) conduct of election of union and workers' association officers/nullification of election
of union and workers' association officers;
(c) audit/accounts examination of union or workers' association funds;
xxx xxx xxx
(g) validity/invalidity of impeachment/expulsion of union and workers' association
officers and members;
xxx xxx xxx
(j) violations of or disagreements over any provision in a union or workers' association
constitution and by-laws;

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 xxx xxx xxx
(l) violations of the rights and conditions of union or workers' association membership;
xxx xxx xxx
(n) such other disputes or conPicts involving the rights to self-organization, union
membership and collective bargaining —
1. between and among legitimate labor organizations;
2. between and among members of a union or workers' association.

In brief, "Inter-Union Dispute" refers to any conPict between and among legitimate labor unions
involving representation questions for purposes of collective bargaining or to any other conPict
or dispute between legitimate labor unions. "Intra-Union Dispute" refers to any conPict between
and among union members, including grievances arising from any violation of the rights and
conditions of membership, violation of or disagreement over any provision of the union's
constitution and by-laws, or disputes arising from chartering or affiliation of union. On the other
hand, the circumstances of unfair labor practices (ULP) of a labor organization are stated in Article
249 of the Labor.

We find that the issues arising from petitioner's right to information on the increased membership
dues, right to appeal his suspension and expulsion according to CBL provisions, and right to vote
and be voted on are essentially intra-union disputes; these involve violations of rights and
conditions of union membership. But his claim that a director of MWEU warned that non-MWEU
members would not receive CBA benefits is an inter-union dispute. It is more of an "interference"
by a rival union to ensure the loyalty of its members and to persuade non-members to join their
union. This is not an actionable wrong because interfering in the exercise of the right to organize
is itself a function of self-organizing. 37 As long as it does not amount to restraint or coercion, a
labor organization may interfere in the employees' right to self-organization.

In admin and quasi-judicial proceedings only substantial evidence is necessary to establish the
case for or against a party. Substantial evidence is that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion. Petitioner failed to discharge
the burden of proving, by substantial evidence, the allegations of ULP in his complaint. The NLRC,
therefore, properly dismissed the case.

FOR THESE REASONS, the petition is DISMISSED.

ISSUE:
WON there is unfair labor practice which falls under the jurisdiction of the labor arbiter. YES

HELD:
It is true that some of petitioner's causes of action constitute intra-union cases cognizable by the BLR
under Article 226 of the Labor Code.

An intra-union dispute refers to any conPict between and among union members, including
grievances arising from any violation of the rights and conditions of membership, violation of or
disagreement over any provision of the union's constitution and by-laws, or disputes arising from
chartering or disaffiliation of the union. Sections 1 and 2, Rule XI of Department Order No. 4003,
Series of 2003 of the DOLE enumerate the following circumstances as inter/intra-union disputes .

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However, petitioner's charge of unfair labor practices falls within the original and exclusive jurisdiction of
the Labor Arbiters, pursuant to Article 217 of the Labor Code. In addition, Article 247 of the same Code
provides that "the civil aspects of all cases involving unfair labor practices, which may include claims for
actual, moral, exemplary and other forms of damages, attorney's fees and other affirmative relief, shall
be under the jurisdiction of the Labor Arbiters."

Unfair labor practices may be committed both by the employer under Article 248 and by labor
organizations under Article 249 of the Labor Code, which provides that follows:

ART. 249. Unfair labor practices of labor organizations. — It shall be unfair labor practice for a
labor organization, its officers, agents or representatives:

(a) To restrain or coerce employees in the exercise of their right to self-organization. However, a
labor organization shall have the right to prescribe its own rules with respect to the acquisition or
retention of membership;

(b) To cause or attempt to cause an employer to discriminate against an employee, including

discrimination against an employee with respect to whom membership in such organization has
been denied or to terminate an employee on any ground other than the usual terms and
conditions under which membership or continuation of membership is made available to other
members;

(c) To violate the duty, or refuse to bargain collectively with the employer, provided it is the
representative of the employees;

(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver any
money or other things of value, in the nature of an exaction, for services which are not performed
or not to be performed, including the demand for fee for union negotiations;

(e) To ask for or accept negotiation or attorney's fees from employers as part of the settlement
of any issue in collective bargaining or any other dispute; or

(f) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers, members of
governing boards, representatives or agents or members of labor associations or organizations
who have actually participated in, authorized or ratified unfair labor practices shall be held
criminally liable.

In regard to suspension of a union member, MWEU's Constitution and By-Laws provides under Article X,
Section 4 thereof that "[a]ny suspended member shall have the right to appeal within three (3) working
days from the date of notice of said suspension. In case of an appeal a simple majority of vote of the
Executive Board shall be necessary to nullify the suspension."

Thus, when an MWEU member is suspended, he is given the right to appeal such suspension within three
working days from the date of notice of said suspension, which appeal the MWEU Executive Board is

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obligated to act upon by a simple majority vote. When the penalty imposed is expulsion, the expelled
member is given seven days from notice of said dismissal and/or expulsion to appeal to the Executive
Board, which is required to act by a simple majority vote of its members. The Board's decision shall then
be approved/disapproved by a majority vote of the general membership assembly in a meeting duly called
for the purpose.

The documentary evidence is clear that when petitioner received Borela's August 21, 2007 letter
informing him of the Executive Board's unanimous approval of the grievance committee recommendation
to suspend him for the second time effective August 24, 2007, he immediately and timely Bled a written
appeal. However, the Executive Board did not act thereon. Then again, when petitioner was charged for
the third time and meted the penalty of expulsion from MWEU by the unanimous vote of the Executive
Board, his timely appeal was again not acted upon by said board.

Thus, contrary to respondents' argument that petitioner lost his right to appeal when he failed to petition
to convene the general assembly through the required signature of 30% of the union membership in good
standing pursuant to Article VI, Section 2 (a) of MWEU's Constitution and By-Laws or by a petition of the
majority of the general membership in good standing under Article VI, Section 3, this Court finds that
petitioner was illegally suspended for the second time and thereafter unlawfully expelled from MWEU
due to respondents' failure to act on his written appeals. The required petition to convene the general
assembly through the required signature of 30% (under Article VI, Section 2 [a]) or majority (under Article
VI, Section 3) of the union membership does not apply in petitioner's case; the Executive Board must first
act on his two appeals before the matter could properly be referred to the general membership. Because
respondents did not act on his two appeals, petitioner was unceremoniously suspended, disqualified and
deprived of his right to run for the position of MWEU Vice-President in the September 14, 2007 election
of officers, expelled from MWEU, and forced to join another union, WATER-AFWC. For these, respondents
are guilty of unfair labor practices under Article 249 (a) and (b) — that is, violation of petitioner's right to
self-organization, unlawful discrimination, and illegal termination of his union membership — which case
falls within the original and exclusive jurisdiction of the Labor Arbiters, in accordance with Article 217 of
the Labor Code.

The primary concept of unfair labor practices is stated in Article 247 of the Labor Code, which states:

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. — Unfair
labor practices violate the constitutional right of workers and employees to self-organization, are
inimical to the legitimate interests of both labor and management, including their right to bargain
collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect,
disrupt industrial peace and hinder the promotion of healthy and stable labor-management
relations.

"In essence, [unfair labor practice] relates to the commission of acts that transgress the workers' right to
organize." "[A]ll the prohibited acts constituting unfair labor practice in essence relate to the workers'
right to self-organization." " [T]he term unfair labor practice refers to that gamut of offenses defined in
the Labor Code which, at their core, violates the constitutional right of workers and employees to self-
organization."

Guaranteed to all employees or workers is the 'right to self-organization and to form, join, or assist
labor organizations of their own choosing for purposes of collective bargaining.' This is made plain

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 by no less than three provisions of the Labor Code of the Philippines. Article 243 of the Code
provides as follows:

ART. 243. Coverage and employees' right to self-organization. — All persons employed in
commercial, industrial and agricultural enterprises and in religious, charitable, medical,
or educational institutions whether operating for proBt or not, shall have the right to self-
organization and to form, join, or assist labor organizations of their own choosing for
purposes or collective bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite employers may form
labor organizations for their mutual aid and protection.

Article 248 (a) declares it to be an unfair labor practice for an employer, among others, to
'interfere with, restrain or coerce employees in the exercise of their right to self-organization.'
Similarly, Article 249 (a) makes it an unfair labor practice for a labor organization to 'restrain or
coerce employees in the exercise of their rights to self-organization . . .'

xxx xxx xxx

The right of self-organization includes the right to organize or affiliate with a labor union or
determine which of two or more unions in an establishment to join, and to engage in concerted
activities with co-workers for purposes of collective bargaining through representatives of their
own choosing, or for their mutual aid and protection, i.e., the protection, promotion, or
enhancement of their rights and interests.

NOTES:
Claim for damages
As members of the governing board of MWEU, respondents are presumed to know, observe, and apply
the union's constitution and by-laws. Thus, their repeated violations thereof and their disregard of
petitioner's rights as a union member — their inaction on his two appeals which resulted in his suspension,
disqualification from running as MWEU officer, and subsequent expulsion without being accorded the full
benefits of due process — connote willfulness and bad faith, a gross disregard of his rights thus causing
untold suffering, oppression and, ultimately, ostracism from MWEU. "Bad faith implies breach of faith and
willful failure to respond to plain and well understood obligation." This warrants an award of moral
damages in the amount of P100,000.00. Moreover, the Civil Code provides:

Art. 32. Any public officer or employee, or any private individual, who directly or indirectly
obstructs, defeats, violates or in any manner impedes or impairs any of the following rights and
liberties of another person shall be liable to the latter for damages:

xxx xxx xxx

(12) The right to become a member of associations or societies for purposes not contrary to law;

In Vital-Gozon v. Court of Appeals, this Court declared, as follows:

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 Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. They may be
recovered if they are the proximate result of the defendant's wrongful act or omission. The
instances when moral damages may be recovered are, inter alia, 'acts and actions referred to in
Articles 21, 26, 27, 28, 29, 30, 32, 34 and 35 of the Civil Code,' which, in turn, are found in the
Chapter on Human Relations of the Preliminary Title of the Civil Code. . . .

Under the circumstances, an award of exemplary damages in the amount of P50,000.00, as prayed for, is
likewise proper. "Exemplary damages are designed to permit the courts to mould behavior that has
socially deleterious consequences, and their imposition is required by public policy to suppress the
wanton acts of the offender." This should prevent respondents from repeating their mistakes, which
proved costly for petitioner.

Finally, petitioner is also entitled to attorney's fees equivalent to 10 per cent (10%) of the total award. The
unjustified acts of respondents clearly compelled him to institute an action primarily to vindicate his rights
and protect his interest. Indeed, when an employee is forced to litigate and incur expenses to protect his
rights and interest, he is entitled to an award of attorney's fees.

