G.R. No.
127553 November 28, 1997
EDDIE MANUEL, ROMEO BANA, ROGELIO PAGTAMA, JR. and JOEL REA, petitioners,
vs.
N.C. CONSTRUCTION SUPPLY, JOHNNY LIM, ANITA SY and NATIONAL LABOR RELATIONS COMMISSION
(SECOND DIVISION), respondents.
PUNO, J.:
This special civil action for certiorari seeks to review the decision of the National Labor Relations Commission
(NLRC) dated June 27, 1996 in NLRC-NCR-00-07-04925-95 entitled Eddie Manuel, Romeo Bana, Rogelio Pagtama,
Jr. and Joel Rea v. N.C. Construction Supply, Johnny Lim and Anita Sy.1
Petitioners Eddie Manuel, Romeo Bana, Rogelio Pagtama, Jr. and Joel Rea were employed as drivers at N.C.
Construction Supply owned by private respondents Johnny Lim (a.k.a. Lao Ching Eng) and Anita Sy.
On June 3, 1995, the security guards of respondent company caught Aurelio Guevara, a company driver, and Jay
Calso, his helper ("pahinante"), taking out from the company premises two rolls of electrical wire worth P500.00
without authority. Calso was brought to the Pasig Police station for questioning. During the investigation, Calso
named seven other employees who were allegedly involved in a series of thefts at respondent company, among
them petitioners Manuel, Bana, Pagtama, Jr. and Rea. 2
On June 5, 1995, petitioners received separate notices from respondent company informing them that they were
positively identified by their co-worker, Jay Calso, as perpetrators of the series of thefts committed at respondent
company. They were thus invited to the Pasig police station for investigation regarding their alleged involvement in
the offense.
Atty. Ramon Reyes, private respondents' counsel conducted in their behalf an investigation regarding petitioners'
involvement in the theft. Atty. Reyes interrogated the petitioners on their alleged participation in the series of thefts
committed at respondent company. Petitioners initially denied the charge. However, after being positively identified
by Jay Calso, petitioners admitted their guilt and offered to resign in exchange for the withdrawal of any criminal
charge against them.3 Petitioners Bana and Rea filed separate resignation letters while petitioners Manuel and
Pagtama, Jr. tendered their resignations orally. Petitioner Bana's resignation letter 4 reads:
Dear Bong,
Sa ganitong sitwasyon nagpapasalamat rin ako na humantong sa ganito para hindi na tumagal
ang masama naming gawain. Piro lubos rin ako nagpapasalamat sa iyong pagpapatawad sa
akin, at ang masasabi ko lang na I'm very, very sorry na lang. Kasi alam mo naman na kapos na
kapos talaga ako. Kaya alam mo halos hindi na nga ako nag-a-absent dahil sa sahod ko lang
kapos pa sa pamilya ko. Kaya sana sa pag-resign ko sana mabigyan mo man lang ako nang
kaunti para makapamasahi man lang pau-wi sa Mindanao kasama ang mga anak ko. Yon lang. .
.
Petitioner Rea's resignation letter, 5 on the other hand, states:
Boss,
Dahil sa hindi maganda ang aking naging performance sa inyo sa loob ng NC Construction
Supply sa nakakahiya na aking nasangkutan magreresign na ho ako, magsisimula Hunyo 6,
1995. Siguro naman Boss alam naman ninyo ang totoo nakikisama lang ako sa mga dati
ninyong tauhan dahil kailangan ko talaga ng trabaho kahit labag man sa aking kalooban ang
gumawa ng hindi maganda.
Boss, kahit paano sana maintindihan mo ako, tatanggalin nyo na ho ako sana bigyan nyo na
lang ako ng kahit pamasahe namin pauwing probinsya para makapagbagong buhay na ako.
Salamat po.
Atty. Reyes accepted petitioners' resignation effective June 5, 1995.
On July 17, 1995, petitioners filed a complaint against private respondents for illegal dismissal. Petitioners alleged
that they were not informed of the charge against them nor were they given an opportunity to dispute the same. They
also alleged that their admission made at the Pasig police station regarding their involvement in the theft as well as
their resignation were not voluntary but were obtained by private respondents' lawyer by means of threat and
intimidation.
Labor Arbiter Manuel R. Caday ruled in favor of petitioners and found their dismissal to be illegal. He held that private
respondents failed to show a just cause for the termination of petitioners' services. He declared that petitioners'
admission regarding their involvement in the theft was inadmissible in evidence as it was taken without the
assistance of counsel, in violation of Section 12 Article III of the 1987 Constitution. 6 He also held that petitioners
were not afforded due process before their services were terminated. Hence, Labor Arbiter Caday ordered private
respondents to reinstate petitioners to their former position without loss of seniority rights and to pay them full
backwages. He also ordered private respondents to pay petitioners their service incentive leave benefits plus
attorney's fees. 7
On appeal, the NLRC reversed the decision of the Labor Arbiter. It ruled that petitioners were dismissed for a just
cause. It held that petitioners failed to adduce competent evidence to show a vitiation of their admission regarding
their participation in the theft. It further stated that such admission may be admitted in evidence because Section 12
Article III of the 1987 Constitution applies only to criminal proceedings but not to administrative proceedings. The
NLRC, however, agreed with the Labor Arbiter that petitioners were denied due process. Hence, it ordered private
respondents to pay petitioners the amount of P1,000.00 as indemnity. The dispositive portion of the decision reads:
WHEREFORE, premises duly considered, the decision appealed from is hereby reversed and
set aside. A new one is hereby entered ordering respondents to pay to the complainants the
amount of P1,000.00 each as and for indemnity for failure of the respondents to observe due
process.
SO ORDERED. 8
Petitioners filed the instant petition on the following grounds:
1. The National Labor Relations Commission committed grave abuse of
discretion in declaring the dismissal legal;
2. The National Labor Relations Commission committed grave abuse of
discretion in declaring that the admission of petitioners is admissible in
evidence despite the fact that it was obtained in a hostile environment and
without the presence or assistance of counsel;
3. The National Labor Relations Commission committed grave abuse of
discretion in finding that respondents N.C. Construction Supply et al. are
 right in withdrawing their trust and confidence with petitioners without any
valid and legal basis. 9
We affirm the decision of the NLRC.
An employer has a right to terminate the services of an employee subject to both substantive and procedural
limitations. This means that (1) the dismissal must be for a just or authorized cause provided in the Labor
Code, 10 and (2) the employee must be accorded due process before his employment is terminated. The validity of
the dismissal hinges on the employer's compliance with these two requirements. 11
In the case at bar, petitioners who were employed as drivers at respondent company were found guilty of stealing
company property consisting of electrical wire, welding rod, G.I. sheet, steel bar and plywood. Article 282 of the
Labor Code authorizes an employer to terminate the services of an employee for loss of trust and confidence,
provided that the loss of confidence arises from particular proven facts. The law does not require proof beyond
reasonable doubt of the employee's misconduct. Substantial evidence is sufficient. 12 Substantial evidence has been
defined as such relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. 13
Petitioners' culpability in the instant case was sufficiently proved by private respondents. Jay Calso, an employee of
respondent company who has personal knowledge about the series of thefts that has been going on at respondent
company, positively identified petitioners as among the perpetrators of the theft. Petitioners have not shown any ill
motive on the part of Calso to implicate them in the offense, unless it was true. In addition, petitioners admitted their
participation in the theft during an investigation conducted by private respondents' lawyer.
