[G.R. No. 116172.

October 10, 1996]

SAN MIGUEL FOODS, INC.-CEBU B-MEG FEED PLANT, petitioner, vs. HON.
BIENVENIDO E. LAGUESMA, Undersecretary of DOLE and ILAW AT BUKLOD NG
MANGGAGAWA (IBM), respondents.
DECISION
HERMOSISIMA, JR., J.:
This is a petition for certiorari under Rule 65 to review and set aside two Resolutions of
Mediator-Arbiter Achilles V. Manit, dated January 5, 1994 and April 6, 1994, and the affirmation
Order on appeal of the public respondent, Undersecretary Bienvenido E. Laguesma of the
Department of Labor and Employment. The petition below was entitled: In Re: Petition for
Direct Certification as the Sole and Exclusive Bargaining Agent of All Monthly Paid Employees
of SMFI-Cebu B-Meg Feeds Plant, docketed as OS-MA-A-3-51-94 (RO700-9309-RU-036).
The essential facts are not disputed.
On September 24, 1993, a petition for certification election among the monthly-paid employees
of the San Miguel Foods, Inc.-Cebu B-Meg Feeds Plant was filed by private respondent labor
federation Ilaw at Buklod ng Manggagawa (IBM, for brevity) before Med-Arbiter Achilles V.
Manit, alleging, inter alia, that it is a legitimate labor organization duly registered with the
Department of labor and Employment (DOLE) under the Registration Certificate No. 5369-IP.
SMFI-Cebu B-Meg Feeds Plant (SMFI, for brevity), herein petitioner, is a business entity duly
organized and existing under the laws of the Philippines which employs roughly seventy-five
(75) monthly paid employees, almost all of whom support the present petition. It was submitted
in said petition that there has been no certification election conducted in SMFI to determine the
sole and exclusive bargaining agent thereat for the past two years and that the proposed
bargaining unit, which is SMFIs monthly paid employees, is an unorganized one. It was also
stated therein that petitioner IBM (herein private respondent) has already complied with the
mandatory requirements for the creation of its local or affiliate in SMFIs establishment.
On October 25, 1993, herein petitioner SMFI filed a Motion to Dismiss the aforementioned
petition dated September 24, 1993 on the ground that a similar petition remains pending between
the same parties for the same cause of action before Med-Arbiter Achilles V. Manit.
SMFI was referring to an evidently earlier petition, docketed as CE CASE NO R0700-9304-RU016, filed on April 28, 1993 before the office of Med-Arbiter Manit. Indeed, both petitions
involved the same parties, cause of action and relief being prayed for, which is the issuance of an
order by the Med-Arbiter allowing the conduct of a certification election in SMFIs
establishment. The contention is that the judgment that may be rendered in the first petition
would be determinative of the outcome of the second petition, dated September 24, 1993.

On December 2, 1993, private respondent IBM filed its Opposition to SMFIs Motion to Dismiss
contending, among others, that the case referred to by SMFI had already been resolved by MedArbiter Manit in his Resolution and Order date July 26, 1993i and September 2, 1993,ii
respectively, wherein IBMs first petition for certification election was denied mainly due to
IBMs failure to comply with certain mandatory requirements of the law. This denial was
affirmed by the Med-Arbiter in another Order dated November 12, 1993iii wherein the
Resolutions dated July 26, 1993 and September 2, 1993 were made to stand. Thus, IBM argues
that there having been no similar petition pending before Med-Arbiter Manit, another petition for
certification election may be refiled as soon as the said requirements are met. These requirements
were finally satisfied before the second petition for certification election was brought on
September 24, 1993.
On January 5, 1994, Med-Arbiter Manit, this time, granted the second petition for certification
election of private respondent IBM in this wise:
Let, therefore, a certification election be conducted among the monthly paid rank and
file employees of SMFI-CEBU B-MEG FEEDS PLANT at Lo-oc, Mandaue City. The
choices shall be: YES-for IBM AT SMFI-CEBU B-MEG; and NO-for No Union.
The parties are hereby notified of the pre-election conference which will take place on
January 17, 1994 at 3:00 oclock in the afternoon to set the date and time of the election
and to thresh out the mechanics thereof. On said date and time the respondent is
directed to submit the payroll of its monthly paid rank and file employees for the month
of June 1993 which shall be the basis for the list of the eligible voters. The petitioner is
directed to be ready to submit a list of the monthly paid rank and file employees of
SMFI-CEBU B-MEG FEEDS PLANT when the respondent fails to submit the required
payroll.
SO ORDERED.iv
Petitioner SMFI appealed the foregoing Order to the Secretary of Labor and Employment
alleging that the Med-Arbiter erred in directing the conduct of certification election considering
that the local or chapter of IBM at SMFI is still not a legitimate labor organization with a right to
be certified as the exclusive bargaining agent in petitioners establishment based on two grounds:
(1) the authenticity and due execution of the Charter Certificate submitted by IBM in favor of its
local at SMFI cannot yet be ascertained as it is still now known who is the legitimate and
authorized representative of the IBM Federation who may validly issue said Charter Certificate;
and (2) a group of workers or a local union shall acquire legal personality only upon the issuance
of a Certificate of Registration by the Bureau of Labor Relations under Article 234 of the Labor
Code, which IBM at SMFI did not possess.
In a resolution dated April 6, 1994, public respondent Undersecretary Bienvenido Laguesma, by
authority of the Secretary of Labor and Employment, denied petitioners appeal, viz.:
WHEREFORE, the appeal is hereby denied for lack of merit and the Order of the MedArbiter is hereby affirmed.

Let the records of this case be forwarded to the Regional Office of origin for the
immediate conduct of certification election subject to the usual pre-election conference.
SO RESOLVED.v
Thereafter, a Motion for Reconsideration was filed which was also denied by the public
respondent in his Order dated May 24, 1994.vi
Hence, the instant petition interposing the following justifications:
1)THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA
GRAVELY ABUSED HIS DISCRETION WHEN HE ARBITRARILY
RULED THAT A LOCAL OR CHAPTER OF A LABOR FEDERATION,
LIKE RESPONDENT IBM, NEED NOT OBTAIN A CERTIFICATE OF
REGISTRATION FROM THE BUREAU OF LABOR RELATIONS TO
ACQUIRE LEGAL PERSONALITY, WHEN ARTICLE 234 OF THE
LABOR CODE OF THE PHILIPPINES AND SECTION 3 OF RULE II OF
BOOK V OF THE RULES IMPLEMENTING THE LABOR CODE, AS
AMENDED, CLEARLY PROVIDES THAT A GROUP OF WORKERS OR
A LOCAL UNION SHALL ACQUIRE LEGAL PERSONALITY ONLY
UPON THE ISSUANCE OF THE CERTIFICATE OF REGISTRATION BY
THE BUREAU OF LABOR RELATIONS. AND,
2)

THE HONORABLE UNDERSECRETARY BIENVENIDO E. LAGUESMA

GRAVELY ABUSED HIS DISCRETION WHEN HE PREMATURELY
AND ARBITRARILY RULED THAT RESPONDENT IBM IS A
LEGITIMATE LABOR ORGANIZATION WHEN THE AUTHENTICITY
AND DUE EXECUTION OF THE CHARTER CERTIFICATE
SUBMITTED BY RESPONDENT IBM CANNOT YET BE
ASCERTAINED BECAUSE IT IS STILL NOT KNOWN WHO ARE THE
LEGITIMATE OFFICERS OF THE IBM FEDERATION WHO MAY
VALIDLY ISSUE SAID CHARTER CERTIFICATE AS THE CASE FILED
TO RESOLVE THE ISSUE ON WHO ARE THE LEGITIMATE OFFICERS
OF THE IBM FEDERATION IS STILL PENDING RESOLUTION
BEFORE THIS HONORABLE SUPREME COURT.vii

The petition has no merit.