Atlas Farms vs NLRC

FACTS:
Private respondent Jaime O. dela Peña was employed as a veterinary aide by petitioner in December 1975.
On March 13, 1993, 4 Peña was allegedly caught urinating and defecating on company premises not
intended for the purpose. The farm manager of petitioner issued a formal notice directing him to explain
within 24 hours why disciplinary action should not be taken against him for violating company rules and
regulations. Peña refused, however, to receive the formal notice. He never bothered to explain, either
verbally or in writing, according to petitioner. Thus, on March 20, 1993, a notice of termination with
payment of his monetary benefits was sent to him. He duly acknowledged receipt of his separation pay of
P13,918.67.

Co-respondent Marcial I. Abion was a carpenter/mason and a maintenance man whose employment by
petitioner commenced on October 8, 1990. Allegedly, he caused the clogging of the fishpond drainage
resulting in damages worth several hundred thousand pesos when he improperly disposed of the cut grass
and other waste materials into the pond's drainage system. Petitioner sent a written notice to Abion,
requiring him to explain what happened, otherwise, disciplinary action would be taken against him. He
refused to receive the notice and give an explanation, according to petitioner. Consequently, the company
terminated his services on October 27, 1992. He acknowledged receipt of a written notice of dismissal,
with his separation pay.

Peña and Abion filed separate complaints for illegal dismissal that were later consolidated. Both claimed
that their termination from service was due to petitioner's suspicion that they were the leaders in a plan
to form a union to compete and replace the existing management-dominated union.

On November 9, 1993, the labor arbiter dismissed their complaints on the ground that the grievance
machinery in the collective bargaining agreement (CBA) had not yet been exhausted. Private respondents

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availed of the grievance process, but later on re<led the case before the NLRC in Region IV. They alleged
"lack of sympathy" on petitioner's part to engage in conciliation proceedings.

Their cases were consolidated in the NLRC. At the initial mandatory conference, petitioner <led a motion
to dismiss, on the ground of lack of jurisdiction, alleging private respondents themselves admitted that
they were members of the employees' union with which petitioner had an existing CBA. This being the
case, according to petitioner, jurisdiction over the case belonged to the grievance machinery and
thereafter the voluntary arbitrator, as provided in the CBA.

NLRC, which reversed the labor arbiter's decision. Dissatisfied with the NLRC ruling, petitioner went to the
Court of Appeals by way of a petition for review on certiorari under Rule 65, seeking reinstatement of the
labor arbiter's decision. The appellate court denied the petition and affirmed the NLRC resolution with
some modifications, thus:

WHEREFORE, the petition is DENIED. The resolution in NLRC CA No. 010520-96 is AFFIRMED with
the following modifications:

1) The private respondents can not be reinstated, due to their acceptance of the separation pay
offered by the petitioner;
2) The private respondents are entitled to their full back wages; and,
3) The amount of the separation pay received by private respondents from petitioner shall not be
deducted from their full back wages.

Hence, the petition

Petitioner contends that the dismissal of private respondents was for a just and valid cause, pursuant to
the provisions of the company's rules and regulations. It also alleges lack of jurisdiction on the part of the
labor arbiter, claiming that the cases should have been resolved through the grievance machinery, and
eventually referred to voluntary arbitration, as prescribed in the CBA.

ISSUE:
1. WON private respondents were legally and validly dismissed. YES
2. WON the LA has jurisdiction. YES

HELD:
1. Illegal dismissal
The first issue primarily involves questions of fact, which can serve as basis for the conclusion that private
respondents were legally and validly dismissed. The burden of proving that the dismissal of private
respondents was legal and valid falls upon petitioner. The NLRC found that petitioner failed to
substantiate its claim that both private respondents committed certain acts that violated company rules
and regulations, hence we find no factual basis to say that private respondents' dismissal was in order.
We see no compelling reason to deviate from the NLRC ruling that their dismissal was illegal, absent a
showing that it reached its conclusion arbitrarily. Moreover, factual findings of agencies exercising quasi-
judicial functions are accorded not only respect but even finality, aside from the consideration here that
this Court is not a trier of facts.

2. LA jurisdiction

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Article 217 of the Labor Code provides that labor arbiters have original and exclusive jurisdiction over
termination disputes. A possible exception is provided in Article 261 of the Labor Code, which provides
that —
The Voluntary Arbitrator or panel of voluntary arbitrators shall have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or
implementation of the Collective Bargaining Agreement and those arising from the interpretation
or enforcement of company personnel policies referred to in the immediately preceding article.
Accordingly, violations of a Collective Bargaining Agreement, except those which are gross in
character, shall no longer be treated as unfair labor practice and shall be resolved as grievances
under the Collective Bargaining Agreement. For purposes of this article, gross violations of
Collective Bargaining Agreement shall mean flagrant and or malicious refusal to comply with the
economic provisions of such agreement.

The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original
jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the grievance Machinery or Arbitration provided in the Collective
Bargaining Agreement.

But as held in Vivero vs. CA, "petitioner cannot arrogate into the powers of Voluntary Arbitrators the
original and exclusive jurisdiction of Labor Arbiters over unfair labor practices, termination disputes, and
claims for damages, in the absence of an express agreement between the parties in order for Article 262
of the Labor Code [Jurisdiction over other labor disputes] to apply in the case at bar."

Records show, however, that private respondents sought without success to avail of the grievance
procedure in their CBA. 16 On this point, petitioner maintains that by so doing, private respondents
recognized that their cases still fell under the grievance machinery. According to petitioner, without
having exhausted said machinery, the private respondents <led their action before the NLRC, in a clear
act of forum-shopping. 17 However, it is worth pointing out that private respondents went to the NLRC
only after the labor arbiter dismissed their original complaint for illegal dismissal. Under these
circumstances private respondents had to find another avenue for redress. We agree with the NLRC that
it was petitioner who failed to show proof that it took steps to convene the grievance machinery after the
labor arbiter first dismissed the complaints for illegal dismissal and directed the parties to avail of the
grievance procedure under Article VII of the existing CBA. They could not now be faulted for attempting
to find an impartial forum, after petitioner failed to listen to them and after the intercession of the labor
arbiter proved futile. The NLRC had aptly concluded in part that private respondents had already
exhausted the remedies under the grievance procedure.

In Vivero vs. CA, private respondents attempted to justify the jurisdiction of the voluntary arbitrator over
a termination dispute alleging that the issue involved the interpretation and implementation of the
grievance procedure in the CBA. There, we held that since what was challenged was the legality of the
employee's dismissal for lack of cause and lack of due process, the case was primarily a termination
dispute. The issue of whether there was proper interpretation and implementation of the CBA provisions
came into play only because the grievance procedure in the CBA was not observed, after he sought his
union's assistance. Since the real issue then was whether there was a valid termination, there was no
reason to invoke the need to interpret nor question an implementation of any CBA provision.

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One significant fact in the present petition also needs stressing. Pursuant to Article 260 21 of the Labor
Code, the parties to a CBA shall name or designate their respective representatives to the grievance
machinery and if the grievance is unsettled in that level, it shall automatically be referred to the voluntary
arbitrators designated in advance by the parties to a CBA. Consequently only disputes involving the union
and the company shall be referred to the grievance machinery or voluntary arbitrators. In these
termination cases of private respondents, the union had no participation, it having failed to object to the
dismissal of the employees concerned by the petitioner. It is obvious that arbitration without the union's
active participation on behalf of the dismissed employees would be pointless, or even prejudicial to their
cause.

Coming to the merits of the petition, the NLRC found that petitioner did not comply with the requirements
of a valid dismissal. For a dismissal to be valid, the employer must show that: (1) the employee was
accorded due process, and (2) the dismissal must be for any of the valid causes provided for by law. No
evidence was shown that private respondents refused, as alleged, to receive the notices requiring them
to show cause why no disciplinary action should be taken against them. Without proof of notice, private
respondents who were subsequently dismissed without hearing were also deprived of a chance to air
their side at the level of the grievance machinery. Given the fact of dismissal, it can be said that the cases
were effectively removed from the jurisdiction of the voluntary arbitrator, thus placing them within the
jurisdiction of the labor arbiter. Where the dispute is just in the interpretation, implementation or
enforcement stage, it may be referred to the grievance machinery set up in the CBA, or brought to
voluntary arbitration. But, where there was already actual termination, with alleged violation of the
employee's rights, it is already cognizable by the labor arbiter.

In sum, we conclude that the labor arbiter and then the NLRC had jurisdiction over the cases involving
private respondents' dismissal, and no error was committed by the appellate court in upholding their
assumption of jurisdiction.

NOTES:
As a consequence of their illegal dismissal, private respondents are entitled to reinstatement to their
former positions. But since reinstatement is no longer feasible because petitioner had already closed its
shop, separation pay in lieu of reinstatement shall be awarded. A terminated employee's receipt of his
separation pay and other monetary benefits does not preclude reinstatement or full benefits under the
law, should reinstatement be no longer possible. 25 As held in Cariño vs. ACCFA: 26

Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and
employee, obviously, do not stand on the same footing. The employer drove the employee to the
wall. The latter must have to get hold of the money. Because out of job, he had to face the harsh
necessities of life. He thus found himself in no position to resist money proffered. His, then, is a
case of adherence, not of choice. One thing sure, however, is that petitioners did not relent their
claim. They pressed it. They are deemed not to have waived their rights. Renuntiato non
praesumitur.

Conformably, private respondents are entitled to separation pay equivalent to one month's salary for
every year of service, in lieu of reinstatement. 27 As regards the award of damages, in order not to further
delay the disposition of this case, we find it necessary to expressly set forth the extent of the backwages
as awarded by the appellate court. Pursuant to R.A. 6715, as amended, private respondents shall be

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entitled to full backwages computed from the time of their illegal dismissal up to the date of promulgation
of this decision without qualification, considering that reinstatement is no longer practicable under the
circumstances.

Negros Metal vs Lamayo

FACTS:
Armelo J. Lamayo began working for Negros Metal Corporation in September 1999 as a machinist.

Sometime in May 2002, while respondent was at the company's foundry grinding some tools he was using,
William Uy, Sr. (Uy), company manager, called his attention why he was using the grinder there to which
he replied that since the machine there was bigger, he would finish his work faster.

Respondent's explanation was found unsatisfactory, hence, he was, via memorandum, charged of
loitering and warned. Taking the warning as a three-day suspension as penalized under company rules,
respondent reported for work after three days, only to be meted with another 10-day suspension 2 —
from May 30 to June 10, 2002, for allegedly failing to sign the memorandum suspending him earlier.

After serving the second suspension, respondent reported for work on June 11, 2002 but was informed
by Uy that his services had been terminated and that he should draft his resignation letter, drawing
respondent to Ale on June 17, 2002 a complaint for illegal dismissal.

In lieu of a position paper, petitioner submitted a Manifestation contending that the complaint should be
dismissed because the Labor Arbiter had no jurisdiction over it since, under their Collective Bargaining
Agreement (CBA), such matters must first be brought before the company's grievance machinery.