We are not convinced by petitioners' allegation that such admission was obtained by means of threat or intimidation
as such allegation is couched in general terms and is unsupported by evidence.
We also reject petitioners' argument that said admission is inadmissible as evidence against them under Section 12
Article III of the 1987 Constitution. The right to counsel under Section 12 of the Bill of Rights is meant to protect a
suspect in a criminal case under custodial investigation. Custodial investigation is the stage where the police
investigation is no longer a general inquiry into an unsolved crime but has begun to focus on a particular suspect
who had been taken into custody by the police to carry out a process of interrogation that lends itself to elicit
incriminating statements. It is when questions are initiated by law enforcement officers after a person has been taken
into custody or otherwise deprived of his freedom of action in any significant way. The right to counsel attaches only
upon the start of such investigation. 14 Therefore, the exclusionary rule under paragraph (3) Section 12 of the Bill of
Rights applies only to admission made in a criminal investigation but not to those made in an administrative
investigation.
In the case at bar, the admission was made by petitioners during the course of the investigation conducted by private
respondents' counsel to determine whether there is sufficient ground to terminate their employment. Petitioners were
not under custodial investigation as they were not yet accused by the police of committing a crime. The investigation
was merely an administrative investigation conducted by the employer, not a criminal investigation. The questions
were propounded by the employer's lawyer, not by police officers. The fact that the investigation was conducted at
the police station did not necessarily put petitioners under custodial investigation as the venue of the investigation
was merely incidental. Hence, the admissions made by petitioners during such investigation may be used as
evidence to justify their dismissal.
Private respondents, however, failed to observe due process in terminating the employment of petitioners. Due
process demands that the employer should furnish the worker whose employment is sought to be terminated a
written notice containing a statement of the cause(s) for termination and afford him ample opportunity to be heard
and to defend himself with the assistance of a representative if he so desires. Specifically, the employer must furnish
the worker with two written notices before termination of employment can be legally effected: (1) notice which
apprises the employee of the particular acts or omissions for which his dismissal is sought, and (2) the subsequent
notice which informs the employee of the employer's decision to dismiss him. 15 There is no showing in this case that
private respondents furnished petitioners which such notices. Private respondents, through their counsel, Atty.
Reyes, immediately terminated petitioners' services upon conclusion of the investigation. Private respondents must
therefore indemnify petitioners for failure to observe due process before dismissing them from work.
IN VIEW WHEREOF, the petition is DISMISSED. The assailed decision is hereby AFFIRMED. No costs.
G.R. Nos. 170384-85 March 9, 2007
LORNA DISING PUNZAL, Petitioner,
vs.
ETSI TECHNOLOGIES, INC., WERNER GEISERT, and CARMELO D. REMUDARO, Respondents.
DECISION
CARPIO MORALES, J.:
Petitioner, Lorna Dising Punzal, had been working for respondent, ETSI Technologies, Inc. (ETSI), for 12 years prior
to the termination of her services on November 26, 2001 on which date she was holding the position of Department
Secretary.
On October 30, 2001, petitioner sent an electronic mail (e-mail) message to her officemates announcing the holding
of a Halloween party that was to be held in the office the following day. The e-mail message read verbatim:
Dear ETSI-JMT Colleagues,
Good day!
As you all know, tomorrow is the day before HALLOWEEN. And many of our kids will go around "TRICK OR
TREATING". We will be dressing them up in costumes of all sorts, from cute to outrageous, from wild to "scary."
What we want to have is a similar activity here in the office. So we invite you to participate in this effort. You can also
dress your kids up in funny costumes. Also the kids will then go around the office Trick or Treating. So, we ask you to
prepare your Treats, like candies, biscuits, cookies, etc., (Cash is also welcome for parents like me . . . he he he)
Why are we doing this? Well, we just want the kids to have a good time. Kung gusto ninyo, mag-costume din kayo.
Alright! See you tomorrow morning, [October 31, 2001].1 (Underscoring supplied)
Petitioner’s immediate superior, respondent Carmelo Remudaro (Remudaro), who was one of those to whom the e-
mail message was sent, advised petitioner to first secure the approval of the Senior Vice President, respondent
Werner Geisert (Geisert), for the holding of the party in the office.
Petitioner soon learned that Geisert did not approve of the plan to hold a party in the office. She thereupon sent also
on October 30, 2001 another e-mail message to her officemates, reading verbatim:
Sorry for the mail that I sent you, unfortunately the SVP of ETSI Technologies, Inc. did not agree to our idea to bring
our children in the office for the TRICK or TREATING. He was so unfair…para bang palagi siyang iniisahan sa
trabaho…bakit most of the parents na mag-joined ang anak ay naka-VL naman. Anyway, solohin na lang niya bukas
ang office.
Anyway, to those parents who would like to bring their Kids in Megamall there will be Trick or Treating at Mc Donalds
Megamall Bldg. A at 10:00 AM tomorrow and let’s not spoil the fun for our kids.2 (Underscoring supplied)
Remudaro and Arnold Z. David (David), the Assistant Vice President of Human Resources/TQM of ETSI, later
informed petitioner, by letter of November 13, 2001, that Geisert got a copy of her e-mail message and that he
required her to explain in writing within 48 hours why she
. . . should not be given disciplinary action for committing Article IV, No. 5 & 8 Improper conduct or acts of
discourtesy or disrespect and Making malicious statements concerning Company Officer, whereby such
offenses may be subject to suspension to termination depending upon the gravity of the offense/s as specified in
our ETSI’s Code of Conduct and Discipline.3 (Emphasis in the original)
Petitioner replied by letter of November 14, 2001 that she had no malicious intention in sending the second e-mail
message and that she "never expected such kind of words can be called as ‘acts of discourtesy or disrespect.’" 4
On November 19, 2001, Geisert and Remudaro conferred with petitioner to give her a chance to explain her side. 5
David and Remudaro subsequently sent petitioner a letter on November 26, 2001, finding her explanation "not
acceptable" and terminating her services, effective immediately, "for committing Article IV, No[s]. 5 & 8, Improper
conduct or act of discourtesy or disrespect and making malicious statements concerning company officer." 6
On February 11, 2002, petitioner filed before the National Labor Relations Commission (NLRC) a complaint 7 for
illegal dismissal against ETSI, Geisert, and Remudaro.
By Order of November 26, 2002, the Labor Arbiter dismissed petitioner’s complaint, finding that she was legally
dismissed for serious misconduct, and that she was afforded due process. 8
On petitioner’s appeal, the NLRC, by Resolution9 dated October 27, 2003, found that while she was indeed guilty of
misconduct, the penalty of dismissal was disproportionate to her infraction. 10 The NLRC thus ordered that petitioner
was entitled to reinstatement which, however, was no longer feasible due to strained relations. The NLRC thus
ordered that petitioner be awarded separation pay equivalent to one month pay for every year of service, a period of
at least six months to be considered one whole year.11
Noting that petitioner was not entirely faultless, the NLRC denied her prayer for backwages 12 as well as her prayer
for exemplary and moral damages and attorney’s fees in the absence of the legal conditions justifying their award. 13
Both parties filed their respective motions for reconsideration14 which the NLRC denied.15 Both parties thereupon
filed their respective petitions for certiorari16 with the Court of Appeals.