Petitioner asserts that IBM at SMFI is not a legitimate labor organization notwithstanding the
fact that it is a local or chapter of the IBM Federation. This is so because under Article 234 of the
Labor Code, any labor organization shall acquire legal personality upon the issuance of the
Certificate of Registration by the Bureau of Labor Relations.
We do not agree.
I

Article 212(h) of the Labor Code defines a legitimate labor organization as any labor
organization duly registered with the Department of Labor and Employment, and includes any
branch or local thereof.
It is important to determine whether or not a particular labor organization is legitimate since
legitimate labor organizations have exclusive rights under the law which cannot be exercised by
non-legitimate unions, one of which is the right to be certified as the exclusive representative of
all the employees in an appropriate collective bargaining unit for purposes of collective
bargaining. These rights are found under Article 242 of the Labor Code, to wit:
ART. 242. Rights of legitimate organizations.--A legitimate labor organization shall have the
right:
(a)To act as the representative of its members for the purpose of collective bargaining;
(b)
To be certiified as the exclusive representative of all the employees in an appropriate
collective bargaining unit for purposes of collective bargaining;
(c)
To be furnished by the employer, upon written request, with his annual audited financial
statements, including the balance sheet and the profit and loss statement, within thirty (30)
calendar days from the date of receipt of the request, after the union has been duly recognized by
the employer or certified as the sole and exclusive bargaining representative of the employees in
the bargaining unit, or within sixty (60) calendar days before the expiration of the existing
collective bargaining agreement, or during the collective bargaining negotiation;
(d)
To own property, real or personal, for the use and benefit of the labor organization and its
members;
(e)

To sue and be sued in its registered name; and

(f)
To undertake all other activities designed to benefit the organization and its members,
including cooperative, housing welfare and other projects not contrary to law.
xxx

xxx

x x x."

The pertinent question, therefore, must be asked: When does a labor organization acquire
legitimacy?
Ordinarily, a labor organization attains the status of legitamacy only upon the issuance in its
name of a Certificate of Registration by the Bureau of Labor Relations pursuant to Articles 234
and 235 of the Labor Code, viz.:
ART. 234. Requirements of registration.--Any applicant labor organization, association
or group of unions or workers shall acquire legal personality and shall be entitled to
the rights and privileges granted by law to legitimate labor organizations upon
issuance of the certificate of registration based on the following requirements:

(a)

Fifty pesos (P50.00) registration fee;

(b)
The names of its officers, their addresses, the principal address of the labor organization,
the minutes of the organizational meetings and the list of the workers who participated in such
meetings;
(c)
The names of all its members comprising at least twenty percent (20%) of all the
employees in the bargaining unit where it seeks to operate;
(d)
If the applicant union has been in existence for one or more years, copies of its annual
financial reports; and
(e)
Four (4) copies of the constitution and by-laws of the applicant union, minutes of its
adoption or ratification, and the list of the members who participated in it.
ART. 235. Action on application. -- The Bureau shall act on all applications for
registration within thirty (30) days from filing.
All requisite documents and papers shall be certified under oath by the secretary or the
treasurer of the organization, as the case may be, and attested to by its president.
The foregoing procedure is not the only way by which a labor union may become legitimate,
however. When an unregistered union becomes a branch, local or chapter of a federation, some
of the aforementioned requirements for registration are no longer required.viii Section 3, Rule II,
Book V of the Implementing Rules of the Labor Code governs the procedure for union
affiliation, the relevant portions of which provide:
Sec. 3. Union Affiliation: Direct Membership with National Union. An affiliate of a
labor federation or national union may be a local or chapter thereof or an independently
registered union.
(a)The labor federation or national union concerned shall issue a chapter certificate
indicating the creation or establishment of a local or chapter, copy of which shall be
submitted to the Bureau of Labor Relations within thirty (30) days from issuance of
such charter certificate.
(b)
An independently registered union shall be considered an affiliate of a labor
federation or national union after submission to the Bureau of the contract or agreement
of affiliation within thirty (30) days after its execution.
xxx

xxx

xxx

(e)The local or chapter of a labor federation or national union shall have and maintain a
constitution and by-laws, set of officers and book of accounts. For reporting purposes,
the procedure governing the reporting of independently registered unions, federations or
national unions shall be observed.

Paragraph (a) refers to a local or chapter of a federation which did not undergo the rudiments of
registration while paragraph (b) refers to an independently registered union which affiliated with
a federation. Implicit in the foregoing differentiation is the fact that a local or chapter need not be
independently registered. By force of law (in this case, Article 212 [h]), such local or chapter
becomes a legitimate labor organization upon compliance with the aforementioned provisions of
Section 3ix (a) and (e), without having to be issued a Certificate of Registration in its favor by the
BLR.
The cases of Lopez Sugar Corporation v. Secretary of Labor and Employment,x Phoenix Iron
and Steel Corporation v. Secretary of Labor and Employment,xi and Protection Technology, Inc.
v. Secretary, Department of Labor and Employment,xii all going back to our landmark holding in
Progressive Development Corporation v. Secretary, Department of Labor and Employment,xiii
unequivocably laid down the rule, thus:
A local or chapter therefore becomes a legitimate labor organization only upon
submission of the following to the BLR:
1)A charter certificate, within 30 days from its issuance by the labor federation
or national union, and
2)

The constitution and by-laws, a statement on the set of officers, and the
books of accounts all of which are certified under oath by the secretary or
treasurer, as the case may be, of such local or chapter, and attested to by
its president.