Labor Arbiter, brushing aside petitioner's position, held that respondent was illegally dismissed.

National Labor Relations Commission (NLRC), by Resolution of March 30, 2006, set aside the ruling of, and
remanded the case to, the Labor Arbiter for disposition based on the company's grievance procedure.

the appellate court set aside the NLRC Resolutions and reinstated the Labor Arbiter's Decision. It held that
the Labor Arbiter had jurisdiction to hear the complaint; that as respondent's dismissal did not proceed
from the parties' interpretation of or implementation of the CBA, it is not covered by the grievance
machinery procedure; that the laws and rules governing illegal dismissal are not to be found in the parties'
CBA but in the labor statutes, hence, the Labor Arbiter had jurisdiction; and that although the option to
go through the grievance machinery was stated in Ronquillo's letter to petitioner, respondent denied
having made that option as he had ceased to be a member of the union. The appellate court went on to
hold that, at that point, it was too late to direct the parties to go through the grievance machinery.

In holding that respondent was illegally dismissed, the appellate court noted that he was not allowed to
go back to work after serving two suspensions, without affording him the requisite notice and hearing;
and that respondent's failure to seek reinstatement did not negate his claim for illegal dismissal, there
being nothing wrong in opting for separation pay in lieu of reinstatement.

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ISSUE:
WON the grievance machinery procedure should have been followed first before respondent's complaint
for illegal dismissal could be given due course. NO (depends on the facts of the case, not a general rule)

HELD:
Articles 217, 261, and 262 of the Labor Code outline the jurisdiction of labor arbiters and voluntary
arbitrators as follows:

Art. 217. Jurisdiction of the Labor Arbiters and the Commission. — (a) Except as otherwise
provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear
and decide, within thirty (30) calendar days after the submission of the case by the parties for
decision without extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes ;
3. If accompanied with a claim for reinstatement, those cases that workers may Ale involving
wages, rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits,
all other claims arising from employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements
and those arising from the interpretation or enforcement of company personnel policies shall be
disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary
arbitration as may be provided in said agreements.

Art. 261. Jurisdiction of Voluntary Arbitrators or panel of Voluntary Arbitrators. — The Voluntary
Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear
and decide all unresolved grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding article. Accordingly,
violations of a Collective Bargaining Agreement, except those which are gross in character, shall
no longer be treated as unfair labor practice and shall be resolved as grievances under the
Collective Bargaining Agreement. For purposes of this article, gross violations of Collective
Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with the economic
provisions of such agreement.

The Commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original

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 jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary Arbitration provided in the
Collective Bargaining Agreement. (emphasis and underscoring supplied)

ART. 262. Jurisdiction over other labor disputes. — The Voluntary Arbitrator or panel of Voluntary
Arbitrators , upon agreement of the parties , shall also hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks.

Under Art. 217, it is clear that a labor arbiter has original a n d exclusive jurisdiction over termination
disputes. On the other hand, under Article 261, a voluntary arbitrator has original and exclusive
jurisdiction over grievances arising from the interpretation or enforcement of company policies.

As a general rule then, termination disputes should be brought before a labor arbiter, except when the
parties, under Art. 262, unmistakably express that they agree to submit the same to voluntary arbitration.

In the present case, the CBA provision on grievance machinery being invoked by petitioner does not
expressly state that termination disputes are included in the ambit of what may be brought before the
company's grievance machinery.

Even assuming, however, that the suspension of an employee may be considered as a "disagreement"
which bears on the "application and interpretation of any of the provisions" of the CBA, respondent could
not have bound himself to bring the matter of his suspension to grievance procedure or voluntary
arbitration in light of the documented fact that he had resigned from the union more than a year before
his suspension, not to mention the fact that he denied having a hand in the preparation of the union
president Ronquillo's letter invoking the grievance procedure. In FINE, the labor tribunal had original and
exclusive jurisdiction over respondent's complaint for illegal dismissal.

On the merits, as did the appellate court, the Court sustains the Labor Arbiter's ruling that respondent
was illegally dismissed absent a showing that he was accorded due process when he was summarily
terminated.

Vivero vs CA

FACTS:
Petitioner Vivero, a licensed seaman, is a member of the Associated Marine Oddicers and Seamen's Union
of the Philippines (AMOSUP). Complainant was hired by respondent as Chief Officer of the vessel " M.V.
Sunny Prince" on 10 June 1994. On grounds of very poor performance and conduct, refusal to perform his
job, refusal to report to the Captain or the vessel's Engineers or cooperate with other ship officers about
the problem in cleaning the cargo holds or of the shipping pump and his dismal relations with the Captain
of the vessel, complainant was repatriated.
On 01 August 1994, complainant :led a complaint for illegal dismissal at Associated Marine Officers' and
Seaman's Union of the Philippines (AMOSUP) of which complainant was a member. Pursuant to Article XII
of the Collective Bargaining Agreement, grievance proceedings were conducted; however, parties failed
to reach and settle the dispute amicably, thus, on 28 November 1994, complainant :led [a] complaint with
the Philippine Overseas Employment Administration (POEA).

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The law in force at the time petitioner :led his Complaint with the POEA was EO No. 247.

While the case was pending before the POEA, private respondents :led a Motion to Dismiss on the ground
that the POEA had no jurisdiction over the case considering petitioner Vivero's failure to refer it to a
Voluntary Arbitration Committee in accordance with the CBA between the parties. Upon the enactment
of RA 8042, the Migrant Workers and Overseas Filipinos Act of 1995, the case was transferred to the
Adjudication Branch of the National Labor Relations Commission.

LA dismissed the Complaint for want of jurisdiction. According to the Labor Arbiter, since the CBA of the
parties provided for the referral to a Voluntary Arbitration Committee should the Grievance Committee
fail to settle the dispute, and considering the mandate of Art. 261 of the Labor Code on the original and
exclusive jurisdiction of Voluntary Arbitrators, the Labor Arbiter clearly had no jurisdiction over the case.

NLRC set aside the decision of the Labor Arbiter on the ground that the record was clear that petitioner
had exhausted his remedy by submitting his case to the Grievance Committee of AMOSUP. Considering
however that he could not obtain any settlement he had to ventilate his case before the proper forum,
i.e., the Philippine Overseas Employment Administration. The NLRC further held that the contested
portion in the CBA providing for the intercession of a Voluntary Arbitrator was not binding upon petitioner
since both petitioner and private respondents had to agree voluntarily to submit the case before a
Voluntary Arbitrator or Panel of Voluntary Arbitrators. This would entail expenses as the Voluntary
Arbitrator chosen by the parties had to be paid.

The NLRC then remanded the case to the Labor Arbiter for further proceedings.

the Court of Appeals ruled in favor of private respondents. It held that the CBA "is the law between the
parties and compliance therewith is mandated by the express policy of the law." Hence, petitioner should
have followed the provision in the CBA requiring the submission of the dispute to the Voluntary
Arbitration Committee once the Grievance Committee failed to settle the controversy. According to the
Court of Appeals, the parties did not have the choice to "volunteer" to refer the dispute to the Voluntary
Arbitrator or a Panel of Arbitrators when there was already an agreement requiring them to do so.
"Voluntary Arbitration" means that it is binding because of a prior agreement or contract, while
"Compulsory Arbitration" is when the law declares the dispute subject to arbitration, regardless of the
consent or desire of the parties.

The Court of Appeals further held that the Labor Code itself enumerates the original and exclusive
jurisdiction of the Voluntary Arbitrator or Panel of Voluntary Arbitrators, and prohibits the NLRC and the
Regional Directors of the Department of Labor and Employment (DOLE) from entertaining cases falling
under the same. Thus, the fact that private respondents filed their Position Paper first before :ling their
Motion to Dismiss was immaterial and did not operate to confer jurisdiction upon the Labor Arbiter,
following the well-settled rule that jurisdiction is determined by law and not by consent or agreement of
the parties or by estoppel.

ISSUE:

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WON the dismissal of an employee constitute a "grievance between the parties," as defined under the
provisions of the CBA, and consequently, within the exclusive original jurisdiction of the Voluntary
Arbitrators, thereby rendering the NLRC without jurisdiction to decide the case. NO

HELD:
The case is primarily a termination dispute. It is clear from the claim/assistance request form submitted
by petitioner to AMOSUP that he was challenging the legality of his dismissal for lack of cause and lack of
due process. The issue of whether there was proper interpretation and implementation of the CBA
provisions comes into play only because the grievance procedure provided for in the CBA was not
observed after he sought his Union's assistance in contesting his termination. Thus, the question to be
resolved necessarily springs from the primary issue of whether there was a valid termination; without
this, then there would be no reason to invoke the need to interpret and implement the CBA provisions
properly.

In San Miguel Corp. v. National Labor Relations Commission this Court held that the phrase "all other labor
disputes" may include termination disputes provided that the agreement between the Union and the
Company states "in unequivocal language that [the parties] conform to the submission of termination
disputes and unfair labor practices to voluntary arbitration." Ergo, it is not sufficient to merely say that
parties to the CBA agree on the principle that "all disputes" should first be submitted to a Voluntary
Arbitrator. There is a need for an express stipulation in the CBA that illegal termination disputes should
be resolved by a Voluntary Arbitrator or Panel of Voluntary Arbitrators, since the same fall within a special
class of disputes that are generally within the exclusive original jurisdiction of Labor Arbiters by express
provision of law. Absent such express stipulation, the phrase "all disputes" should be construed as limited
to the areas of conflict traditionally within the jurisdiction of Voluntary Arbitrators, i.e., disputes relating
to contract-interpretation, contract-implementation, or interpretation or enforcement of company
personnel policies. Illegal termination disputes — not falling within any of these categories — should then
be considered as a special area of interest governed by a specific provision of law.

In this case, however, while the parties did agree to make termination disputes the proper subject of
voluntary arbitration, such submission remains discretionary upon the parties. A perusal of the CBA
provisions shows that Sec. 6, Art. XII (Grievance Procedure) of the CBA is the general agreement of the
parties to refer grievances, disputes or misunderstandings to a grievance committee, and henceforth, to
a voluntary arbitration committee. The requirement of specificity is fulfilled by Art. XVII (Job Security)
where the parties agreed —
Sec. 4. . . . Transfer, lay-off or discipline of seamen for incompetence, inefficiency, neglect of work,
bad behavior, perpetration of crime, drunkenness, insubordination, desertion, violation of . . .
regulations of any port touched by the Company's vessel/s and other just and proper causes shall
be at Master's discretion . . . in the high seas or foreign ports. The Master shall refer the
case/dispute upon reaching port and if not satisfactorily settled, the case/dispute may be referred
to the grievance machinery or procedure hereinafter provided

The use of the word "may" shows the intention of the parties to reserve the right to submit the illegal
termination dispute to the jurisdiction of the Labor Arbiter, rather than to a Voluntary Arbitrator.
Petitioner validly exercised his option to submit his case to a Labor Arbiter when he filed his Complaint
before the proper government agency.