In the petition of petitioner, docketed as CA-G.R. SP No. 83296, she questioned the denial of her prayer for
backwages.17 Upon the other hand, in the petition of respondent ETSI, et al., docketed as CA-G.R. SP No. 83205,
they questioned the finding of illegal dismissal, the grant of separation pay, and the imputation of liability to Geisert
and Remudaro.18
In her comment to the petition of ETSI, et al. in CA-G.R. SP No. 83205, petitioner raised the issue of due process,
alleging that her employer did not inform her of her right to be assisted by counsel during the conference with
respondents Geisert and Remudaro.19
By Decision20 of May 13, 2005, the Court of Appeals, which priorly consolidated the petitions of both parties, held that
petitioner’s dismissal was in order:21
The gravity of Punzal’s infraction is borne by the fact that her e-mail message to the workers of ETSI tended to cast
scorn and disrespect toward a senior vice president of the company. The message itself resounds of subversion and
undermines the authority and credibility of management.
xxxx
Also, this message was not a mere expression of dissatisfaction privately made by one person to another, but was
circulated to everyone in the work area. The message was sent close at the heels of SVP Geisert’s disapproval of
Punzal’s plan to hold a Halloween affair in the office, because the said event would disrupt the operations and peace
and order in the office. Punzal therefore displayed a tendency to act without management’s approval, and even
against management’s will, as she invited her co-workers to join a trick or treating activity at another venue during
office hours.
The message also comes across as an encouragement to ignore SVP Geisert’s authority, and portrayed him as
unworthy of respect because of his unpopular personality.
This is in clear violation of Article IV, Section 5 of the company’s Code of Conduct and Discipline, which clearly
imposes the penalty of "suspension to dismissal, depending upon the gravity of the offense" in cases where an
employee displays "improper conduct or acts of discourtesy or disrespect to fellow employees, visitors, guests,
clients, at any time."
The imposition of the penalty of dismissal is proper, because of the gravity of Punzal’s misconduct, as earlier pointed
out, and considering that:
(1) Punzal’s statements were discourteous and disrespectful not only to a mere co-employee, but to a high
ranking executive official of the company;
(2) Punzal’s statements tended to ridicule and undermine the credibility and authority of SVP Geisert, and
even encouraged disobedience to the said officer;
(3) Punzal’s message was sent to a great number of employees of ETSI, which tended to sow dissent and
disrespect to management among a great number of employees of ETSI;
(4) Punzal’s message could not have been made in good faith, because the message itself used language
that placed SVP Geisert in ridicule and portrayed him as an object of scorn, betraying the sender’s bad
faith.
Given these circumstances, the fact that Punzal’s infraction occurred only once should be largely insignificant. The
gravity and publicity of the offense as well as its adverse impact in the workplace is more than sufficient to place the
same in the level of a serious misconduct.22 (Underscoring supplied)
Contrary to petitioner’s contention, the Court of Appeals also found that due process was observed in her dismissal. 23
The Court of Appeals thus reinstated the Labor Arbiter’s Order. Thus it disposed:
WHEREFORE, premises considered, the petition filed by Lorna Dising Punzal in CA-G.R. SP No. 83296 is hereby
DISMISSED, while the petition filed by ETSI, Werner Geisert and Carmelo D. Remudaro is hereby GRANTED. The
assailed Resolutions, dated October 27, 2003 and January 28, 2004, of the respondent National Labor Relations
Commission are hereby SET ASIDE. In lieu thereof, the Decision of Labor Arbiter Joel S. Lustria, dated November
26, 2002, dismissing the complaint filed by Lorna Dising Punzal is hereby REINSTATED.
SO ORDERED.24 (Underscoring supplied)
Hence, petitioner’s present Petition for Review on Certiorari,25 faulting the appellate court to have erred
. . . WHEN IT RULED THAT PETITIONER’S STATEMENT WAS DISCOURTEOUS AND
DISRESPECTFUL CONSTITUTING GROSS DISRESPECT AND SERIOUS MISCONDUCT;
. . . WHEN IT FOUND THAT DUE PROCESS WAS ACCORDED THE PETITIONER;
. . . WHEN IT FAILED TO AWARD THE PETITIONER HER RIGHT TO REINSTATEMENT AND
BACKWAGES.26
Petitioner posits that her second e-mail message was merely an exercise of her right to freedom of expression
without any malice on her part.27
On the other hand, ETSI, et al. maintain that petitioner’s second e-mail message was tainted with bad faith and
constituted a grave violation of the company’s code of discipline.28
In Philippines Today, Inc. v. NLRC,29 this Court, passing on the attitude or respect that an employee is expected to
observe towards an employer, held:
Alegre’s choice of words and way of expression betray his allegation that the memorandum was simply an
"opportunity to open the eyes of (Petitioner) Belmonte to the work environment in petitioner’s newspaper with the end
in view of persuading (her) to take a hand at improving said environment." Apprising his employer (or top-level
management) of his frustrations in his job and differences with his immediate superior is certainly not done in an
abrasive, offensive, and disrespectful manner. A cordial or, at the very least, civil attitude, according due deference
to one’s superiors, is still observed, especially among high-ranking management officers. The Court takes judicial
notice of the Filipino values of pakikisama and paggalang which are not only prevalent among members of a family
and community but within organizations as well, including work sites. An employee is expected to extend due respect
to management, the employer being the "proverbial hen that lays the golden egg," so to speak. An aggrieved
employee who wants to unburden himself of his disappointments and frustrations in his job or relations with his
immediate superior would normally approach said superior directly or otherwise ask some other officer possibly to
mediate and discuss the problem with the end in view of settling their differences without causing ferocious conflicts.
No matter how [much] the employee dislikes the employer professionally, and even if he is in a confrontational
disposition, he cannot afford to be disrespectful and dare to talk with an unguarded tongue and/or with a bileful
pen.30 (Underscoring supplied)
A scrutiny of petitioner’s second e-mail message shows that her remarks were not merely an expression of her
opinion about Geisert’s decision; they were directed against Geisert himself, viz: "He was so unfair . . . para bang
palagi siyang iniisahan sa trabaho. . . Anyway, solohin na lang niya bukas ang office." (Emphasis supplied)31
As the Court of Appeals noted, petitioner, in her closing statement – "Anyway, to those parents who would like to
bring their Kids in Megamall there will be Trick or Treating at Mc Donalds x x x tomorrow and let’s not spoil the fun for
our kids"32 – even invited her co-workers to join a trick or treating activity at another venue during office hours33(10:00
AM), October 31, 2001 being a Wednesday and there is no showing that it was declared a holiday, encouraging
them to ignore Geisert’s authority.
Additionally, petitioner sent the e-mail message in reaction to Geisert’s decision which he had all the right to make.