Absent compliance with these mandatory requirements, the local or chapter does not
become a legitimate labor organization.
Corollarily, the satisfaction of all these requirements by the local or chapter shall vest upon it the
status of legitimacy with all its concomitant statutory privileges, one of which is the right to be
certified as the exclusive representative of all the employees in an appropriate bargaining unit.
In the case at bench, public respondent Bienvenido E. Laguesma, in affirming the finding of the
Med-Arbiter that IBM at SMFI is a legitimate labor organization,xiv made the following material
pronouncements amply supported by the records:
[t]he resolution of the issue raised by the respondent on whether or not petitioner is a
legitimate labor organization will depend on the documents submitted by the petitioner
in the second petition.
A close scrutiny of the records shows that at the time of the filing of the subject petition
on 24 September 1993 by the petitioner Ilaw at Buklod ng Manggagawa, for and in
behalf of its local affiliate IBM at SMFI-CEBU B-MEG, the latter has been clothed
with the status and/or character of a legitimate labor organization. This is so, because on
19 July 1993, petitioner submitted to the Bureau of Labor Relations (BLR), this
Department, the following documents: charter certificate, constitution and by-laws,
names and addresses of the union officers and a certification of the unions secretary on
the non-availability of the unions Books of Accounts. Said documents (except the

charter certificate) are certified under oath and attested to by the local unions secretary
and President, respectively.xv
Petitioner SMFI does not dispute the fact that IBM at SMFI has complied with the second set of
requirements, i.e., constitution, by-laws, et. al. What is controverted is the non-compliance with
the requirement as to the charter certificate which must be submitted to the BLR within thirty
(30) days from its issuance by the labor federation. While the presence of a charter certificate is
conceded, petitioner maintains that the validity and authenticity of the same cannot yet be
ascertained as it is still not known who is the legitimate and authorized representative of the IBM
Federation who may validly issue said charter certificate in favor of its local, IBM at SMFI.
According to petitioner, there are two (2) contending sets of officers of the IBM Federation at the
time the charter certificate was issued in favor of IBM at SMFI, the faction of Mr. Severino O.
Meron and that of Mr. Edilberto B. Galvez.
On this point, public respondent, in upholding the legitimate status of IBM at SMFI, backed up
by the Solicitor General, had this to say:
The contention of the respondent that unless and until the issue on who is the legitimate
national president, of the Ilaw at Buklod ng Manggagawa is resolved, the petitioner
cannot claim that it has a valid charter certificate necessary for it to acquire legal
personality is untenable. We wish to stress that the resolution of the said issue will not
in any way affect the validity of the charter certificate issued by the IBM in favor of the
local union. It must be borne in mind that the said charter certificate was issued by the
IBM in its capacity as a labor organization, a juridical entity which has a separate and
distinct legal personality from its members. When as in this case, there is no showing
that the Federation acting as a separate entity is questioning the legality of the issuance
of the said charter certificate, the legality of the issuance of the same in favor of the
local union is presumed. This, notwithstanding the alleged controversy on the
leadership of the federation.xvi
We agree with this position of the public respondent and the Solicitor General. In addition,
private respondents Comment to this petition indicates that in the election of officers held to
determine the representatives of IBM, the faction of Mr. Meron lost to the group of Mr. Edilberto
Galvez, and the latter was acknowledged as the duly elected IBM National President.xvii Thus, the
authority of Mr. Galvez to sign the charter certificate of IBM at SMFI, as President of the IBM
Federation,xviii can no longer be successfully questioned. A punctilious examination of the records
presents no evidence to the contrary and petitioner, instead of squarely refuting this point, skirted
the issue by insisting that the mere presence of two contending factions in the IBM prevents the
issuance of a valid and authentic charter certificate in favor of IBM at SMFI. This averment of
petitioner simply does not deserve any merit.
II
In any case, this Court notes that it is petitioner, the employer, which has offered the most
tenacious resistance to the holding of a certification election among its monthly-paid rank-andfile employees. This must not be so, for the choice of a collective bargaining agent is the sole

concern of the employees.xix The only exception to this rule is where the employer has to file the
petition for certification election pursuant to Article 258xx of the Labor Code because it was
requested to bargain collectively,xxi which exception finds no application in the case before us. Its
role in a certification election has aptly been described in Trade Unions of the Philippines and
Allied Services (TUPAS) v. Trajano,xxii as that of a mere by-stander. It has no legal standing in a
certification election as it cannot oppose the petition or appeal the Med-Arbiters orders related
thereto. An employer that involves itself in a certification election lends suspicion to the fact that
it wants to create a company union.xxiii This Court should be the last agency to lend support to
such an attempt at interference with a purely internal affair of labor.xxiv
While employers may rightfully be notified or informed of petitions of such nature, they should
not, however, be considered parties thereto with the concomitant right to oppose it. Sound policy
dictates that they should maintain a strictly hands-off policy.xxv
It bears stressing that no obstacle must be placed to the holding of certification elections,xxvi for it
is a statutory policy that should not be circumvented.xxvii The certification election is the most
democratic and expeditious method by which the laborers can freely determine the union that
shall act as their representative in their dealings with the establishment where they are
working.xxviii It is the appropriate means whereby controversies and disputes on representation
may be laid to rest, by the unequivocal vote of the employees themselves.xxix Indeed, it is the
keystone of industrial democracy.xxx
III
Petitioner next asseverates that the Charter Certificate submitted by the private respondent was
defective in that it was not certified under oath and attested to by the organizations secretary and
President.
Petitioner is grasping at straws. Under our ruling in the Progressive Development Corporationxxxi
case, what is required to be certified under oath by the secretary or treasurer and attested to by
the locals president are the constitution and by-laws, a statement on the set of officers, and the
books of accounts of the organization. The charter certificate issued by the mother union need
not be certified under oath by the secretary or treasurer and attested to by the locals president.
IV
Petitioner, in its Reply to public respondents Comment, nevertheless calls the attention of this
court to the fact that, contrary to the assertion of private respondent IBM that it is a legitimate
labor federation and therefore has the capacity and authority to create a local or chapter at SMFI,
the Chief of the Labor Organizations Division of the Bureau of Labor Relations Manila had
allegedly issued a certification last January 17, 1995 to the effect that private respondent is not a
legitimate labor federation.xxxii
This is a factual issue which petitioner should have raised before the Med-Arbiter so as to allow
the private respondent ample opportunity to present evidence to the contrary. This Court is
definitely not the proper venue to consider this matter for it is not a trier of facts. It is noteworthy

that petitioner did not challenge the legal personality of the federation in the proceedings before
the Med-Arbiter. Nor was this issue raised in petitioners appeal to the Office of the Secretary of
Labor and Employment. This matter is being raised for the first time in this petition. An issue
which was neither alleged in the pleadings nor raised during the proceedings below cannot be
ventilated for the first time before this Court. It would be offensive to the basic rule of fair play,
justice and due process.xxxiii Certiorari is a remedy narrow in its scope and inflexible in character.
It is not a general utility tool in the legal workshop.xxxiv Factual issues are not a proper subject for
certiorari, as the power of the Supreme Court to review labor cases is limited to the issue of
jurisdiction and grave abuse of discretion.xxxv It is simply unthinkable for the public respondent
Undersecretary of Labor to have committed grave abuse of discretion in this regard when the
issue as to the legal personality of the private respondent IBM Federation was never interposed
in the appeal before said forum.
V
Finally, the certification election sought to be stopped by petitioner is, as of now, fait accompli.
The monthly paid rank-and-file employees of SMFI have already articulated their choice as to
who their collective bargaining agent should be. In the certification election held on August 20,
1994,xxxvi the SMFI workers chose IBM at SMFI to be their sole and exclusive bargaining agent.
This democratic decision deserves utmost respect. Again, it bears stressing that labor legislation
seeks in the main to protect the interest of the members of the working class. It should never be
used to subvert their will.xxxvii
WHEREFORE, the petition is DENIED. Costs against petitioner.
SO ORDERED.
Bellosillo, Vitug, and Kapunan, JJ., concur.
Padilla (Chairman), J., no part, on account of interests in San Miguel Group of companies.

ii

iii

iv

vi

vii

viii

ix

xi[G.R. No. 120506. October 28, 1996]PHILIPPINE AIRLINES, INC. petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION, HON. LABOR ARBITER CORNELIO LINSANGAN,

UNICORN SECURITY SERVICES, INC., and FRED BAUTISTA, et al., respondents.