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The Court had held in San Miguel Corp. v. NLRC 28 that neither officials nor tribunals can assume
jurisdiction in the absence of an express legal conferment. In the same manner, petitioner cannot arrogate
into the powers of Voluntary Arbitrators the original and exclusive jurisdiction of Labor Arbiters over
unfair labor practices, termination disputes, and claims for damages, in the absence of an express
agreement between the parties in order for Art. 262 of the Labor Code to apply in the case at bar. In other
words, the Court of Appeals is correct in holding that Voluntary Arbitration is mandatory in character if
there is a specific agreement between the parties to that effect. It must be stressed however that, in the
case at bar, the use of the word " may" shows the intention of the parties to reserve the right of recourse
to Labor Arbiters.

It may be observed that under Policy Instruction No. 56 of the Secretary of Labor, dated 6 April 1993,
"Clarifying the Jurisdiction Between Voluntary Arbitrators and Labor Arbiters Over Termination Cases and
Providing Guidelines for the Referral of Said Cases Originally Filed with the NLRC to the NCMB," termination
cases arising in or resulting from the interpretation and implementation of collective bargaining
agreements and interpretation and enforcement of company personnel policies which were initially
processed at the various steps of the plant-level Grievance Procedures under the parties' collective
bargaining agreements fall within the original and exclusive jurisdiction of the voluntary arbitrator
pursuant to Art. 217 (c) and Art. 261 of the Labor Code; and, if filed before the Labor Arbiter, these cases
shall be dismissed by the Labor Arbiter for lack of jurisdiction and referred to the concerned NCMB Regional
Branch for appropriate action towards an expeditious selection by the parties of a Voluntary Arbitrator or
Panel of Arbitrators based on the procedures agreed upon in the CBA.

As earlier stated, the instant case is a termination dispute falling under the original and exclusive
jurisdiction of the Labor Arbiter, and does not specifically involve the application, implementation or
enforcement of company personnel policies contemplated in Policy Instruction No. 56. Consequently,
Policy Instruction No. 56 does not apply in the case at bar. In any case, private respondents never invoked
the application of Policy Instruction No. 56 in their Position Papers, neither did they raise the question in
their Motion to Dismiss which they filed nine (9) months after the filling of their Position Papers. At this
late stage of the proceedings, it would not serve the ends of justice if this case is referred back to a
Voluntary Arbitrator considering that both the AMOSUP and private respondents have submitted to the
jurisdiction of the Labor Arbiter by filling their respective Position Papers and ignoring the grievance
procedure set forth in their CBA.

The private respondents should not have waited for nine (9) months from the :ling of their Position Paper
with the POEA before it moved to dismiss the case purportedly for lack of jurisdiction. As it is, private
respondents are deemed to have waived their right to question the procedure followed by petitioner,
assuming that they have the right to do so.

NOTES:
the original and exclusive jurisdiction of Labor Arbiters, Art. 217 of the Labor Code provides —

Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide
within thirty (30) calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases involving all workers,
whether agricultural or non-agricultural: (1) Unfair labor practice cases; (2) Termination disputes;
(3) If accompanied with a claim for reinstatement, those cases that workers may :le involving

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 wages, rates of pay, hours of work and other terms and conditions of employment; (4) Claims for
actual, moral, exemplary and other forms of damages arising from the employer-employee
relations; (5) Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and, (6) Except claims for Employees Compensation,
Social Security, Medicare and maternity bene:ts, all other claims arising from employer-employee
relations, including those of persons in domestic or household service, involving an amount
exceeding :ve thousand pesos (P5,000.00) regardless of whether accompanied with a claim for
reinstatement.

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

(c) Cases arising from the interpretation of collective bargaining agreements and those arising
from the interpretation or enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may
be provided in said agreements (italics supplied).

However, any or all of these cases may, by agreement of the parties, be submitted to a Voluntary
Arbitrator or Panel of Voluntary Arbitrators for adjudication. Articles 261 and 262 of the Labor Code
provide —

Art. 261. Jurisdiction of Voluntary Arbitrators or Panel of Voluntary Arbitrators. — The Voluntary
Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear
and decide all unresolved grievances arising from the interpretation or implementation of the
Collective Bargaining Agreement and those arising from the interpretation or enforcement of
company personnel policies referred to in the immediately preceding article. Accordingly,
violations of a Collective Bargaining Agreement, except those which are gross in character, shall
no longer be treated as unfair labor practice and shall be resolved as grievances under the
Collective Bargaining Agreement. For purposes of this article, gross violations of Collective
Bargaining Agreement shall mean Eagrant and/or malicious refusal to comply with the economic
provisions of such agreement.
The Commission, its Regional ODces and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original
jurisdiction of the Voluntary Arbitrator or panel of Voluntary Arbitrators and shall immediately
dispose and refer the same to the Grievance Machinery or Voluntary Arbitration provided in the
Collective Bargaining Agreement.

Art. 262. Jurisdiction Over Other Labor Disputes. — The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks

University of Immaculate Concepcion vs NLRC

FACTS:

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Petitioner University of the Immaculate Conception is a private educational institution located in Davao
City. Private respondent Teodora C. Axalan is a regular faculty member in the university holding the
position of Associate Professor II. Aside from being a regular faculty member, Axalan is the elected
president of the employees' union.

From 18 November to 22 November 2002, Axalan attended a seminar in Quezon City on website
development. Axalan then received a memorandum from Dean Maria Rosa Celestial asking her to explain
in writing why she should not be dismissed for having been absent without official leave.

In her letter, Axalan claimed that she held online classes while attending the seminar. She explained that
she was under the impression that faculty members would not be marked absent even if they were not
physically present in the classroom as long as they conducted online classes.

In reply, 8 Dean Celestial relayed to Axalan the message of the university president that no administrative
charge would be Bled if Axalan would admit having been absent without official leave and write a letter
of apology seeking forgiveness.

Convinced that she could not be deemed absent since she held online classes, Axalan opted not to write
the letter of admission and contrition the university president requested. The Dean wrote Axalan that the
university president had created an ad hoc grievance committee to investigate the AWOL charge.

From 28 January to 3 February 2003, Axalan attended a seminar in Baguio City on advanced paralegal
training. Dean Celestial wrote Axalan informing her that her participation in the paralegal seminar in
Baguio City was the subject of a second AWOL charge. The dean asked Axalan to explain in writing why
no disciplinary action should be taken against her.

In her letter, Axalan explained that before going to Baguio City for the seminar, she sought the approval
of Vice-President for Academics Alicia Sayson. In a letter, 14 VP Sayson denied having approved Axalan's
application for official leave. The VP stated in her letter that it was the university president, Maria
Assumpta David, who must approve the application.

After conducting hearings and receiving evidence, the ad hoc grievance committee found Axalan to have
incurred AWOL on both instances and recommended that Axalan be suspended without pay for six
months on each AWOL charge.

In a letter, the university president informed Axalan that the total penalty of one-year suspension without
pay for both AWOL charges would be effective immediately.

On 1 December 2003, Axalan filed a complaint against the university for illegal suspension, constructive
dismissal, reinstatement with backwages, and unfair labor practice with prayer for damages and
attorney's fees.

the Labor Arbiter held that there being no existing collective bargaining agreement between the parties,
no grievance machinery was constituted, which barred resort to voluntary arbitration.

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Labor Arbiter rendered a Decision holding that the suspension of Axalan amounted to constructive
dismissal entitling her to reinstatement and payment of backwages, salary differentials, damages, and
attorney's fees.

The NLRC held that the Labor Arbiter, not the voluntary arbitrator, had jurisdiction as the controversy did
not pertain to a dispute involving the union and the university.

NLRC Commissioner Jovito C. Cagaanan, in his dissenting opinion, stressed that the parties previously
agreed to submit the dispute to voluntary arbitration, which cast doubt on the jurisdiction of the Labor
Arbiter.

The Court of Appeals affirmed the findings of the Labor Arbiter and the NLRC. In its 13 December 2007
Decision, the Court of Appeals dismissed the university’s petition

ISSUE:
WON the voluntary arbitrator had jurisdiction over the labor dispute. YES

HELD:
Article 217 of the Labor Code states that unfair labor practices and termination disputes fall within the
original and exclusive jurisdiction of the Labor Arbiter.

Article 262 of the same Code provides the exception:

ART. 262. Jurisdiction over other labor disputes. — The Voluntary Arbitrator or panel of Voluntary
Arbitrators, upon agreement of the parties , shall also hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks.

In San Miguel Corp. v. NLRC, 26 the Court ruled that for the exception to apply, there must be agreement
between the parties clearly conferring jurisdiction to the voluntary arbitrator. Such agreement may be
stipulated in a collective bargaining agreement. However, in the absence of a collective bargaining
agreement, it is enough that there is evidence on record showing the parties have agreed to resort to
voluntary arbitration.

As can be gleaned from the transcript of stenographic notes of the administrative hearing held on 20
February 2003, the parties in this case clearly agreed to resort to voluntary arbitration.

Thus, the Labor Arbiter should have immediately disposed of the complaint and referred the same to the
voluntary arbitrator when the university moved to dismiss the complaint for lack of jurisdiction.

No less than Section 3, Article XIII of the Constitution declares as state policy the preferential use of
voluntary modes in settling disputes, to wit:

Sec. 3. . . . The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes , including conciliation,
and shall enforce their mutual compliance therewith to foster industrial peace.

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The Court recognizes the right of employers to discipline its employees for serious violations of company
rules after affording the latter due process and if the evidence warrants. The university, after affording
Axalan due process and finding her guilty of incurring AWOL on two separate occasions, acted well within
the bounds of labor laws in imposing the penalty of six-month suspension without pay for each incidence
of AWOL.

NOTES:
Issue on constructive dismissal

constructive dismissal occurs when there is cessation of work because continued employment is rendered
impossible, unreasonable, or unlikely as when there is a demotion in rank or diminution in pay or when a
clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee leaving
the latter with no other option but to quit. 29

In this case however, there was no cessation of employment relations between the parties. It is unrefuted
that Axalan promptly resumed teaching at the university right after the expiration of the suspension
period. In other words, Axalan never quit. Hence, Axalan cannot claim that she was left with no choice but
to quit, a crucial element in a finding of constructive dismissal.

There being no constructive dismissal, there is no legal basis for the Labor Arbiter's order of reinstatement
as well as payment of backwages, salary differentials, damages, and attorney's fees. Thus, the third issue
raised in the petition is now moot. There being no constructive dismissal, there is no legal basis for the
Labor Arbiter's order of reinstatement as well as payment of backwages, salary differentials, damages,
and attorney's fees. Thus, the third issue raised in the petition is now moot.