That it has been a tradition in ETSI to celebrate occasions such as Christmas, birthdays, Halloween, and
others34does not remove Geisert’s prerogative to approve or disapprove plans to hold such celebrations in office
premises and during company time. It is settled that
x x x it is the prerogative of management to regulate, according to its discretion and judgment, all aspects of
employment. This flows from the established rule that labor law does not authorize the substitution of the judgment of
the employer in the conduct of its business. Such management prerogative may be availed of without fear of any
liability so long as it is exercised in good faith for the advancement of the employers’ interest and not for the purpose
of defeating or circumventing the rights of employees under special laws or valid agreement and are not exercised in
a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite. 35 (Underscoring supplied)
In the case at bar, the disapproval of the plan to hold the Halloween party on October 31, 2001 may not be
considered to have been actuated by bad faith. As the Labor Arbiter noted:
It may not be ignored that holding a trick or treat party in the office premises of respondent ETSI would
certainly affect the operations of the office, since children will be freely roaming around the office premises, things
may get misplaced and the noise in the office will simply be too hard to ignore. Contrary to complainant’s position, it
is immaterial if the parents of the children who will participate in the trick or treat will be on vacation leave, since it is
the work of the employees who will not be on leave and who will be working on that day which will be disrupted,
possibly resulting in the disruption of the operations of the company. 36 (Underscoring supplied)
Given the reasonableness of Geisert’s decision that provoked petitioner to send the second e-mail message, the
observations of the Court of Appeals that "the message x x x resounds of subversion and undermines the authority
and credibility of management"37 and that petitioner "displayed a tendency to act without management’s approval,
and even against management’s will" are well taken.38
Moreover, in circulating the second e-mail message, petitioner violated Articles III (8) and IV (5) of ETSI’s Code of
Conduct on "making false or malicious statements concerning the Company, its officers and employees or its
products and services"39 and "improper conduct or acts of discourtesy or disrespect to fellow employees, visitors,
guests, clients, at any time."40
Petitioner invokes Samson v. National Labor Relations Commission41 where this Court held that the dismissal of the
therein petitioner was too harsh a penalty for uttering "Si EDT [Epitacio D. Titong, the General Manager and
President of the employer], bullshit yan," "sabihin mo kay EDT yan" and "sabihin mo kay EDT, bullshit yan," while
making the "dirty finger" gesture, and warning that the forthcoming national sales conference of the company would
be a "very bloody one."
Petitioner’s reliance on Samson is misplaced. First, in that case, this Court found that the misconduct committed was
not related with the employee’s work as the offensive remarks were verbally made during an informal Christmas
gathering of the employees, an occasion "where tongues are more often than not loosened by liquor or other
alcoholic beverages"42 and "it is to be expected x x x that employees freely express their grievances and gripes
against their employers."43
In petitioner’s case, her assailed conduct was related to her work. It reflects an unwillingness to comply with
reasonable management directives.
While in Samson, Samson was held to be merely expressing his dissatisfaction over a management decision, 44 in
this case, as earlier shown, petitioner’s offensive remarks were directed against Geisert.
Additionally, in Samson, this Court found that unlike in Autobus Workers’ Union (AWU) v. NLRC45 where dismissal
was held to be an appropriate penalty for uttering insulting remarks to the supervisor, 46 Samson uttered the insulting
words against EDT in the latter’s absence.47 In the case at bar, while petitioner did not address her e-mail message
to Geisert, she circulated it knowing – or at least, with reason to know – that it would reach him. As ETSI notes,
"[t]hat [petitioner] circulated this e-mail message with the knowledge that it would reach the eyes of management
may be reasonably concluded given that the first e-mail message reached her immediate supervisor’s attention."48
Finally, in Samson, this Court found that the "lack of urgency on the part of the respondent company in taking any
disciplinary action against [the employee] negates its charge that the latter’s misbehavior constituted serious
misconduct."49 In the case at bar, the management acted 14 days after petitioner circulated the quoted e-mail
message.50
Petitioner asks that her 12 years of service to ETSI during which, so she claims, she committed no other offense be
taken as a mitigating circumstance.51 This Court has held, however, that "the longer an employee stays in the service
of the company, the greater is his responsibility for knowledge and compliance with the norms of conduct and the
code of discipline in the company."52
In fine, petitioner, having been dismissed for just cause, is neither entitled to reinstatement nor to backwages.
Petitioner’s contention that she was denied due process is well-taken however, as the records do not show that she
was informed of her right to be represented by counsel during the conference with Geisert and Remudaro.
The protestations of ETSI, et al. that the right to be informed of the right to counsel does not apply to investigations
before administrative bodies and that law and jurisprudence merely give the employee the option to secure the
services of counsel in a hearing or conference53 fall in light of the clear provision of Article 277 (b) of the Labor Code
that
the employer xxx shall afford [the worker whose employment is sought to be terminated] ample opportunity to be
heard and to defend himself with the assistance of his representatives if he so desires in accordance with company
rules and regulations pursuant to guidelines set by the Department of Labor and Employment,
and this Court’s explicit pronouncement that "[a]mple opportunity connotes every kind of assistance that
management must accord the employee to enable him to prepare adequately for his defense including legal
representation."54
Following Agabon, et al. v. National Labor Relations Commission,55 the violation of petitioner’s statutory due process
right entitles her to an award of nominal damage, which this Court fixes at ₱30,000. 56
WHEREFORE, the petition is in part GRANTED. The questioned decision is AFFIRMED with
the MODIFICATIONthat respondent ETSI Technologies, Inc. is ordered to pay petitioner, Lorna Punzal, nominal
damages in the amount of ₱30,000.
SO ORDERED.
G.R. No. 191008 April 11, 2011
QUIRICO LOPEZ, Petitioner,
vs.
ALTURAS GROUP OF COMPANIES and/or MARLITO UY, Respondents.
DECISION
CARPIO MORALES, J.:
Quirico Lopez (petitioner) was hired by respondent Alturas Group of Companies in 1997 as truck driver. Ten years
later or sometime in November 2007, he was dismissed after he was allegedly caught by respondent’s security guard
in the act of attempting to smuggle out of the company premises 60 kilos of scrap iron worth ₱840 aboard
respondents’ Isuzu Cargo Aluminum Van with Plate Number PHP 271 that was then assigned to him. When
questioned, petitioner allegedly admitted to the security guard that he was taking out the scrap iron consisting of lift
springs out of which he would make axes.
Petitioner, in compliance with the Show Cause Notice1 dated December 5, 2007 issued by respondent company’s
Human Resource Department Manager, denied the allegations by a handwritten explanation written in the Visayan
dialect.
Finding petitioner’s explanation unsatisfactory, respondent company terminated his employment by Notice of
Termination2 effective December 14, 2007 on the grounds of loss of trust and confidence, and of violation of
company rules and regulations. In issuing the Notice, respondent company also took into account the result of an
investigation showing that petitioner had been smuggling out its cartons which he had sold, in conspiracy with one
Maritess Alaba, for his own benefit to thus prompt it to file a criminal case for Qualified Theft 3 against him before the
Regional Trial Court (RTC) of Bohol. It had in fact earlier filed another criminal case for Qualified Theft 4 against
petitioner arising from the theft of the scrap iron.
Petitioner thereupon filed a complaint against respondent company for illegal dismissal and underpayment of wages.
He claimed that the smuggling charge against him was fabricated to justify his illegal dismissal; that the filing of the
charge came about after he reported the loss of the original copy of his pay slip, which report, he went on to claim,
respondent company took to mean that he could use the pay slip as evidence for filing a complaint for violation of
labor laws; and that on account of the immediately stated concern of respondent, it forced him into executing an
affidavit that if the pay slip is eventually found, it could not be used in any proceedings between them.
By Decision5 of June 30, 2008, the Labor Arbiter, holding that the pendency of the criminal case involving the scrap
iron did not warrant the suspension of the proceedings before him, held that petitioner’s dismissal was justified, for
he, a truck driver, held a position of trust and confidence, and his act of stealing company property was a violation of
the trust reposed upon him.
Respecting the charge of underpayment of wages, the Labor Arbiter noted that on the basis of the records, petitioner
had been paid the correct wages and benefits mandated by law.
The Labor Arbiter accordingly dismissed petitioner’s complaint.