DECISION
DAVIDE, JR., J.:
This is a petition for certiorari under Rule 65 of the Rules of Court to annul the decision of the Labor
Arbiter dated 12 August 1991 in NLRC Case No. 00-11-06008-90 and the resolutions of public
respondent National Labor Relations Commission (NLRC) promulgated on 27 October 1994 and 31
May 1995 dismissing the appeal filed by the petitioner and denying the motion for reconsideration,
respectively.
The dispute arose from these antecedents:
On 23 December 1987, private respondent Unicorn Security Services, Inc. (USSI) and petitioner
Philippine Airlines, Inc. (PAL) executed a security service agreement. USSI was designated therein as
the CONTRACTOR. Among the pertinent terms and conditions of the agreement are as follows:
(4) The CONTRACTOR shall assign to PAL an initial force of EIGHTY ONE (81) bodies which
may be decreased or increased by agreement in writing . It is, of course, understood that the
CONTRACTOR undertakes to pay the wages or salaries and cost of living allowance of the
guards in accordance with the provisions of the Labor Code, as amended, the different
Presidential Decrees, Orders and with the rules and regulations promulgated by competent
authorities implementing said acts, assuming all responsibilities therefor .
xxx
(6) Without any expense on the part of PAL, CONTRACTOR shall see to it that the guards
assigned to PAL are provided, at the expense of CONTRACTOR, with the necessary firearms,
ammunitions and facilities needed for the rendition of the security services as aforesaid;
(7) CONTRACTOR shall select, engage and discharge the guards, employees, or agents, and shall
otherwise direct and control their services herein provided or heretofore to be set forth or
prescribed. The determination of wages, salaries and compensation of the guards or
employees of the CONTRACTOR shall be within its full control but shall in no way
contravene existing laws on the matter. It is further understood that CONTRACTOR as the
employer of the security guards agrees to comply with all relevant laws and regulations,
including compulsory coverage under the Social Security Act, Labor Code, as amended and
the Medical Care Act, in its operations. Although it is understood and agreed between parties
hereto that CONTRACTOR in the performance of its obligations under this Agreement, is
subject to the control and direction of PAL merely as to the result as to be accomplished by
the work or services herein specified, and not as to the means and methods for accomplishing
such result, CONTRACTOR hereby warrants that it will perform such work or services in
such manner as will achieve the result herein desired by PAL.

(8) Discipline and administration of the security guards shall be the sole responsibility of the
CONTRACTOR to the end that CONTRACTOR shall be able to render the desired security
service requirements of PAL. CONTRACTOR, therefore, shall conform to such rules and
regulations that may be issued by PAL. For this purpose, Annex A, which forms part of this
Agreement, contains such rules and regulations and CONTRACTOR is expected to comply
with them. At its discretion, PAL may, however, work out with CONTRACTOR such rules
and regulations before their implementation.
(9) Should PAL at any time have any justifiable objection to the presence in its premises of any of
CONTRACTORs officer, guard or agent under this Agreement, it shall send such objection in
writing to CONTRACTOR and the latter shall immediately take proper action.
(10) The security guards employed by CONTRACTOR in performing this Agreement shall be paid
by the CONTRACTOR and it is distinctly understood that there is no employee-employer
relationship between CONTRACTOR and/or his guards on the one hand, and PAL on the
other. CONTRACTOR shall have entire charge, control and supervision of the work and
services herein agreed upon, and PAL shall in no manner be answerable or accountable for
any accident or injury of any kind which may occur to any guard or guards of the
CONTRACTOR in the course of, or as a consequence of, their performance of work and
services under this Agreement, or for any injury, loss or damage arising from the negligence
of or carelessness of the guards of the CONTRACTOR or of anyone of its employ to any
person or persons or to its or their property whether in the premises of PAL or elsewhere; and
the CONTRACTOR hereby covenants and agrees to assume, as it does hereby assume, any
and all liability or on account of any such injury, loss or damage, and shall indemnify PAL
for any liability or expense it may incur by reason thereof and to hold PAL free and harmless
from any such liability.
xxx
(13) For and in consideration of the services to be rendered by CONTRACTOR under these
presents, PAL shall pay CONTRACTOR the amount of PESOS NINE & 40/100 CTVS
(P9.40) PER HOUR multiplied by 905 hours equivalent to PESOS TWO HUNDRED
SEVENTY FIVE THOUSAND NINE HUNDRED NINE & 58/100 CTVS, Philippine
currency, - (P275,909.58) the basis of eight (8) working hours per office/guard a day,
Sundays and Holidays included, the same to be payable on or before the 15 of each month
for services on the first half of the month and on or before the end of the month for services
for the 2 half of the month.
th

nd

Nothing herein contained shall prevent the parties from meeting for a review of the rates
should circumstances warrant.
xxx
(20) This Agreement shall take effect on 06 December 1987 an shall be in force for a period of SIX
(6) MONTHS 05 JUNE 1988 thereafter it shall continue indefinitely unless sooner