Austria vs NLRC

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

The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight (28)
years from 1963 to 1991. 2 He began his work with the SDA on 15 July 1963 as a literature evangelist,
selling literature of the SDA over the island of Negros. From then on, petitioner worked his way up the
ladder and got promoted several times. In January, 1968, petitioner became the Assistant Publishing
Director in the West Visayan Mission of the SDA. In July, 1972, he was elevated to the position of Pastor
in the West Visayan Mission. Petitioner held the same position up to 1988. Finally, in 1989, petitioner was
promoted as District Pastor of the Negros Mission of the SDA In January, 1991, petitioner was transferred
to Bacolod City. He held the position of district pastor until his services were terminated on 31 October
1991.

On various occasions from August up to October, 1991, petitioner received several communications 3
from Mr. Eufronio Ibesate, the treasurer of the Negros Mission asking him to admit accountability and

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responsibility for the church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his district
which amounted to P15,078.10, and to remit the same to the Negros Mission

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

petitioner went to the oNce of Pastor Buhat, the president of the Negros Mission. During said call,
petitioner tried to persuade Pastor Buhat to convene the Executive Committee for the purpose of settling
the dispute between him and the private respondent, Pastor David Rodrigo. Pastor Buhat denied the
request of petitioner since some committee members were out of town and there was no quorum.
Thereafter, the two exchanged heated arguments. Eventually, petitioner banged the attaché case of
Pastor Buhat on the table, scattered the books in his oNce, and threw the phone.

petitioner received a letter 8 inviting him and his wife to attend the Executive Committee meeting at the
Negros Mission Conference Room on 21 October 1991, at nine in the morning. To be discussed in the
meeting were the non-remittance of church collection and the events that transpired on 16 October 1991.

on 29 October 1991, petitioner received a letter of dismissal citing misappropriation of denominational

funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of
an offense against the person of employer's duly authorized representative, as grounds for the
termination of his services.

petitioner filed a complaint on 14 November 1991, before the Labor Arbiter for illegal dismissal against
the SDA. LA decided in favor of the petitioner.

the NLRC vacated the Endings of the Labor Arbiter. Petitioner filed a motion for reconsideration of the
above-named decision. On 18 July 1995, the NLRC issued a Resolution reversing its original decision.

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

The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the argument
posed by private respondents and, accordingly, dismissed the complaint of petitioner.

Hence, the recourse to this Court by petitioner.

After the filling of the petition, the Court ordered the OSG to fille its comment on behalf of public
respondent NLRC. Interestingly, the OSG filed a manifestation and motion in lieu of comment 16 setting
forth its stand that it cannot sustain the resolution of the NLRC. In its manifestation, the OSG submits that
the termination of petitioner from his employment may be questioned before the NLRC as the same is
secular in nature, not ecclesiastical.

ISSUE:

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 1. WON the LA has jurisdiction over the case. YES
2. WON the termination of the services of petitioner is an ecclesiastical affair, and, as such, involves
the separation of church and state. NO
3. WON the termination is valid. NO.

HELD:
1 & 2. Labor Arbiter has jurisdiction cause it is not an ecclesiastical affair.
The rationale of the principle of the separation of church and state is summed up in the familiar saying,
"Strong fences make good neighbors." The idea advocated by this principle is to delineate the boundaries
between the two institutions and thus avoid encroachments by one against the other because of a
misunderstanding of the limits of their respective exclusive jurisdictions. The demarcation line calls on the
entities to "render therefore unto Ceasar the things that are Ceasar's and unto God the things that are
God's." While the State is prohibited from interfering in purely ecclesiastical affairs, the Church is likewise
barred from meddling in purely secular matters.

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

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

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SDA, as employer, rightfully exercised its management prerogative to dismiss an employee. This is in
consonance with the mandate of the Constitution to afford full protection to labor.

Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough
to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on post-
employment states that "the provisions of this Title shall apply to all establishments or undertakings,
whether for proEt or not." Obviously, the cited article does not make any exception in favor of a religious
corporation. This is made more evident by the fact that the Rules Implementing the Labor Code,
particularly, Section 1, Rule 1, Book VI on the Termination of Employment and Retirement, categorically
includes religious institutions in the coverage of the law, to wit:

SECTION 1. Coverage. — This Rule shall apply to all establishments and undertakings, whether
operated for proEt or not, including educational, medical, charitable and religious institutions and
organizations, in cases of regular employment with the exception of Government and its political
subdivisions including government-owned or controlled corporations.

With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of
separation of church and state to avoid its responsibilities as an employer under the Labor Code.

3.Illegal Termination
In termination cases, the settled rule is that the burden of proving that the termination was for a valid or
authorized cause rests on the employer. hus, private respondents must not merely rely on the weaknesses
of petitioner's evidence but must stand on the merits of their own defense.

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

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

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

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

From the tenor of the letter, it cannot be presumed that petitioner was actually on the verge of dismissal.
The alleged grounds for the dismissal of petitioner from the service were only revealed to him when the
actual letter of dismissal was finally issued. For this reason, it cannot be said that petitioner was given
enough opportunity to properly prepare for his defense. While admittedly, private respondents complied
with the second requirement, the notice of termination, this does not cure the initial defect of lack of the
proper written charge required by law.

In the letter of termination, 37 dated 29 October 1991, private respondents enumerated the following as
grounds for the dismissal of petitioner, namely: misappropriation of denominational funds, willful breach
of trust, serious misconduct, gross and habitual neglect of duties, and commission of an offense against
the person of employer's duly authorized representative. Breach of trust and misappropriation of
denominational funds refer to the alleged failure of petitioner to remit to the treasurer of the Negros
Mission tithes, collections and offerings amounting to P15,078.10 which were collected by his wife, Mrs.
Thelma Austria, in the churches under his jurisdiction. On the other hand, serious misconduct and
commission of an offense against the person of the employer's duly authorized representative pertain to
the 16 October 1991 incident wherein petitioner allegedly committed an act of violence in the oNce of
Pastor Gideon Buhat. The final ground invoked by private respondents is gross and habitual neglect of
duties allegedly committed by petitioner.

We cannot sustain the validity of dismissal based on the ground of breach of trust. Private respondents
allege that they have lost their confidence in petitioner for his failure, despite demands, to remit the tithes
and offerings amounting to P15,078.10, which were collected in his district. A careful study of the
voluminous records of the case reveals that there is simply no basis for the alleged loss of confidence and
breach of trust. Settled is the rule that under Article 282 (c) of the Labor Code, the breach of trust must
be willful. A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse,
as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. 38 It must rest on
substantial grounds and not on the employer's arbitrariness, whims, caprices or suspicion; otherwise, the
employee would eternally remain at the mercy of the employer. 39 It should be genuine and not
simulated. This ground has never been intended to afford an occasion for abuse, because of its subjective
nature.

Though private respondents were able to establish that petitioner collected and received tithes and
donations several times, they were not able to establish that petitioner failed to remit the same to the
Negros Mission, and that he pocketed the amount and used it for his personal purpose. In fact, as admitted
by their own witness, petitioner remitted the amounts which he collected to the Negros Mission for which
corresponding receipts were issued to him. Thus, the allegations of private respondents that petitioner
breached their trust have no leg to stand on.

First of all, as proven by convincing and substantial evidence consisting of the testimonies of the witnesses
for private respondents who are church treasurers, it was Mrs. Thelma Austria who actually collected the

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tithes and donations from them, and, who failed to remit the same to the treasurer of the Negros Mission.
Hence, in the absence of conspiracy and collusion, which private respondents failed to demonstrate,
between petitioner and his wife, petitioner cannot be made accountable for the alleged infraction
committed by his wife. After all, they still have separate and distinct personalities. For this reason, the
Labor Arbiter found it difficult to see the basis for the alleged loss of confidence and breach of trust. The
Court does not find any cogent reason, therefore, to digress from the Endings of the Labor Arbiter which
is fully supported by the evidence on record.

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

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

The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect of
duties, does not require an exhaustive discussion

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

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Reyes vs RTC Makati

FACTS:
Oscar and private respondent Rodrigo C. Reyes (Rodrigo) are two of the four children of the spouses Pedro
and Anastacia Reyes. Pedro, Anastacia, Oscar, and Rodrigo each owned shares of stock of Zenith Insurance
Corporation (Zenith), a domestic corporation established by their family. Pedro died in 1964, while
Anastacia died in 1993. Although Pedro's estate was judicially partitioned among his heirs sometime in
the 1970s, no similar settlement and partition appear to have been made with Anastacia's estate, which
included her shareholdings in Zenith.

On May 9, 2000, Zenith and Rodrigo Fled a complaint 4 with the Securities and Exchange Commission
(SEC) against Oscar, docketed as SEC Case No. 05-00-6615. The complaint stated that it is "a derivative
suit initiated and Fled by the complainant Rodrigo C. Reyes to obtain an accounting of the funds and assets
of ZENITH INSURANCE CORPORATION which are now or formerly in the control, custody, and/or
possession of respondent [herein petitioner Oscar] and to determine the shares of stock of deceased
spouses Pedro and Anastacia Reyes that were arbitrarily and fraudulently appropriated [by Oscar] for
himself [and] which were not collated and taken into account in the partition, distribution, and/or
settlement of the estate of the deceased spouses, for which he should be ordered to account for all the
income from the time he took these shares of stock, and should now deliver to his brothers and sisters
their just and respective shares."

Oscar questioned the SEC's jurisdiction to entertain the complaint because it pertains to the settlement
of the estate of Anastacia Reyes.

When Republic Act (R.A.) No. 8799 7 took effect, the SEC's exclusive and original jurisdiction over cases
enumerated in Section 5 of Presidential Decree (P.D.) No. 902-A was transferred to the RTC designated as
a special commercial court. 8 The records of Rodrigo's SEC case were thus turned over to the RTC

On October 22, 2002, Oscar Fled a Motion to Declare Complaint as Nuisance or Harassment Suit. 9 He
claimed that the complaint is a mere nuisance or harassment suit and should, according to the Interim
Rules of Procedure for Intra-Corporate Controversies, be dismissed. RTC and CA denied the petition.

ISSUE:
WON the trial court, sitting as a special commercial court, has jurisdiction over the subject matter of
Rodrigo's complaint. NO

HELD:
P.D. No. 902-A enumerates the cases over which the SEC (now the RTC acting as a special commercial
court) exercises exclusive jurisdiction:

SEC. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnership, and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction
to hear and decide cases involving:

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

b) Controversies arising out of intra-corporate or partnership relations, between and among

stockholders, members, or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members, or associates, respectively;
and between such corporation, partnership or association and the State insofar as it concerns
their individual franchise or right to exist as such entity; and

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

such corporations, partnerships, or associations.