On appeal, the National Labor Relations Commission’s (NLRC) Fourth Division (Cebu City) set aside the Labor
Arbiter’s Decision by Decision6 dated December 22, 2008, finding that respondent’s evidence did not suffice to
warrant the termination of petitioner’s services; and that petitioner’s alleged admission of taking the scrap iron was
belied by his vehement denial, as even the security guard, one Gerardo Luega, who allegedly witnessed the
asportation and before whom the alleged admission was made, did not even execute an affidavit in support thereof.
Citing Salaw v. NLRC,7 the NLRC went on to hold that petitioner should have been afforded, or at least advised of
the right to counsel. It thus held that "any evaluation which was based only on the explanation to the show-cause
letter and any so-called investigation but without confrontation of the vital witnesses, do[es] not suffice."
Respondent company’s motion for reconsideration was denied by Resolution8 of April 30, 2009, hence, it appealed to
the Court of Appeals.
By Report9 of December 18, 2009, the appellate court reversed the NLRC ruling. It held that respondent company
was justified in terminating petitioner’s employment on the ground of loss of trust and confidence, his alleged act of
smuggling out the scrap iron having been sufficiently established through the affidavits of Patrocinio Borja and Zalde
Tare, supervisor and junior supervisor, respectively, of its Supermarket Motorpool.
The appellate court further held that "the evidence supporting the criminal charge, found after preliminary
investigation are [sic] sufficient to show prima facie guilt, which constitutes just cause for [petitioner’s dismissal]
based on loss of trust and confidence"; and that petitioner’s subsequent acquittal in the criminal case "did not
automatically preclude a determination that he is guilty of acts inimical to the employer’s interest resulting in loss of
trust and confidence."
Albeit the appellate court found that petitioner’s dismissal was for a just cause, it held that due process was not
observed when respondent company failed to give him a chance to defend his side in a proper hearing. Following
Agabon v. NLRC,10 the appellate court thus ordered respondent to pay nominal damages of ₱30,000.
Thus the appellate court disposed:
WHEREFORE, in view of the foregoing, the Decision of the NLRC dated December 22, 2008 is hereby MODIFIED.
Private respondent’s dismissal from employment is upheld on the ground of loss of trust and confidence, a just cause
for termination. However, for failure to comply fully with the procedural due process, petitioner is ORDERED to pay
private respondent the amount of ₱30,000.00 as nominal damages.11 (underscoring supplied)
Hence, the present petition for review on certiorari.
Dismissals have two facets: the legality of the act of dismissal, which constitutes substantive due process, and the
legality of the manner of dismissal which constitutes procedural due process. 12
As to substantive due process, the Court finds that respondent company’s loss of trust and confidence arising from
petitioner’s smuggling out of the scrap iron, conpounded by his past acts of unauthorized selling cartons belonging to
respondent company, constituted just cause for terminating his services.
Loss of trust and confidence as a ground for dismissal of employees covers employees occupying a position of trust
who are proven to have breached the trust and confidence reposed on them. Apropos is Cruz v. Court of
Appeals13which explains the basis and quantum of evidence of loss of trust and confidence, viz:
In addition, the language of Article 282(c) of the Labor Code states that the loss of trust and confidence must be
based on willful breach of the trust reposed in the employee by his employer. Such 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. Moreover, it must be based on substantial evidence and not on the
employer’s whims or caprices or suspicions otherwise, the employee would eternally remain at the mercy of the
employer. Loss of confidence must not be indiscriminately used as a shield by the employer against a claim that the
dismissal of an employee was arbitrary. And, in order to constitute a just cause for dismissal, the act complained of
must be work-related and shows that the employee concerned is unfit to continue working for the employer. In
addition, loss of confidence as a just cause for termination of employment is premised on the fact that the employee
concerned holds a position of responsibility, trust and confidence or that the employee concerned is entrusted with
confidence with respect to delicate matters, such as the handling or care and protection of the property and assets of
the employer. The betrayal of this trust is the essence of the offense for which an employee is penalized. (emphasis
and underscoring supplied)
Petitioner, a driver assigned with a specific vehicle, was entrusted with the transportation of respondent company’s
goods and property, and consequently with its handling and protection, hence, even if he did not occupy a
managerial position, he can be said to be holding a position of responsibility. As to his act–principal ground for his
dismissal — his attempt to smuggle out the scrap iron belonging to respondent company, the same is undoubtedly
work-related.1avvphi1
Respondent company’s charge against petitioner was amply proven by substantial evidence consisting of the
affidavits of various employees of respondent. Contrary to the NLRC’s observation, the security guard who
apprehended petitioner, Gerardo Luega, actually executed a statement14 relative to the smuggling out of scrap iron,
which was attached to, and served as basis for the filing of, the corresponding complaint for Qualified Theft.
Petitioner’s claim that he was framed up after he allegedly lost his pay slip to draw respondent company to suspect
that he might file a labor complaint for underpayment does not inspire credence.
It is, however, with respect to the appellate court’s finding that petitioner was not afforded procedural due process
that the Court deviates from. Procedural due process has been defined as giving an opportunity to be heard before
judgment is rendered.15 In termination cases, Perez v. Philippine Telegraph and Telephone Company,16 illuminates
on the correct proceedings to be followed therein in order to comply with the due process requirement:
The above rulings are a clear recognition that the employer may provide an employee with ample opportunity to be
heard and defend himself with the assistance of a representative or counsel in ways other than a formal hearing. The
employee can be fully afforded a chance to respond to the charges against him, adduce his evidence or rebut the
evidence against him through a wide array of methods, verbal or written.
After receiving the first notice apprising him of the charges against him, the employee may submit a written
explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and offer evidence in
support thereof, like relevant company records (such as his 201 file and daily time records) and the sworn
statements of his witnesses. For this purpose, he may prepare his explanation personally or with the assistance of a
representative or counsel. He may also ask the employer to provide him copy of records material to his defense. His
written explanation may also include a request that a formal hearing or conference be held. In such a case, the
conduct of a formal hearing or conference becomes mandatory, just as it is where there exist substantial evidentiary
disputes or where company rules or practice requires an actual hearing as part of employment pretermination
procedure. (emphasis and underscoring supplied)
Petitioner was given the opportunity to explain his side when he was informed of the charge against him and required
to submit his written explanation with which he complied. That there might have been no hearing is of no moment, for
as Autobus Workers’ Union v. NLRC17 holds:
This Court has held that there is no violation of due process even if no hearing was conducted, where the party was
given a chance to explain his side of the controversy. What is frowned upon is the denial of the opportunity to be
heard. (emphasis supplied)
Parenthetically, the Court finds that it was error for the NLRC to opine that petitioner should have been afforded
counsel or advised of the right to counsel. The right to counsel and the assistance of one in investigations involving
termination cases is neither indispensable nor mandatory, except when the employee himself requests for one or
that he manifests that he wants a formal hearing on the charges against him. In petitioner’s case, there is no showing
that he requested for a formal hearing to be conducted or that he be assisted by counsel. Verily, since he was
furnished a second notice informing him of his dismissal and the grounds therefor, the twin-notice requirement had
been complied with to call for a deletion of the appellate court’s award of nominal damages to petitioner.