terminated upon thirty (30) days notice served upon by one party to the other, except as
provided for in Articles 16, 17 & 18 hereof.
Sometime in August of 1988, PAL requested 16 additional security guards. USSI provided what was
requested; however, PAL insisted that what USSI did was merely to pick out 16 guards from the 86
already assigned by it and directed them to render overtime duty.
On 16 February 1990, PAL terminated the security service agreement with USSI without giving the
latter the 30-day prior notice required in paragraph 20 thereof. Instead, PAL paid each of the security
guards actually assigned at the time of the termination of the agreement an amount equivalent to their
one-month salary to compensate for the lack of notice.
In November 1990, USSI, allegedly in its capacity as Trustee for Sixteen or so Security Guards, filed
with the NLRC Arbitration Branch, National Capital Region, a complaint against PAL for the recovery
of P75,600.00 representing termination pay benefit due the alleged 16 additional security guards, which
PAL failed and refused to pay despite demands. It further asked for an award of not less than
P15,000.00 for each of the 16 guards as damages for the delay in the performance of PALs obligation,
and also for attorneys fees in an amount equivalent to 10% of whatever might be recovered. Pertinent
portions of the complaint read as follows:
3. By virtue of said contract and upon its effectivity, respondent required eighty-six (86) security guards
whom complainant USSI supplied; on or sometime in August 1989, respondent asked for sixteen (16)
security guards to render twelve (12) hours each.
4. In February 1990 and for reasons of its own, respondent caused to terminate not only the contract but
also the services of the security guards; in effecting such termination, said respondent caused to pay the
equivalent of one (1) months notice unto all the security guards, except the 16 who, as aforementioned
were rendering 12 hours each from date of assignment up to and until their termination.
5. As computed, the termination pay benefits due the 16 security guards amount to P75,600.00, more or
less, which, despite demands, respondent fails, neglects or refuses to pay, as it continue refusing, failing
or neglecting to so do up to the present time.
6. Respondent has not only incurred in delay in the performance of its obligation but also contravened
the tenor thereof; hence, complainants are, by law, entitled to be indemnified with damages for no less
than P15,000.00 each for all complainants though the correct amount is left solely to the sound
discretion of the Honorable Labor Arbiter.
7. Complainants are now compelled to litigate their plainly valid, just or demandable claim on account
of which services of counsel have been required and thereby obligated themselves to pay, for and as
attorneys fees, the sum equivalent to ten percent (10%) of whatever sums or sum may be recovered in
the case.
The complaint was docketed as NLRC-NCR Case No. 00-11-06008-90 and assigned to Labor Arbiter
Cornelio L. Linsangan.

PAL filed a motion to dismiss the complaint on the grounds that the Labor Arbiter had no jurisdiction
over the subject matter or nature of the complaint and that USSI had no cause of action against PAL. In
amplification thereof, PAL argued that the case involved the interpretation of the security service
agreement, which is purely civil in character and falls outside of the Labor Arbiters jurisdiction. It is
clear from Article 217 of the Labor Code that for claims to be within the jurisdiction of Labor Arbiters,
they must arise from an employer-employee relationship. PAL claimed that USSI did not allege the
existence of an employer-employee relationship between PAL and USSI or its guards, and that in fact,
paragraph 10 of the agreement provides that there is no employer-employee relationship between the
CONTRACTOR and/or his guards on the one hand and PAL on the other.
In its Opposition, USSI pointed out that PAL forgot or overlooked the fact that insofar as labor
standards, benefits, etc. have to be resolved or adjudicated, liability therefor is shifted to, or assumed by
respondent [herein petitioners] which, in law, has been constituted as an indirect employer.
PAL filed a supplemental motion to dismiss wherein it cites the following reasons for the dismissal of
the complaint: (1) the clear stipulations in the agreement (paragraphs 4 and 10) that there exists no
employer-employee relationship between PAL on the one hand and USSI and the guards on the other;
(2) there were no 16 additional guards, as the 16 guards who were required to render 12-hour shifts
were picked out from the original 86 guards already assigned and were already given a one-month
salary in lieu of the 30-day notice of termination of the agreement; (3) USSI had no legal personality to
file the case as alleged trustee of the 16 security guards; and (4) the real parties in interest -- the 16
security guards -- never showed any interest in the case either by attending any hearing or conference,
or by following up the status of the case.
Attached to the supplemental motion dismiss were, among other things, xerox copies of confirmation
letter of USSI to PAL to show that no additional guards were in fact provided.
Labor Arbiter Linsangan did not resolve the motion to dismiss and the supplemental motion to dismiss.
On 12 August 1991, he handed down a decision ordering PAL to pay: (1) the sum of P75,600.00
representing the equivalent of one-months separation pay due the 16 individual security guards, plus,
10% interest from the date of filing of the case until the whole obligations shall have been fully settled;
(2) the sum of P5,000.00 by way of exemplary damages due each of the 16 security guards; and (3)
another sum equivalent to 10% of the total award for and as attorneys fees.
It was in that decision that Labor Arbiter Linsangan mentioned for the first time that the resolution of
the motion to dismiss and supplemental motion to dismiss was deferred until [the] case is decided on
the merits considering the ground not to be indubitable. In holding that he had jurisdiction over the
case, he stated:
As heretofore and invariably held in similar cases, the issue of whether or not Labor Arbiters have
jurisdiction over money claims affecting security guards assigned by security agencies (like
complainant herein) to their client-companies such as PAL is, more or less, settled, especially since, as
the law views such as peculiar relationship, such money claims insofar as they have to be paid, are the
ultimate responsibility of the client-firms. In effect, the security guards have been constituted as
indirect employees of the client just as the client becomes the indirect employer of the guards. Art. 107

and 109 of the Labor Code expressly provide that.