The allegations set forth in Rodrigo's complaint principally invoke Section 5, paragraphs (a) and (b) above
as basis for the exercise of the RTC's special court jurisdiction. Our focus in examining the allegations of
the complaint shall therefore be on these two provisions.
Fraudulent Devices and Schemes
The rule is that a complaint must contain a plain, concise, and direct statement of the ultimate facts
constituting the plaintiff's cause of action and must specify the relief sought. Section 5, Rule 8 of the
Revised Rules of Court provides that in all averments of fraud or mistake, the circumstances constituting
fraud or mistake must be stated with particularity . These rules Find specific application to Section 5 (a) of
P.D. No. 902-A which speaks of corporate devices or schemes that amount to fraud or misrepresentation
detrimental to the public and/or to the stockholders.

Allegations of deceit, machination, false pretenses, misrepresentation, and threats are largely conclusions
of law that, without supporting statements of the facts to which the allegations of fraud refer, do not
sufficiently state an effective cause of action. 15 The late Justice Jose Feria, a noted authority in Remedial
Law, declared that fraud and mistake are required to be averred with particularity in order to enable the
opposing party to controvert the particular facts allegedly constituting such fraud or mistake. 16

Tested against these standards, we find that the charges of fraud against Oscar were not properly
supported by the required factual allegations. While the complaint contained allegations of fraud
purportedly committed by him, these allegations are not particular enough to bring the controversy within
the special commercial court's jurisdiction; they are not statements of ultimate facts, but are mere
conclusions of law: how and why the alleged appropriation of shares can be characterized as "illegal and
fraudulent" were not explained nor elaborated on.

Not every allegation of fraud done in a corporate setting or perpetrated by corporate officers will bring
the case within the special commercial court's jurisdiction. To fall within this jurisdiction, there must be
sufficient nexus showing that the corporation's nature, structure, or powers were used to facilitate the
fraudulent device or scheme. Contrary to this concept, the complaint presented a reverse situation. No
corporate power or office was alleged to have facilitated the transfer of the shares; rather, Oscar, as an
individual and without reference to his corporate personality, was alleged to have transferred the shares
of Anastacia to his name, allowing him to become the majority and controlling stockholder of Zenith, and
eventually, the corporation's President.

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In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute a ground for
dismissal since such defect can be cured by a bill of particulars. In cases governed by the Interim Rules of
Procedure on Intra-Corporate Controversies, however, a bill of particulars is a prohibited pleading. 17 It
is essential, therefore, for the complaint to show on its face what are claimed to be the fraudulent
corporate acts if the complainant wishes to invoke the court's special commercial jurisdiction.

Intra-Corporate Controversy
Initially, the main consideration in determining whether a dispute constitutes an intra-corporate
controversy was limited to a consideration of the intra-corporate relationship existing between or among
the parties. 19 The types of relationships embraced under Section 5 (b), as declared in the case of Union
Glass & Container Corp. v. SEC, 20 were as follows:
1. between the corporation, partnership, or association and the public;
2. between the corporation, partnership, or association and its stockholders, partners,
members, or officers;
3. between the corporation, partnership, or association and the State as far as its franchise,
permit or license to operate is concerned; and
4. among the stockholders, partners, or associates

The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction to the SEC,
regardless of the subject matter of the dispute. This came to be known as the relationship test .

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., 21 the Court
introduced the nature of the controversy test . We declared in this case that it is not the mere existence
of an intra-corporate relationship that gives rise to an intra-corporate controversy; to rely on the
relationship test alone will divest the regular courts of their jurisdiction for the sole reason that the dispute
involves a corporation, its directors, officers, or stockholders. We saw that there is no legal sense in
disregarding or minimizing the value of the nature of the transactions which gives rise to the dispute.

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. 22 The controversy must
not only be rooted in the 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 corporation. If the relationship and its incidents are merely
incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no
intra-corporate controversy exists.

The Court then combined the two tests and declared that jurisdiction should be determined by
considering not only the status or relationship of the parties, but also the nature of the question under
controversy. This two-tier test was adopted in the recent case of Speed Distribution, Inc. v. Court of
Appeals:

To determine whether a case involves an intra-corporate controversy, and is to be heard and

decided by the 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.

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 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 stockholders, members or associates; between any or all of them and the
corporation, partnership, or association of which they are stockholders, members, or associates,
respectively; and between such corporation, partnership, or association and the State insofar as
it concerns their individual 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 matters that are purely civil in character, necessarily, the case does not
involve an intra-corporate controversy.

Rodrigo must, therefore, hurdle two obstacles before he can be considered a stockholder of Zenith with
respect to the shareholdings originally belonging to Anastacia. First, he must prove that there are
shareholdings that will be left to him and his co-heirs, and this can be determined only in a settlement of
the decedent's estate. No such proceeding has been commenced to date. Second, he must register the
transfer of the shares allotted to him to make it binding against the corporation. He cannot demand that
this be done unless and until he has established his specific allotment (and prima facie ownership) of the
shares. Without the settlement of Anastacia's estate, there can be no definite partition and distribution
of the estate to the heirs. Without the partition and distribution, there can be no registration of the
transfer. And without the registration, we cannot consider the transferee-heir a stockholder who may
invoke the existence of an intra-corporate relationship as premise for an intra-corporate controversy
within the jurisdiction of a special commercial court.

In sum, we Find that — insofar as the subject shares of stock ( i.e., Anastacia's shares) are concerned —
Rodrigo cannot be considered a stockholder of Zenith. Consequently, we cannot declare that an intra-
corporate relationship exists that would serve as basis to bring this case within the special commercial
court's jurisdiction under Section 5 (b) of P.D. 902-A, as amended. Rodrigo's complaint, therefore, fails the
relationship test.

Another significant indicator that points us to the real nature of the complaint are Rodrigo's repeated
claims of illegal and fraudulent transfers of Anastacia's shares by Oscar to the prejudice of the other heirs
of the decedent; he cited these allegedly fraudulent acts as basis for his demand for the collation and
distribution of Anastacia's shares to the heirs. These claims tell us unequivocally that the present
controversy arose from the parties' relationship as heirs of Anastacia and not as shareholders of Zenith.
Rodrigo, in Fling the complaint, is enforcing his rights as a co-heir and not as a stockholder of Zenith. The
injury he seeks to remedy is one suffered by an heir (for the impairment of his successional rights) and
not by the corporation nor by Rodrigo as a shareholder on record.

That an accounting of the funds and assets of Zenith to determine the extent and value of Anastacia's
shareholdings will be undertaken by a probate court and not by a special commercial court is completely
consistent with the probate court's limited jurisdiction

In sum, we hold that the nature of the present controversy is not one which may be classified as an intra-
corporate dispute and is beyond the jurisdiction of the special commercial court to resolve. In short,
Rodrigo's complaint also fails the nature of the controversy test.

NOTES:
Derivative Suit

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Rodrigo's bare claim that the complaint is a derivative suit will not su? ce to confer jurisdiction on the RTC
(as a special commercial court) if he cannot comply with the requisites for the existence of a derivative
suit. These requisites are:

1. the party bringing suit should be a shareholder during the time of the act or transaction
complained of, the number of shares not being material;
2. the party has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board
of directors for the appropriate relief, but the latter has failed or refused to heed his plea; and
3. the cause of action actually devolves on the corporation; the wrongdoing or harm having been
or being caused to the corporation and not to the particular stockholder bringing the suit. 34

Based on these standards, we hold that the allegations of the present complaint do not amount to a
derivative suit.

First, as already discussed above, Rodrigo is not a shareholder with respect to the shareholdings originally
belonging to Anastacia; he only stands as a transferee-heir whose rights to the share are inchoate and
unrecorded. With respect to his own individually-held shareholdings, Rodrigo has not alleged any
individual cause or basis as a shareholder on record to proceed against Oscar.

Second, in order that a stockholder may show a right to sue on behalf of the corporation, he must allege
with some particularity in his complaint that he has exhausted his remedies within the corporation by
making a sufficient demand upon the directors or other officers for appropriate relief with the expressed
intent to sue if relief is denied. 35 Paragraph 8 of the complaint hardly satisfies this requirement since
what the rule contemplates is the exhaustion of remedies within the corporate setting:

8. As members of the same family, complainant Rodrigo C. Reyes has resorted [to] and exhausted
all legal means of resolving the dispute with the end view of amicably settling the case, but the
dispute between them ensued.

Lastly, we Find no injury, actual or threatened, alleged to have been done to the corporation due to
Oscar's acts. If indeed he illegally and fraudulently transferred Anastacia's shares in his own name, then
the damage is not to the corporation but to his co-heirs; the wrongful transfer did not affect the capital
stock or the assets of Zenith. As already mentioned, neither has Rodrigo alleged any particular cause or
wrongdoing against the corporation that he can champion in his capacity as a shareholder on record

Locsin vs Nissan Lease Phils Inc,

FACTS:
Locsin was elected Executive Vice President and Treasurer (EVP/Treasurer) of NCLPI. As EVP/Treasurer,
his duties and responsibilities included: (1) the management of the finances of the company; (2) carrying
out the directions of the President and/or the Board of Directors regarding financial management; and (3)
the preparation of financial reports to advise the officers and directors of the financial condition of NCLPI.
Locsin 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.

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a little over seven (7) months after his election as Chairman of the Board, the NCLPI Board held a special
meeting at the Manila Polo Club. One of the items of the agenda was the election of a new set of officers.
Unfortunately, Locsin was neither re-elected Chairman nor reinstated to his previous position as
EVP/Treasurer

Locsin filed a complaint for illegal dismissal with prayer for reinstatement, payment of backwages,
damages and attorney's fees before the Labor Arbiter

NCLPI and Banson filed a Motion to Dismiss, on the ground that the Labor Arbiter did not have jurisdiction
over the case since the issue of Locsin's removal as EVP/Treasurer involves an intra-corporate dispute.

Labor Arbiter Concepcion issued an Order denying the Motion to Dismiss, holding that her office
acquired "jurisdiction to arbitrate and/or decide the instant complaint finding extant in the case
an employer-employee relationship."

NCLPI, on June 3, 2008, elevated the case to the CA through a Petition for Certiorari under Rule 65 of the
Rules of Court.

The CA Decision - Locsin was a corporate officer; the issue of his removal as EVP/Treasurer is an intra-
corporate dispute under the RTC's jurisdiction.

ISSUE:
WON there is employer employee relationship, hence LA have jurisdiction. No

HELD:
the CA correctly ruled that no employer-employee relationship exists between Locsin and Nissan.

Locsin was undeniably Chairman and President, and was elected to these positions by the Nissan board
pursuant to 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 corporation who are given that character either by the Corporation Code
or by the corporation's by-laws." Likewise, Section 25 of Batas Pambansa Blg. 69, or the Corporation Code
of the Philippines (Corporation Code) provides that corporate officers are the president , secretary,
treasurer and such other officers as may be provided for in the by-laws .

In Okol v. Slimmers World International, Relations Commission, citing Tabang v. National Labor we held -

x x x an "office" is created by the charter of the corporation and the officer is elected by the
directors or stockholders . On the other hand, an "employee" usually occupies no office and
generally is employed not by action of the directors or stockholders but by the managing officer
of the corporation who also determines the compensation to be paid to such employee.
[Emphasis supplied.]