As for the subsequent dismissal of the criminal cases18 filed against petitioner, criminal and labor proceedings are
distinct and separate from each other. Each requires a different quantum of proof, arising though they are from the
same set of facts or circumstances. As Vergara v. NLRC19 holds:
An employee’s acquittal in a criminal case does not automatically preclude a determination that he has been guilty of
acts inimical to the employer’s interest resulting in loss of trust and confidence. Corollarily, the ground for the
dismissal of an employee does not require proof beyond reasonable doubt; as noted earlier, the quantum of proof
required is merely substantial evidence. More importantly, the trial court acquitted petitioner not because he did not
commit the offense, but merely because of the failure of the prosecution to prove his guilt beyond reasonable doubt..
In other words, while the evidence presented against petitioner did not satisfy the quantum of proof required for
conviction in a criminal case, it substantially proved his culpability which warranted his dismissal from employment.
(emphasis supplied)
WHEREFORE, the petition is DENIED. The Report dated December 18, 2009 of the Court of Appeals dismissing
petitioner’s complaint is AFFIRMED with MODIFICATION in that the award of nominal damages in the amount of
₱30,000 is DELETED.
Costs against petitioner.
SO ORDERED.
G.R. No. 113271 October 16, 1997
WATEROUS DRUG CORPORATION and MS. EMMA CO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ANTONIA MELODIA CATOLICO, respondents.
DAVIDE, JR., J.:
Nor is he a true Servant [who] buys dear to share in the Profit with the Seller. 1
This petition for certiorari under Rule 65 of the Rules of Court seeks to declare private respondent Antonia Melodia
Catolico (hereafter Catolico) not a "true Servant," thereby assailing the 30 September 1993 decision 2 and December
1993 Resolution3 of the National Labor Relations Commission (NLRC) in NLRC-NCR CA No. 005160-93, which
sustained the reinstatement and monetary awards in favor of private respondent 4 and denied the petitioners' motion
for reconsideration.5
The facts are as follows:
Catolico was hired as a pharmacist by petitioner Waterous Drug Corporation (hereafter WATEROUS) on 15 August
1988.
On 31 July 1989, Catolico received a memorandum 6 from WATEROUS Vice President-General Manager Emma R.
Co warning her not to dispense medicine to employees chargeable to the latter's accounts because the same was a
prohibited practice. On the same date, Co issued another memorandum 7 to Catolico warning her not to negotiate
with suppliers of medicine without consulting the Purchasing Department, as this would impair the company's control
of purchases and, besides she was not authorized to deal directly with the suppliers.
As regards the first memorandum, Catolico did not deny her responsibility but explained that her act was "due to
negligence," since fellow employee Irene Soliven "obtained the medicines in bad faith and through misrepresentation
when she claimed that she was given a charge slip by the Admitting Dept." Catolico then asked the company to look
into the fraudulent activities of Soliven.8
In a memorandum9 dated 21 November 1989, WATEROUS Supervisor Luzviminda E. Bautro warned Catolico
against the "rush delivery of medicines without the proper documents."
On 29 January 1990, WATEROUS Control Clerk Eugenio Valdez informed Co that he noticed an irregularity
involving Catolico and Yung Shin Pharmaceuticals, Inc. (hereafter YSP), which he described as follows:
. . . A case in point is medicine purchased under our Purchase Order (P.O.) No. 19045 with YSP Sales
Invoice No. 266 representing purchase of ten (10) bottles of Voren tablets at P384.00 per unit. Previews
P.O.s issued to YSP, Inc. showed that the price per bottle is P320.00 while P.O. No. 19045 is priced at
P384.00 or an over price of P64.00 per bottle (or total of P640.00). WDRC paid the amount of P3,840.00
thru MBTC Check No. 222832 dated December 15, 1988. Verification was made to YSP, Inc. to determine
the discrepancy and it was found that the cost per bottle was indeed overpriced. YSP, Inc. Accounting
Department (Ms. Estelita Reyes) confirmed that the difference represents refund of jack-up price of ten
bottles of Voren tablets per sales invoice no. 266 as per their check voucher no. 629552 (shown to the
undersigned), which was paid to Ms. Catolico through China Bank check no. 892068 dated November 9,
1989 . . . .
The undersigned talked to Ms. Catolico regarding the check but she denied having received it and that she
is unaware of the overprice. However, upon conversation with Ms. Saldana, EDRC Espana Pharmacy
Clerk, she confirmed that the check amounting to P640.00 was actually received by Ms. Catolico. As a
matter of fact, Ms. Catolico even asked Ms. Saldana if she opened the envelope containing the check but
Ms. Saldana answered her "talagang ganyan, bukas." It appears that the amount in question (P640.00)
had been pocketed by Ms. Catolico.10
Forthwith, in her memorandum11 dated 37 January 1990, Co asked Catolico to explain, within twenty-four hours, her
side of the reported irregularity. Catolico asked for additional time to give her explanation, 12 and she was granted a
48-hour extension from 1 to 3 February 1990. However, on 2 February 1990, she was informed that effective 6
February 1990 to 7 March 1990, she would be placed on preventive suspension to protect the interests of the
company.13
In a letter dated 2 February 1990, Catolico requested access to the file containing Sales Invoice No. 266 for her to be
able to make a satisfactory explanation. In said letter she protested Saldaña's invasion of her privacy when Saldaña
opened an envelope addressed to Catolico.14
In a letter15 to Co dated 10 February 1990, Catolico, through her counsel, explained that the check she received from
YSP was a Christmas gift and not a "refund of overprice." She also averred that the preventive suspension was ill-
motivated, as it sprang from an earlier incident between her and Co's secretary, Irene Soliven.
On 5 March 1990, WATEROUS Supervisor Luzviminda Bautro, issued a memorandum 16 notifying Catolico of her
termination; thus:
We received your letter of explanation and your lawyer's letter dated Feb. 2, 1990 and Feb. 10, 1990
respectively regarding our imposition of preventive suspension on you for acts of dishonesty. However,
said letters failed to rebut the evidences [sic] in our possession which clearly shows that as a Pharmacist
stationed at Espana Branch, you actually made Purchase Orders at YSP Phils., Inc. for 10 bottles of Voren
tablets at P384.00/bottle with previous price of P320.00/bottle only. A check which you received in the
amount of P640.00 actually represents the refund of over price of said medicines and this was confirmed
by Ms. Estelita Reyes, YSP Phils., Inc. Accounting Department.
Your actuation constitutes an act of dishonesty detrimental to the interest of the company. Accordingly, you
are hereby terminated effective March 8, 1990.
On 5 May 1990, Catolico filed before the Office of the Labor Arbiter a complaint for unfair labor practice, illegal
dismissal, and illegal suspension.17
In his decision18 of 10 May 1993, Labor Arbiter Alex Arcadio Lopez found no proof of unfair labor practice against
petitioners. Nevertheless, he decided in favor of Catolico because petitioners failed to "prove what [they] alleged as
complainant's dishonesty," and to show that any investigation was conducted. Hence, the dismissal was without just
cause and due process. He thus declared the dismissal and suspension illegal but disallowed reinstatement, as it
would not be to the best interest of the parties. Accordingly, he awarded separation pay to Catolico computed at one-
half month's pay for every year of service; back wages for one year; and the additional sum of P2,000.00 for illegal
suspension "representing 30 days work." Arbiter Lopez computed the award in favor of Catolico as follows:
 30 days Preventive Suspension P2,000.00
Backwages 26,858.50
1/12 of P26,858.50 2,238.21
Separation pay (3 years) 4,305.15
—————
TOTAL AWARD P35,401.86
—————
Petitioners seasonably appealed from the decision and urged the NLRC to set it aside because the Labor Arbiter
erred in finding that Catolico was denied due process and that there was no just cause to terminate her services.