To justify the awards, Labor Arbiter Linsangan opined:
Evidence adduced clearly show that sometime in December 1987, aforementioned security service
contract was executed, based on which the required number of security guards were assigned to, or
posted at, the various premises of respondent -- PAL. Said number of security guards may, as the
contract provides, be increased or reduced at respondents request, such that the original number of
eighty-six (86) guards, an additional sixteen (16) were needed and, accordingly supplied who, pursuant
to PALs instructions, were required to render twelve (12) hours each, per day.
In February 1990, and for reasons of its own, PAL caused to terminate, as it did, the contract of security
service. Unequivocably, it caused to pay the separation pay benefits of the 86-security guards for the
equivalent amount of one (1) months pay. As to the additional 16, it failed and refused to grant similar
equivalent, without any valid reasons therefor.
As earlier stated, respondent opted to rely solely on the ground set forth in its Motion to Dismiss as
well as Supplement thereto. It failed to file, despite directive made thereon, its position paper. Neither
did it submit, nor adduce, evidence (documentary or otherwise) to rebut or controvert complainants
claims especially since the money equivalent of the one month separation pay due the 16 guards has
been duly quantified as amounting to Seventy Five Thousand Six Hundred (P75,600.00) Pesos. Thus
established, it is clear that there was absolutely no legal/justifiable reason why said 16 guards applied
and who rendered 12 hours each per day had to be discriminated against.
Following PALs failure or refusal to pay, demands were made by complainant, asking at the same time
why that was so. Conceivably, respondent has smarted itself on its mistaken belief that there was, as
between the guards and itself, no employer-employee relationship and, hence, there is no legal basis for
it to pay. If that was so, why did it pay separation pay unto the 86 regular employed guards.
PAL being widely known as a progressively-minded employer, it should be the first to show good
example for emulation. In this instant case, it did not; in fact, its actuations were not consistent with
good faith. It should, therefore, be held liable for exemplary damages and having required complainant
to litigate a plainly valid, just or demandable claim, an award for attorneys fees must perforce be
assessed.
On 3 September 1991, PAL filed its Appeal wherein it indicated that it received a copy of the decision
on 26 August 1991. Attached thereto was a machine copy of the Notice of Judgment/Final Order, with
the date of its receipt, i.e., 26 August 1991, having been stamped on the upper right hand corner by
PALs Legal Department.
USSI countered this Appeal with a motion for execution of judgment on the ground that since PAL,
received a copy of the decision on the 23 , not on the 26 , of August 1991 it had until 2 September 1991
to appeal; hence, the appeal interposed on 3 September was late by one day. The decision had then
become final and executory.
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In its opposition to this motion, PAL insisted that it received a copy of the decision on 26 August 1991;
thus, it had until 5 September 1991 to file its appeal.
On 30 September 1991, Labor Arbiter Linsangan issued a writ of execution.
On 1 October 1991, PAL filed a motion to quash the writ of execution. It tried to explain therein why it
thought all along that it received a copy of the decision on 26 August 1991, thus:
4. Upon investigation the undersigned counsel learned that on 23 August 1991 (Friday) a servermessenger went to PAL Legal Department to serve said decision. The receiving clerks at that time were
all out of the office so that the server persuaded a secretary, Ms. April Rose del Rosario to receive the
same, notwithstanding the fact that Ms. Del Rosario told him (server) that she was not authorized to
receive documents for an in behalf of PAL. Ms. Del Rosario then stamped the date of receipt on the
services copy without stamping (the date of receipt) PALs copy of the decision which was left by the
server. Thereafter, Ms. Del Rosario placed PALs copy of the Decision on the incoming documents rack
of the receiving clerk.
Attached herewith is the affidavit of Ms. Del Rosario and as Annex A hereof.
5. On 26 August 1991 (Monday), the receiving clerk/messenger Mr. Greg Soriano upon finding the
Decision among the documents in the incoming documents rack, immediately stamped Received 26
August 1991 thereon, on the honest and sincere belief that the same just arrived that day (26 August
1991). He then forwarded the same to the secretary of the undersigned counsel.
Attached herewith is the affidavit of Mr. Greg Soriano marked as Annex B hereof.
6. The undersigned counsel believing that the said decision was received on 26 August 1991
reckoned/counted the ten (10) day period for appeal from said date.
7. Considering the foregoing circumstances, the undersigned counsels innocent reliance on the date
of receipt stamped on the copy of the Decision furnished him was clearly due to an innocent mistake
and/or excusable neglect. Hence, justice and equity dictates that respondent PAL should be considered
to have filed its Appeal within the reglementary period for Appeal.
On 8 October 1991, Labor Arbiter Linsangan issued an order denying the motion to quash.
On 10 October 1991, PAL appealed to the NLRC the aforesaid order of 8 October 1991 on the ground
that it was issued with grave abuse of discretion.
In its resolution of 27 October 1994, the Second Division of the NLRC dismissed PALs appeal for
having been filed out if time. It sustained the labor Arbiters finding that PAL had received a copy of the
decision on 23 August 1991, and hence the last day to appeal was 2 September 1991. It ruled that
whether or not the decision was received by an employee other than the receiving clerk or messenger
was of no moment, as the proper performance of employees duties was PALs concern.

On 31 May 1995, the NLRC denied the motion for reconsideration for the reason that it cannot accept
PALs excuse as it may open the floodgates to abuse; and that the lapse of the period to appeal had
already deprived the Commission of jurisdiction over the case.
PAL then filed this special civil action for certiorari under Rule 65 of the Rules of Court alleging that
(1) public respondents committed serious and patent error in failing to declare that the Labor Arbiter
had no jurisdiction over the instant case; (2) The Labor Arbiter gravely abused its discretion in ordering
PAL to pay the separation pay of the 16 security guards assigned at PALs premises by USSI; and (3)
respondent NLRC committed grave abuse of discretion in declaring PALs appeal to have been filed out
of time.
PAL argues that since USSIs cause of action was founded on the security service agreement, and that
thereunder no employer-employee relationship existed between PAL and the security guards who were
USSIs employees, the Labor Arbiter had no jurisdiction over the complaint. Moreover, assuming
arguendo that the claims of the security guards were valid, USSI had no personality to file the
complaint, for there is nothing whatsoever to show that it was expressly authorized by the security
guards to act as their trustee.
As to the second assigned error, PAL asserts that it is not liable to pay separation pay because (1) it was
not the employer of the security guards; (2) even as an indirect employer, as held by the Labor Arbiter,
its liability was limited to violations of labor standards law, and non-payment of the separation pay is
not a violation of the said law; (3) the security service agreement with USSI did not provide for
payment of separation pay; (4) the payment made to the 86 security guards upon the termination of the
agreement without the prior 30-day notice was not for separation pay but a benefit in lieu of the 30-day
notice required under paragraph 20 of the agreement; and (5) since PAL was not the employer of the
security guards, in no way could it terminate their services.
In its third assigned error, PAL submits that rules of procedure ought not to be applied in a very rigid
technical sense, since they are used only to help secure and not override substantial justice, especially
in this case where the appeal was meritorious. Moreover, the delay in the perfection of the appeal,
reckoned from the finding of the Labor Arbiter, was only one day; but if reckoned from what its
counsel innocently believed to be PALs date of receipt of the decision, which was 26 August 1991, the
appeal could be said to have been seasonably filed.
In its Comment, USSI points out that the grounds relied upon by PAL are based on factual a issue,
namely, the discrimination made by PAL in paying the 86 and not the 16 security guards. It argues that
the case touched upon the rights of the 16 security guards as employees; thus, the same was within the
jurisdiction of the Labor Arbiter. As regards PALs plea for the relaxation of the rule on perfection of
appeals, USSI contends that the negligence of PALs counsel should not be deemed compelling reason
to warrant relaxation of the rule.
In its Manifestation and Motion in Lieu of Comment, the Office of the Solicitor General agrees with
PAL that the Labor Arbiter did not have jurisdiction over the complaint because there was no employeremployee relationship between PAL and the 16 security guards; that Articles 107 and 109 of the Labor
Code which provide for joint and several liability for payment of wages by the direct and indirect