In this case, Locsin was elected by the NCLPI Board, in accordance with the Amended By-Laws of the
corporation. The following factual determination by the CA is elucidating:

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 More important, private respondent failed to state any such "circumstance" by which the
petitioner corporation "engaged his services" as corporate officer that would make him an
employee. In the first place, the Vice-President/Treasurer was elected on an annual basis as
provided in the By-Laws, and no duties and responsibilities were stated by private respondent
which he discharged while occupying said position other than those specifically set forth in the
By-Laws or required of him by the Board of Directors. The unrebutted fact remains that private
respondent held the position of Executive Vice-President/Treasurer of petitioner corporation, a
position provided for in the latter's by-laws, by virtue of election by the Board of Directors, and
has functioned as such Executive VicePresident/Treasurer pursuant to the provisions of the said
By-Laws.

Given Locsin's status as a corporate officer, the RTC, not the Labor Arbiter or the NLRC, has jurisdiction to
hear the legality of the termination of his relationship with Nissan. As we also held in Okol, a corporate
officer’s dismissal from service is an intra-corporate dispute:

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 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.]

so that the RTC should exercise jurisdiction based on the following legal reasoning:

Prior to its amendment, Section 5(c) of Presidential Decree No. 902-A (PD 902-A) provided that
intra-corporate disputes fall within the jurisdiction of the Securities and Exchange Commission
(SEC):

Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange
Commission over corporations, partnerships and other forms of associations registered with it as
expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction
to hear and decide cases involving:
c) Controversies in the election or appointments of directors, trustees, officers or managers of
such corporations, partnerships or associations.

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

Under these circumstances, we have to give precedence to the merits of the case, and primacy to the
element of 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 jurisdiction has become obvious, based on the records
and the law .

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WESLEYAN UNIVERSITY-PHILIPPINES , petitioner, vs. GUILLERMO T. MAGLAYA, SR. , respondent.

FACTS:
WUP is a non-stock, non-pro6t, non-sectarian educational corporation duly organized and existing under
the Philippine laws on April 28, 1948.

Respondent Atty. Guillermo T. Maglaya, Sr. (Maglaya) was appointed as a corporate member on January
1, 2004, and was elected as a member of the Board of Trustees (Board) on January 9, 2004 — both for a
period of 5) years. On May 25, 2005, he was elected as President of the University for a 5 year term. He
was reelected as a trustee on May 25, 2007.

On March 25, 2009, Maglaya learned that the Bishops created an Ad Hoc Committee to plan the efficient
and orderly turnover of the administration of the WUP in view of the alleged "gentleman's agreement"
reached in December 2008, and that the Bishops have appointed the incoming corporate members and
trustees. He clarified that there was no agreement and any discussion of the turnover because the
corporate members still have valid and existing corporate terms.

On April 24, 2009, the Bishops, through a formal notice to all the officers, deans, staff, and employees of
WUP, introduced the new corporate members, trustees, and officers. In the said notice, it was indicated
that the new Board met, organized, and elected the new set of officers on April 20, 2009. 9 Manuel Palomo
(Palomo), the new Chairman of the Board, informed Maglaya of the termination of his services and
authority as the President of the University on April 27, 2009. 10

Thereafter, Maglaya and other former members of the Board (Plaintiffs) 6led a Complaint for Injunction
and Damages before the Regional Trial Court (RTC). The RTC dismissed the case declaring the same as a
nuisance or harassment suit prohibited under Section 1 (b), Rule 1 of the Interim Rules for Intra-Corporate
Controversies. The RTC observed that it is clear from the by-laws of WUP that insofar as membership in
the corporation is concerned, which can only be given by the College of Bishops of the United Methodist
Church, it is a precondition to a seat in the WUP Board. 15 Consequently, the expiration of the terms of
the plaintiffs, including Maglaya, as corporate members carried with it their termination as members of
the Board.

The CA, in a Decision 18 dated March 15, 2011, affirmed the decision of the RTC.

Maglaya filed on March 22, 2011 the present illegal dismissal case against WUP with the LA.

Meanwhile, this Court, in a Resolution dated June 13, 2011, denied the petition for review on certiorari
6led by Maglaya and the other former members of the Board for failure to show any reversible error in
the decision of the CA.

In a Decision 28 dated September 20, 2011, the Labor Arbiter (LA) ruled in favor of WUP. The LA held that
the action between employers and employees where the employer-employee relationship is merely
incidental is within the exclusive and original jurisdiction of the regular courts. 29 Since he was appointed
as President of the University by the Board, Maglaya was a corporate officer and not a mere employee.
The instant case involves intra-corporate dispute which was definitely beyond the jurisdiction of the labor
tribunal.

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NLRC reversed and set aside the Decision of the LA ruling that the illegal dismissal case falls within the
jurisdiction of the labor tribunals. Since the reasons for his termination cited by WUP were not among the
just causes provided under Article 282 33 (now Article 297) of the Labor Code, Maglaya was illegally
dismissed. The NLRC observed that the Board did not elect Maglaya, but merely appointed him.

Ruling in favor of Maglaya, the NLRC explicated that although the position of the President of the
University is a corporate office, the manner of Maglaya's appointment, and his duties, salaries, and
allowances point to his being an employee and subordinate.

In a Resolution, the CA dismissed the petition for certiorari 6led by WUP. The CA noted that the decision
and resolution of the NLRC became final and executory on March 16, 2013. Hence, this petition.

ISSUE:
WON the NLRC has jurisdiction over the illegal dismissal case filed by Maglaya. NO

HELD:
The president, vice-president, secretary and treasurer are commonly regarded as the principal or
executive officers of a corporation, and they are usually designated as the officers of the corporation.
However, other officers are sometimes created by the charter or by-laws of a corporation , or the board
of directors may be empowered under the by-laws of a corporation to create additional offices as may be
necessary. This Court expounded that an "office" is created by the charter of the corporation and the
officer is elected by the directors or stockholders, while an "employee" usually occupies no office and
generally is employed not by action of the directors or stockholders but by the managing officer of the
corporation who also determines the compensation to be paid to such employee.

From the foregoing, that the creation of the position is under the corporation's charter or by-laws, and
that the election of the officer is by the directors or stockholders must concur in order for an individual to
be considered a corporate officer, as against an ordinary employee or officer. It is only when the officer
claiming to have been illegally dismissed is classified as such corporate officer that the issue is deemed an
intra-corporate dispute which falls within the jurisdiction of the trial courts.

It is apparent from the By-laws of WUP that the president was one of the officers of the corporation, and
was an honorary member of the Board. He was appointed by the Board and not by a managing officer of
the corporation. We held that one who is included in the by-laws of a corporation in its roster of corporate
officers is an officer of said corporation and not a mere employee.

The alleged "appointment" of Maglaya instead of "election" as provided by the bylaws neither convert
the president of university as a mere employee, nor amend its nature as a corporate officer. With the
office specifically mentioned in the by-laws, the NLRC erred in taking cognizance of the case, and in
concluding that Maglaya was a mere employee and subordinate official because of the manner of his
appointment, his duties and responsibilities, salaries and allowances, and considering the Identification
Card, the Administration and Personnel Policy Manual which specified the retirement of the university
president, and the check disbursement as pieces of evidence supporting such finding.

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A corporate officer’s dismissal is always a corporate act, or an intra-corporate controversy which arises
between a stockholder and a corporation, and the nature is not altered by the reason or wisdom with
which the Board of Directors may have in taking such action. 59 The issue of the alleged termination
involving a corporate officer, not a mere employee, is not a simple labor problem but a matter that comes
within the area of corporate affairs and management and is a corporate controversy in contemplation of
the Corporation Code. 60

The long-established rule is that the jurisdiction over a subject matter is conferred by law. 61 Perforce,
Section 5 (c) of PD 902-A, as amended by Subsection 5.2, Section 5 of Republic Act No. 8799, which
provides that the regional trial courts exercise exclusive jurisdiction over all controversies in the election
or appointment of directors, trustees, officers or managers of corporations, partnerships or associations,
applies in the case at bar.

NOTES:
WUP alleges that while the NLRC decision became final and executory on March 16, 2013, it did not mean
that the said decision had become immutable and unalterable as the CA ruled.

Settled is the rule that while the decision of the NLRC becomes final and executory after the lapse of ten
calendar days from receipt thereof by the parties under Article 223 42 (now Article 229) of the Labor Code,
the adverse party is not precluded from assailing it via Petition for Certiorari under Rule 65 before the CA
and then to this Court via a Petition for Review under Rule 45.

Consequently, the remedy of the aggrieved party is to timely file a motion for reconsideration as a
precondition for any further or subsequent remedy , and then seasonably avail of the special civil action
of certiorari under Rule 65, for a period of sixty (60) days from notice of the decision.

Records reveal that WUP received the decision of the NLRC on May 12, 2012, and 6led its motion for
reconsideration on May 24, 2012. 46 WUP received the Resolution dated February 11, 2013 denying its
motion on March 12, 2013. Thereafter, it filed its petition for certiorari before the CA on March 26, 2013.

We find that the application of the doctrine of immutability of judgment in the case at bar is misplaced.
To reiterate, although the 10-day period for finality of the decision of the NLRC may already have lapsed
as contemplated in the Labor Code, this Court may still take cognizance of the petition for certiorari on
jurisdictional and due process considerations if 6led within the reglementary period under Rule 65. From
the abovementioned, WUP was able to discharge the necessary conditions in availing its remedy against
the final and executory decision of the NLRC.

Cacho vs North Star International Travel Inc.

FACTS:
In her Position Paper submitted before the Labor Arbiter, petitioner [Balagtas] alleged that she was a
former employee of respondent TQ3 Travel Solutions/North Star International Travel, Inc., a corporation
duly registered with the Securities and Exchange Commission (SEC) on February 12, 1990. She also alleged
that she was one of the original incorporators-directors of the said corporation and, when it started its

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operations in 1990, she was the General Manager and later became the Executive Vice President/Chief
Executive Officer.

On March 19, 2004 or after 14 years of service in the said corporation, petitioner was placed under 30
days preventive suspension pursuant to a Board Resolution passed by the Board of Directors of the
respondent Corporation due to her alleged questionable transactions.

On April 5, 2004, while under preventive suspension, petitioner wrote a letter to private respondent
Norma Cacho informing the latter that she was assuming her position as Executive Vice-President/Chief
Executive Officer effective on that date; however, she was prevented from re-assuming her position.

Labor Arbiter found that respondent Balagtas was illegally dismissed from North Star

NLRC ruled in favor of petitioner viz;

WHEREFORE, the questioned Decision of the Labor Arbiter is REVERSED and SET ASIDE and the
complaint is DISMISSED for lack of jurisdiction.