In its decision19 of 30 September 1993, the NLRC affirmed the findings of the Labor Arbiter on the ground that
petitioners were not able to prove a just cause for Catolico's dismissal from her employment. It found that petitioner's
evidence consisted only of the check of P640.00 drawn by YSP in favor of complainant, which her co-employee saw
when the latter opened the envelope. But, it declared that the check was inadmissible in evidence pursuant to
Sections 2 and 3(1 and 2) of Article III of the Constitution.20 It concluded:
With the smoking gun evidence of respondents being rendered inadmissible, by virtue of the constitutional
right invoked by complainants, respondents' case falls apart as it is bereft of evidence which cannot be
used as a legal basis for complainant's dismissal.
The NLRC then dismissed the appeal for lack of merit, but modified the dispositive portion of the appealed decision
by deleting the award for illegal suspension as the same was already included in the computation of the aggregate of
the awards in the amount of P35,401.86.
Their motion for reconsideration having been denied, petitioners filed this special civil action for certiorari, which is
anchored on the following grounds:
I. Public respondent committed grave abuse of discretion in its findings of facts.
II. Due process was duly accorded to private respondent.
III. Public respondent gravely erred in applying Section 3, Article III of the 1987
Constitution.
As to the first and second grounds, petitioners insist that Catolico had been receiving "commissions" from YSP, or
probably from other suppliers, and that the check issued to her on 9 November 1989 was not the first or the last.
They also maintained that Catolico occupied a confidential position and that Catolico's receipt of YSP's check,
aggravated by her "propensity to violate company rules," constituted breach of confidence. And contrary to the
findings of NLRC, Catolico was given ample opportunity to explain her side of the controversy.
Anent the third ground, petitioners submit that, in light of the decision in the People v. Marti,21 the constitutional
protection against unreasonable searches and seizures refers to the immunity of one's person from interference by
government and cannot be extended to acts committed by private individuals so as to bring it within the ambit of
alleged unlawful intrusion by the government.
In its Manifestation in Lieu of Comment, the Office of the Solicitor General (OSG) disagreed with the NLRC's
decision, as it was of the persuasion that (a) the conclusions reached by public respondent are inconsistent with its
findings of fact; and (b) the incident involving the opening of envelope addressed to private respondent does not
warrant the application of the constitutional provisions. It observed that Catolico was given "several opportunities" to
explain her side of the check controversy, and concluded that the opportunities granted her and her subsequent
explanation "satisfy the requirements of just cause and due process." The OSG was also convinced that Catolico's
dismissal was based on just cause and that Catolico's admission of the existence of the check, as well as her "lame
excuse" that it was a Christmas gift from YSP, constituted substantial evidence of dishonesty. Finally, the OSG
echoed petitioners' argument that there was no violation of the right of privacy of communication in this case, 22adding
that petitioner WATEROUS was justified in opening an envelope from one of its regular suppliers as it could assume
that the letter was a business communication in which it had an interest.
In its Comment which we required to be filed in view of the adverse stand of the OSG, the NLRC contends that
petitioners miserably failed to prove their claim that it committed grave abuse of discretion in its findings of fact. It
then prays that we dismiss this petition.
In her Comment, Catolico asserts that petitioners' evidence is too "flimsy" to justify her dismissal. The check in issue
was given to her, and she had no duty to turn it over to her employer. Company rules do not prohibit an employee
from accepting gifts from clients, and there is no indication in the contentious check that it was meant as a refund for
overpriced medicines. Besides, the check was discovered in violation of the constitutional provision on the right to
privacy and communication; hence, as correctly held by the NLRC, it was inadmissible in evidence.
Catolico likewise disputes petitioners' claim that the audit report and her initial response that she never received a
check were sufficient to justify her dismissal. When she denied having received a check from YSP, she meant that
she did not receive any refund of overprice, consistent with her position that what she received was a token gift. All
that can be gathered from the audit report is that there was apparently an overcharge, with no basis to conclude that
Catolico pocketed the amount in collusion with YSP. She thus concluded that her dismissal was based on a mere
suspicion.
Finally, Catolico insists that she could not have breached the trust and confidence of WATEROUS because, being
merely a pharmacist, she did not handle "confidential information or sensitive properties." She was doing the task of
a saleslady: selling drugs and making requisitions when supplies were low.
A thorough review of the record leads us to no other conclusion than that, except as to the third ground, the instant
petition must fail.
Concededly, Catolico was denied due process. Procedural due process requires that an employee be apprised of the
charge against him, given reasonable time to answer the charge, allowed ample opportunity to be heard and defend
himself, and assisted by a representative if the employee so
desires.23 Ample opportunity connotes every kind of assistance that management must accord the employee to
enable him to prepare adequately for his defense, including legal representation. 24
In the case at bar, although Catolico was given an opportunity to explain her side, she was dismissed from the
service in the memorandum of 5 March 1990 issued by her Supervisor after receipt of her letter and that of her
counsel. No hearing was ever conducted after the issues were joined through said letters. The Supervisor's
memorandum spoke of "evidences [sic] in [WATEROUS] possession," which were not, however, submitted. What the
"evidences" [sic] other than the sales invoice and the check were, only the Supervisor knew.
Catolico was also unjustly dismissed. It is settled that the burden is on the employer to prove just and valid cause for
dismissing an employee, and its failure to discharge that burden would result in a finding that the dismissal is
unjustified.25 Here, WATEROUS proved unequal to the task.
It is evident from the Supervisor's memorandum that Catolico was dismissed because of an alleged anomalous
transaction with YSP. Unfortunately for petitioners, their evidence does not establish that there was an overcharge.
Control Clerk Eugenio C. Valdez, who claims to have discovered Catolico's inappropriate transaction, stated in his
affidavit:26
4. My findings revealed that on or before the month of July 31, 1989, Ms. Catolico in violation of the
[company] procedure, made an under the table deal with YSP Phils. to supply WDRC needed medicines
 like Voren tablets at a jack-up price of P384.00 per bottle of 50 mg. which has a previous price of only
P320.00;
5. I verified the matter to YSP Phils. to determine the discrepancy and I found out that the cost per bottle
was indeed overpriced. The Accounting Department of YSP Phils. through Ms. Estelita Reyes confirmed
that there was really an overprice and she said that the difference was refunded through their check
voucher no. 629552 which was shown to me and the payee is Melodia Catolico, through a China Bank
Check No. 892068 dated November 9, 1989.
It clearly appears then that Catolico's dismissal was based on hearsay information. Estelita Reyes never testified nor
executed an affidavit relative to this case; thus, we have to reject the statements attributed to her by Valdez. Hearsay
evidence carries no probative value.27
Besides, it was never shown that petitioners paid for the Voren tablets. While Valdez informed Co, through the
former's memorandum28 of 29 January 1990, that WATEROUS paid YSP P3,840.00 "thru MBTC Check No. 222832,"
the said check was never presented in evidence, nor was any receipt from YSP offered by petitioners.
Moreover, the two purchase orders for Voren tablets presented by petitioners do not indicate an overcharge. The
purchase order dated 16 August 198929 stated that the Voren tablets cost P320.00 per box, while the purchase order
dated 5 October 198930 priced the Voren tablets at P384.00 per bottle. The difference in price may then be attributed
to the different packaging used in each purchase order.