employer find no application in the present case because the 16 security guards employed by USSI
were not after unpaid wages; and that in the interest of justice and considering that the appeal was filed
only one day late, the rule on perfection of appeals should have been relaxed to prevent a miscarriage
of justice.
In view of the stand of the Office of the Solicitor General, we advised public respondents to file their
own comment if they so desired.
In their Comment, the NLRC and Labor Arbiter Linsangan maintain that they had jurisdiction over the
case because of Articles 107 and 109 of the Labor Code which constitute PAL as indirect employer of
the 16 security guards, there being a question involving separation pay due the latter; that the 16
security guards were entitled to separation pay, because PAL paid the other 86 security guards when the
service agreement was terminated; and that for the NLRC to excuse the delay of one day in filing the
appeal would open the floodgates of abuse.
The instant petition is impressed with merit.
We agree with petitioner PAL that the Labor Arbiter was without jurisdiction over the subject matter of
NLRC-NCR Case No. 00-11-06008-90, because no employer-employee relationship existed between
PAL and the security guards provided by USSI under the security service agreement, including the
alleged 16 additional security guards.
We have pronounced in numerous cases that in determining the existence of an employer-employee
relationship, the following elements are generally considered: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control the
employees conduct.
In the instant case, the security service agreement between PAL and USSI provides the key to such
consideration. A careful perusal thereof, especially the terms and conditions embodied in paragraphs 4,
6, 7, 8, 9, 10, 13 and 20 quoted earlier in this ponencia, demonstrates beyond doubt that USSI-and not
PAL was the employer of the security guards. It was USSI which (a) selected, engaged or hired and
discharged the security guards; (b) assigned them to PAL according to the number agreed upon; (c)
provided, at its own expense, the security guards with firearms and ammunitions; (d) discipline and
supervised them or controlled their conduct; and (e) determined their wages, salaries, and
compensation; and (f) paid them salaries or wages. Even if we disregard the explicit covenant in said
agreement that there exist no employer-employee relationship between CONTRACTOR and/or his
guards on the one hand, and PAL on the other all other considerations confirm the fact that PAL was
not the security guards employer. Analogous to the instant case is Canlubang Security Agency Corp. vs.
NLRC.
Considering then that no employer-employee relationship existed between PAL and the security guards,
the Labor Arbiter had no jurisdiction over the claim in NLRC-NCR Case No. 00-11-06008-90. Article
217 of the Labor Code (P.D. No. 442), as amended, vests upon Labor Arbiter exclusive original
jurisdiction only over the following:

1. Unfair labor practice cases;

2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages,
rates of pay, hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from employer-employee
relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving 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
house hold service, involving an amount exceeding five thousand pesos(P5,000.00) regardless of
whether accompanied with a claim for reinstatement.
In all these cases, an employer-employee relationship is an indispensable jurisdictional requisite.
The Labor Arbiter cannot avoid the jurisdictional issue or justify his assumption of jurisdiction on the
pretext that PAL was the indirect employer of the security guards under Article 107 in relation to
Articles 106 and 109 of the Labor Code and, therefore, it is solidarily liable with USSI. We agree with
the Solicitor General that these Articles are inapplicable to PAL under the facts of this case. Article 107
provides:
ART. 107. Indirect employer. -- The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer, contracts
with an independent contractor for the performance of any work, task, job or project.
The preceding Article referred to, which is Article 106, partly reads as follows:
ART. 106. Contractor or subcontractor. -- Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to
such employees to the extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
While USSI is an independent contractor under the security service agreement and PAL may be
considered an indirect employer, that status did not make PAL the employer of the security guards in
every respect. As correctly posited by the Office of the Solicitor General, PAL may be considered an
indirect employer only for purposes of unpaid wages since Article 106, which is applicable to the
situation contemplated in Section 107, speaks of wages. The concept of indirect employer only relates

or refers to the liability for unpaid wages. Read together, Articles 106 and 109 simply mean that the
party with whom an independent contractor deals is solidarily liable with the latter for unpaid wages,
and only to that extent and for that purpose that the latter is considered a direct employer. The term
wage is defined in Article 97(f) of the Labor Code as the remuneration of earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task,
piece, or commission basis, or other method of calculating the unwritten contract of employment for
work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable
value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee.
No valid claim for wages or separation pay can arise from the security service agreement in question by
reason of its termination at the instance of PAL. The agreement contains no provision for separation
pay. A breach thereof could only give rise to damages under the Civil Code, which is cognizable by the
appropriate regular court of justice. Besides, there is no substantial proof that USSI in fact provided 16
additional guards. On the contrary, PAL was able to prove in the annexes attached to its supplemental
motion to dismiss that the 16 guards were actually picked out from the original group and were just
required to render overtime service.
The Labor Arbiters lack of jurisdiction was too obvious from the allegations in the complaint and its
annex (the security service agreement) in NLRC-NCR Case No. 00-11-06008-90. The Labor Arbiter
then should have forthwith resolved the motion to dismiss and the supplemental motion to dismiss. As
correctly pointed out by PAL, under Section 15 of Rule V of the New Rules of Procedure of the NLRC,
any motion to dismiss on the ground of lack of jurisdiction, improper venue, res judicata, or
prescription shall be immediately resolved by the Labor Arbiter by a written order. Yet, the Labor
Arbiter did not, and it was only in his decision that he mentioned that the resolution of the motion to
dismiss was deferred until this case is decided on the merits because the ground thereof was not
indubitable. On this score the Labor Arbiter acted with grave abuse of discretion for disregarding the
rules he was bound to observe.
We shall now turn to the issue of tardiness of the appeal. The record does indeed show that on the
original copy of the Notice of Judgment/Final Order, there is stamped by the PAL Legal Department
the date of its receipt of the decision, viz., AUG. 23 1991,
It is not also denied by respondents that on the right upper hand corner of PALs copy of the Notice of
Judgment/Final Orders, there is stamped the date of receipt thereof by PAL Legal Department, viz.,
AUG. 26 1991. PAL explained how this discrepancy occurred and how its counsel was misled into
believing that PAL received a copy of the decision only on 26 August 1991. This belief in good faith
rendered excusable any negligence it might have committed. Besides, the delay in the perfection of the
appeal was only one day. Considering that the Labor Arbiter had no jurisdiction over the subject matter
of NLRC-NCR Case No. 00-11-06008-90 and that the 16 security guards are not in fact entitled to
separation pay under the security service agreement, the higher interest of justice favors a relaxation of
the rule on perfection of appeals in labor cases.
While it is an established rule that the perfection of an appeal in the manner and within the period
prescribed by law is not only mandatory but jurisdictional, and failure to perfect an appeal has the

effect of rendering the judgment final and executory, it is equally settled that the NLRC may disregard
the procedural lapse where there is an acceptable reason to excuse tardiness in the taking of the appeal.
Among the acceptable reasons recognized by this Court are (a) counsels reliance on the footnote of the
notice of the decision of the Labor Arbiter that the aggrieved party may appeal within ten (10) working
days; (b) fundamental consideration of substantial justice; (c) prevention of miscarriage of justice or of
unjust enrichment, as where the tardy appeal is from a decision granting separation pay which was
already granted in an earlier final decision; and (d) special circumstances of the case combined with its
legal merits or the amount and the issue involved. A one-day delay in the perfection of the appeal was
excused in Pacific Asia Overseas Shipping Corp. vs. NLRC, Insular life Assurance Co. vs. NLRC, and
City Fair Corp vs. NLRC.
In the instant case, the Labor Arbiters lack of jurisdiction -- so palpably clear on the face of the
complaint -- and the perpetuation of unjust enrichment if the appeal is disallowed are enough
combination of reasons that warrant a relaxation of the rules on perfection of appeals in labor cases.
WHEREFORE, the instant petition is hereby GRANTED. The questioned decision of the Labor
Arbiter dated 12 August 1991 and the resolution of the Second Division of the National Labor
Relations Commission promulgated on 27 October 1994 and 31 May 1995 are hereby SET ASIDE, and
NLRC-NCR Case No. 00-11-06008-90 is DISMISSED.
SO ORDERED.
Narvasa, C.J. (Chairman), Melo, Francisco and Panganiban, JJ., concur.