The NLRC's findings are as follows: First, through a Board resolution passed on March 31, 2003, Balagtas
was elected as North Star's Executive Vice President and Chief Executive Officer , as evidenced by a
Secretary's Certificate dated April 22, 2003. Second, in her Counter Affidavit executed sometime in 2004
in relation to the criminal charges against her, respondent Balagtas had in fact admitted occupying these
positions, apart from being one of North Star's incorporators. And, third, the position of " Vice President"
is a corporate office provided in North Star's by-laws.

Based on these findings, the NLRC ruled that respondent Balagtas was a corporate officer of North Star at
the time of her dismissal and not a mere employee . A corporate officer's dismissal is always an intra-
corporate controversy, a subject matter falling within the Regional Trial Court's (RTC) jurisdiction.

Court of Appeals found merit in Balagtas's petition, viz.:

WHEREFORE, the petition is hereby GRANTED. The assailed Resolution, dated September 30, 2008
of the National Labor Relations Commission dismissing the petitioner's complaint for lack of
jurisdiction, is hereby REVERSED and SET ASIDE. The Decision, dated March 28, 2005 of the Labor
Arbiter is AFFIRMED and this case is ordered REMANDED to the NLRC for the re-computation of
petitioner's backwages and attorney's fees in accordance with this Decision.

In ruling that the present case does not involve an intra-corporate controversy, the Court of Appeals
applied a two-tier test , viz.: (a) the relationship test , and (b) the nature of controversy test .

Applying the relationship test , the Court of Appeals explained that no intra-corporate relationship existed
between respondent Balagtas and North Star. While respondent Balagtas was North Star's Chief Executive
Officer and Executive Vice President, petitioners North Star and Cacho failed to establish that occupying
these positions made her a corporate officer. First, respondent Balagtas held the Chief Executive Officer
position as a mere corporate title for the purpose of enlarging North Star's corporate image. According to
North Star's by-laws, the company President shall assume the position of Chief Executive Officer. Thus,
respondent Balagtas was not empowered to exercise the functions of a corporate officer, which was

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lawfully delegated to North Star's President, petitioner Cacho. And, second, petitioner North Star's By-
laws only enumerate the position of Vice President as one of its corporate officers. The NLRC should not
have assumed that the Vice President position is the same as the Executive Vice President position that
respondent Balagtas admittedly occupied. Following Matling Industrial and Commercial Corporation v.
Coros, the appellate court reminded that "a position must be expressly mentioned in the by-laws in order
to be considered a corporate office."

On the other hand, the Court of Appeals elucidated that based on the allegations in herein respondent
Balagtas's complaint <led before the Labor Arbiter, the present case involved labor issues . Thus, even
using the nature of controversy test , it cannot be regarded as an intra-corporate dispute.

ISSUE:
WON the present case is an intra-corporate controversy within the jurisdiction of the regular courts or an
ordinary labor dispute that the Labor Arbiter may properly take cognizance of. REG COURT

HELD;
At the onset, We agree with the appellate court's ruling that a two-tier test must be employed to
determine whether an intra-corporate controversy exists in the present case, viz.: (a) the relationship test
, and (b) the nature of the controversy test .

A. Relationship Test
A dispute is considered an intra-corporate controversy under the relationship test when the relationship
between or among the disagreeing parties is any one of the following: (a) between the corporation,
partnership, or association and the public; (b) between the corporation , partnership, or association and
its stockholders , partners, members, or officers ; (c) between the corporation, partnership, or association
and the State as far as its franchise, permit or license to operate is concerned; and (d) among the
stockholders, partners, or associates themselves.

In the present case, petitioners Cacho and North Star allege that respondent Balagtas, as petitioner North
Star's Executive Vice President, was its corporate officer . On the other hand, while respondent Balagtas
admits to have occupied said position, she argues she was Executive Vice President merely by name and
she did not discharge any of the responsibilities lodged in a corporate officer.

Given the parties' conflicting views, We must now determine whether or not the Executive Vice President
position is a corporate office so as to establish the intra-corporate relationship between the parties.

In Easycall Communications Phils., Inc. v. King , 30 the Court ruled that a corporate office is created by the
charter of the corporation and the officer is elected thereto by the directors or stockholders. In other
words, one shall be considered a corporate officer only if two conditions are met, viz.: (1) the position
occupied was created by charter/by-laws , and (2) the officer was elected (or appointed) by the
corporation's board of directors to occupy said position.

Thus, by name, the Executive Vice President position is embraced by the phrase "one or more vice
president" in North Star's by-laws.`
rule is that corporate officers are those officers of a corporation who are given that character either by
the Corporation Code or by the corporation's bylaws .

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Section 25 of the Corporation Code an explicitly provides for the election of the corporation's president,
treasurer, secretary, and such other officers as may be provided for in the by-laws . In interpreting this
provision, the Court has ruled that if the position is other than the corporate president, treasurer, or
secretary, it must be expressly mentioned in the by-laws in order to be considered as a corporate office.

Consequently, the next question that begs to be asked is whether or not the phrase " one or more vice
president" in the above-cited provision of the bylaws includes the Executive Vice President position held
by respondent Balagtas.

The use of the phrase "one or more" in relation to the establishment of vice president positions without
particular exception indicates an intention to give petitioner North Star's Board ample freedom to make
several vice-president positions available as it may deem fit and in consonance with sound business
practice.

Thus, by name, the Executive Vice President position is embraced by the phrase "one or more vice
president" in North Star's by-laws.

Thus, by name, the Executive Vice President position is embraced by the phrase "one or more vice
president" in North Star's by-laws.

While a corporate office is created by an express provision either in the Corporation Code or the By-laws,
what makes one a corporate officer is his election or appointment thereto by the board of directors. Thus,
there must be documentary evidence to prove that the person alleged to be a corporate officer was
appointed by action or with approval of the board.

In the present case, petitioners Cacho and North Star assert that respondent Balagtas was elected as
Executive Vice President by the Board as evidenced by the Secretary's Certificate dated April 22, 2003.

In any case, that the Executive Vice President's duties and responsibilities are determined by the President
instead of the Board is irrelevant.

When Article IV, Section 4 is read together with Section 1 thereof, it is clear that while petitioner North
Star may have one or more vice presidents and the President is authorized to determine each one's scope
of work, their appointment or election still devolves upon the Board.

At this point, it is best to emphasize that the manner of creation (i.e., under the express provisions of the
Corporation Code or by-laws) and the manner by which it is filled (i.e., by election or appointment of the
board of directors) are sufficient in vesting a position the character of a corporate office.

Based on the above discussion, as Executive Vice President, respondent Balagtas was one of petitioner
North Star's corporate officers. Thus, there is an intra-corporate relationship existing between the parties.

B. Nature of the Controversy Test

The existence of an intra-corporate controversy does not wholly rely on the relationship of the parties.
The incidents of their relationship must also be considered. Thus, under the nature of the controversy

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test, the disagreement must not only be rooted in the 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 corporation. If the
relationship and its incidents are merely incidental to the controversy or if there will still be conflict even
if the relationship does not exist, then no intra-corporate controversy exists.

Verily, in a long line of cases, the Court consistently ruled that a corporate officer's dismissal is always a
corporate act, or an intra-corporate controversy which arises between a stockholder and a corporation.
However, a closer look at these cases will reveal that the intra-corporate nature of the disputes therein
did not hinge solely on the fact that the subject of the dismissal was a corporate officer.

In other words, the dismissal must relate to any of the circumstances and incidents surrounding the
parties' intra-corporate relationship. To be considered an intra-corporate controversy, the dismissal of a
corporate officer must have something to do with the duties and responsibilities attached to his/her
corporate office or performed in his/her official capacity.

In respondent Balagtas's Position Paper filed before the Labor Arbiter she alleged as follows: (a) petitioner
Cacho informed her, through a letter, that she had been preventively suspended by the Board; (b) she
opposed the suspension, was unduly prevented from re-assuming her position as Executive Vice
President, and thereafter constructively dismissed; (c) the Board did not authorize either her suspension
and removal from office ; and (d) as a result of her illegal dismissal, she is entitled to separation pay in lieu
of her reinstatement to her previous positions , plus back wages, allowances, and other benefits.

The foregoing allegations mainly relate to incidents involving her capacity as Executive Vice President, a
position above-declared as a corporate office, viz.: first, respondent Balagtas's claim of dismissal without
prior authority from the Board reveals her understanding that the appointment and removal of a
corporate officer like the Executive Vice President could only be had through an official act by the Board.
And, second, she sought separation pay in lieu of reinstatement to her former positions, one of which was
as Executive Vice President. Even her prayer for full back wages, allowances, commissions, and other
monetary benefits all relate to her corporate office.

On the other hand, petitioners Cacho and North Star terminated respondent Balagtas for the following
reasons: (a) for allegedly appropriating company funds for her personal gain; (b) for abandonment of
work; (c) violation of a lawful order of the corporation; and (d) loss of trust and confidence. In their
Position Paper, petitioners Cacho and North Star described in detail the latter's fund disbursement
process, emphasizing respondent Balagtas's role as the one who approves payment vouchers and the
signatory on issued checks — responsibilities specifically devolved upon her as the vice president . And as
the vice president , respondent Balagtas actively participated in the whole process, if not controlled it
altogether . As a result, petitioners Cacho and North Star accused respondent Balagtas of gravely abusing
the confidence the Board has reposed in her as vice president and misappropriating company funds for
her own personal gain.

From these, it is clear that the termination complained of is intimately and inevitably linked to respondent
Balagtas's role as petitioner North Star's Executive Vice President: first, the alleged misappropriations
were committed by respondent Balagtas in her capacity as vice president, one of the officers responsible
for approving the disbursements and signing the checks. And, second, these alleged misappropriations

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breached petitioners Cacho's and North Star's trust and confidence specifically reposed in respondent
Balagtas as vice president.

That all these incidents are adjuncts of her corporate office lead the Court to conclude that respondent
Balagtas's dismissal is an intra-corporate controversy, not a mere labor dispute.

NOTES:
Petitioners Cacho and North Star not estopped from questioning jurisdiction
Petitioner avers that petitioners, after actively participating in the proceedings before the Labor Arbiter
and obtaining an unfavorable judgment, are barred by laches from attacking the latter's jurisdiction.

We disagree with respondent Balagtas.

The Court has already held that the ruling in Tijam v. Sibonghanoy remains only as an exception to the
general rule. Estoppel by laches will only bar a litigant from raising the issue of lack of jurisdiction in
exceptional cases similar to the factual milieu of Tijam v. Sibonghanoy . To recall, the Court in Tijam v.
Sibonghanoy ruled that the plea of lack of jurisdiction may no longer be raised for being barred by laches
because it was raised for the first time in a motion to dismiss <led almost 15 years after the questioned
ruling had been rendered .

These exceptional circumstances are not present in this case. Thus, the general rule must apply: that the
issue of jurisdiction may be raised at any stage of the proceedings, even on appeal, and is not lost by
waiver or by estoppel .

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