xiiRubberworld (Phils.) vs. NLRC [336 SCRA 433 (July 26, 2000)]

Jurisdiction of the SEC

Facts:
Petitioner Rubberworld, a corporation established in 1965, is engaged in the manufacture of
footwear, bags and garment. Private respondents are employees of the said corporation. On
August 26, 1994, Rubberworld filed with the Department of Labor and employment a notice of
temporary shutdown of operations to take effect on September 26, 1994. Before the
effectivity date, however, Rubberworld was forced to prematurely shutdown its operations.
On November 11, 1994, private respondents filed with the NLRC a complaint against
petitioner for illegal dismissal and non-payment of separation pay. On November 22, 1994,
Rubberworld filed with the SEC a petition for declaration of suspension of payments with a
proposed rehabilitation plan.
On December 28, 1994, SEC issued an order suspending all actions for claims against
Rubberworld in accordance with P.D. 902-A. Despite this order, however, the Labor Arbiter
ruled against Rubberworld, declaring its shutdown illegal and making the corporation liable for
damages and payment of separation pay. The NLRC affirmed the decision of the Labor
Arbiter. Hence, Rubberworld filed with the SC a petition to annul the NLRC resolution.

Issue:
Whether or not NLRC acted without or in excess of its jurisdiction?
Held:
P.D. 902-A is clear that all actions for claims against corporations, partnerships, or
associations under management or receivership pending before any court, tribunal, board or
body shall be suspended accordingly. NLRC thus acted without an in excess of its jurisdiction
when it proceeded to decide the case despite the suspension order. As a consequence, any
resolution decisions or order that is rendered without jurisdiction is a nullity.

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[G.R. No. 128003. July 26, 2000]RUBBERWORLD [PHILS.], INC., and JULIE YAO

ONG, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, AQUINO

MAGSALIN, PEDRO MAIBO, RICARDO BORJA, ALICIA M. SAN PEDRO AND
FELOMENA B. TOLIN, respondents.
DECISION
PARDO, J.:
What is before the Court for resolution is a petition to annul the resolution of the
National Labor Relations Commission (NLRC), affirming the labor-arbiter's award but
deleting the moral and exemplary damages.
The facts are as follows:
Petitioner Rubberworld (Phils.), Inc. [hereinafter Rubberworld], a corporation
established in 1965, was engaged in manufacturing footwear, bags and garments.
Aquilino Magsalin, Pedro Manibo, Ricardo Borja, Benjamin Camitan, Alicia M. San
Pedro, and Felomena Tolin were employed as dispatcher, warehouseman, issue
monitor, foreman, jacks cementer and outer sole attacher, respectively.
On August 26, 1994, Rubberworld filed with the Department of Labor and Employment
a notice of temporary shutdown of operations to take effect on September 26, 1994.
Before the effectivity date, however, Rubberworld was forced to prematurely shutdown
its operations.
On November 11, 1994, private respondents filed with the National Labor Relations
Commission a complaint against petitioner for illegal dismissal and non-payment of
separation pay.
On November 22, 1994, Rubberworld filed with the Securities and Exchange
Commission (SEC) a petition for declaration of suspension of payments with a
proposed rehabilitation plan.
On December 28, 1994, SEC issued the following order:
"Accordingly, with the creation of the Management Committee, all actions for
claims against Rubberworld Philippines, Inc. pending before any court, tribunal,
office, board, body, Commission or sheriff are hereby deemed SUSPENDED.
"Consequently, all pending incidents for preliminary injunctions, writ or
attachments, foreclosures and the like are hereby rendered moot and academic.

"SO ORDERED."
On January 24, 1995, petitioners submitted to the labor arbiter a motion to suspend the
proceedings invoking the SEC order dated December 28, 1994. The labor arbiter did
not act on the motion and ordered the parties to submit their respective position
papers.
On December 10, 1995, the labor arbiter rendered a decision, which provides:
"In the light of the foregoing, respondents are hereby declared guilty of ILLEGAL
SHUTDOWN and that respondents are ordered to pay complainants their
separation pay equivalent to one (1) month pay for every year of service.
Considering the malicious act of closing the business precipitately without due
regard to the rights of complainants, moral damages and exemplary damage in
the sum of P 50,000.00 and P 30,000.00 respectively is hereby awarded for
each of the complainants.
Finally 10 % of all sums owing to complainants is hereby adjudged as attorney's
fees.
SO ORDERED."
On February 5, 1996, petitioners appealed to the National Labor Relations
Commission (NLRC) alleging abuse of discretion and serious errors in the findings of
facts of the labor arbiter.
On August 30, 1996, NLRC issued a resolution, the dispositive portion of which reads:
"PREMISES CONSIDERED, the decision appealed from is hereby, AFFIRMED
with MODIFICATION in that the award of moral and exemplary damages is
hereby, DELETED.
SO ORDERED."
On November 20, 1996, NLRC denied petitioners' motion for reconsideration.
Hence, this petition.
The issue is whether or not the Department of Labor and Employment, the Labor
Arbiter and the National Labor Relations Commission may legally act on the claims of
respondents despite the order of the Securities and Exchange Commission
suspending all actions against a company under rehabilitation by a management
committee created by the Securities and Exchange Commission.

Presidential Decree No. 902-A is clear that "all actions for claims against corporations,
partnerships or associations under management or receivership pending before any
court, tribunal, board or body shall be suspended accordingly." The law did not make
any exception in favor of labor claims.
"The justification for the automatic stay of all pending actions for claims is to enable the
management committee or the rehabilitation receiver to effectively exercise its/his
powers free from any judicial or extra judicial interference that might unduly hinder or
prevent the 'rescue' of the debtor company. To allow such other actions to continue
would only add to the burden of the management committee or rehabilitation receiver,
whose time, effort and resources would be wasted in defending claims against the
corporation instead of being directed toward its restructuring and rehabilitation."
Thus, the labor case would defeat the purpose of an automatic stay. To rule otherwise
would open the floodgates to numerous claims and would defeat the rescue efforts of
the management committee.
Besides, even if an award is given to private respondents, the ruling could not be
enforced as long as petitioner is under management committee.
This finds ratiocination in that the power to hear and decide labor disputes is deemed
suspended when the Securities and Exchange Commission puts the corporation under
rehabilitation.
Thus, when NLRC proceeded to decide the case despite the SEC suspension order,
the NLRC acted without or in excess of its jurisdiction to hear and decide cases. As a
consequence, any resolution, decision or order that it rendered or issued without
jurisdiction is a nullity.
WHEREFORE, the petition is hereby GRANTED. The decision of the labor arbiter
dated December 10, 1995 and the NLRC resolution dated August 30, 1996, are SET
ASIDE.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.

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