Assuming that there was an overcharge, the two purchase orders for the Voren tablets were recommended by
Director-MMG Mario R. Panuncio, verified by AVP-MNG Noli M. Lopez and approved by Vice President-General
Manager Emma R. Co. The purchase orders were silent as to Catolico's participation in the purchase. If the price
increase was objectionable to petitioners, they or their officers should have disapproved the transaction.
Consequently, petitioners had no one to blame for their predicament but themselves. This set of facts emphasizes
the exceedingly incredible situation proposed by petitioners. Despite the memorandum warning Catolico not to
negotiate with suppliers of medicine, there was no proof that she ever transacted, or that she had the opportunity to
transact, with the said suppliers. Again, as the purchase orders indicate, Catolico was not at all involved in the sale of
the Voren tablets. There was no occasion for Catolico to initiate, much less benefit from, what Valdez called an
"under the table deal" with YSP.
Catolico's dismissal then was obviously grounded on mere suspicion, which in no case can justify an employee's
dismissal. Suspicion is not among the valid causes provided by the Labor Code for the termination of
employment;31 and even the dismissal of an employee for loss of trust and confidence must rest on substantial
grounds and not on the employer's arbitrariness, whims, caprices, or suspicion. 32 Besides, Catolico was not shown to
be a managerial employee, to which class of employees the term "trust and confidence" is restricted. 33
As regards the constitutional violation upon which the NLRC anchored its decision, we find no reason to revise the
doctrine laid down in People vs. Marti34 that the Bill of Rights does not protect citizens from unreasonable searches
and seizures perpetrated by private individuals. It is not true, as counsel for Catolico claims, that the citizens have no
recourse against such assaults. On the contrary, and as said counsel admits, such an invasion gives rise to both
criminal and civil liabilities.
Finally, since it has been determined by the Labor Arbiter that Catolico's reinstatement would not be to the best
interest of the parties, he correctly awarded separation pay to Catolico. Separation pay in lieu of reinstatement is
computed at one month's salary for every year of service.35 In this case, however, Labor Arbiter Lopez computed the
separation pay at one-half month's salary for every year of service. Catolico did not oppose or raise an objection. As
such, we will uphold the award of separation pay as fixed by the Labor Arbiter.
WHEREFORE, the instant petition is hereby DISMISSED and the challenged decision and resolution of the National
Labor Relations Commission dated 30 September 1993 and 2 December 1993, respectively, in NLRC-NCR CA No.
005160-93 are AFFIRMED, except as to its reason for upholding the Labor Arbiter's decision, viz., that the evidence
against private respondent was inadmissible for having been obtained in violation of her constitutional rights of
privacy of communication and against unreasonable searches and seizures which is hereby set aside.
Costs against petitioners.
SO ORDERED.
G.R. No. 81561 January 18, 1991
PEOPLE OF THE PHILIPPINES, plaintiff-appellee
vs.
ANDRE MARTI, accused-appellant.
BIDIN, J.:
This is an appeal from a decision * rendered by the Special Criminal Court of Manila (Regional Trial Court, Branch
XLIX) convicting accused-appellant of violation of Section 21 (b), Article IV in relation to Section 4, Article 11 and
Section 2 (e) (i), Article 1 of Republic Act 6425, as amended, otherwise known as the Dangerous Drugs Act.
The facts as summarized in the brief of the prosecution are as follows:
On August 14, 1987, between 10:00 and 11:00 a.m., the appellant and his common-law wife, Shirley
Reyes, went to the booth of the "Manila Packing and Export Forwarders" in the Pistang Pilipino Complex,
Ermita, Manila, carrying with them four (4) gift wrapped packages. Anita Reyes (the proprietress and no
relation to Shirley Reyes) attended to them. The appellant informed Anita Reyes that he was sending the
packages to a friend in Zurich, Switzerland. Appellant filled up the contract necessary for the transaction,
writing therein his name, passport number, the date of shipment and the name and address of the
consignee, namely, "WALTER FIERZ, Mattacketr II, 8052 Zurich, Switzerland" (Decision, p. 6)
Anita Reyes then asked the appellant if she could examine and inspect the packages. Appellant, however,
refused, assuring her that the packages simply contained books, cigars, and gloves and were gifts to his
friend in Zurich. In view of appellant's representation, Anita Reyes no longer insisted on inspecting the
packages. The four (4) packages were then placed inside a brown corrugated box one by two feet in size
(1' x 2'). Styro-foam was placed at the bottom and on top of the packages before the box was sealed with
masking tape, thus making the box ready for shipment (Decision, p. 8).
Before delivery of appellant's box to the Bureau of Customs and/or Bureau of Posts, Mr. Job Reyes
(proprietor) and husband of Anita (Reyes), following standard operating procedure, opened the boxes for
final inspection. When he opened appellant's box, a peculiar odor emitted therefrom. His curiousity
aroused, he squeezed one of the bundles allegedly containing gloves and felt dried leaves inside. Opening
one of the bundles, he pulled out a cellophane wrapper protruding from the opening of one of the gloves.
He made an opening on one of the cellophane wrappers and took several grams of the contents
thereof (tsn, pp. 29-30, October 6, 1987; Emphasis supplied).
Job Reyes forthwith prepared a letter reporting the shipment to the NBI and requesting a laboratory
examination of the samples he extracted from the cellophane wrapper (tsn, pp. 5-6, October 6, 1987).
He brought the letter and a sample of appellant's shipment to the Narcotics Section of the National Bureau
of Investigation (NBI), at about 1:30 o'clock in the afternoon of that date, i.e., August 14, 1987. He was
interviewed by the Chief of Narcotics Section. Job Reyes informed the NBI that the rest of the shipment
was still in his office. Therefore, Job Reyes and three (3) NBI agents, and a photographer, went to the
Reyes' office at Ermita, Manila (tsn, p. 30, October 6, 1987).
 Job Reyes brought out the box in which appellant's packages were placed and, in the presence of the NBI Sec. 3. (1) The privacy of communication and correspondence shall be inviolable except upon lawful order
agents, opened the top flaps, removed the styro-foam and took out the cellophane wrappers from inside of the court, or when public safety or order requires otherwise as prescribed by law.
the gloves. Dried marijuana leaves were found to have been contained inside the cellophane wrappers
(tsn, p. 38, October 6, 1987; Emphasis supplied).
(2) Any evidence obtained in violation of this or the preceding section shall be inadmissible for any purpose
in any proceeding.
The package which allegedly contained books was likewise opened by Job Reyes. He discovered that the
package contained bricks or cake-like dried marijuana leaves. The package which allegedly contained
Our present constitutional provision on the guarantee against unreasonable search and seizure had its origin in the
tabacalera cigars was also opened. It turned out that dried marijuana leaves were neatly stocked
1935 Charter which, worded as follows:
underneath the cigars (tsn, p. 39, October 6, 1987).

The right of the people to be secure in their persons, houses, papers and effects against unreasonable
The NBI agents made an inventory and took charge of the box and of the contents thereof, after signing a
searches and seizures shall not be violated, and no warrants shall issue but upon probable cause, to be
"Receipt" acknowledging custody of the said effects (tsn, pp. 2-3, October 7, 1987).
determined by the judge after examination under oath or affirmation of the complainant and the witnesses
he may produce, and particularly describing the place to be searched, and the persons or things to be
Thereupon, the NBI agents tried to locate appellant but to no avail. Appellant's stated address in his passport being seized. (Sec. 1 [3], Article III)
the Manila Central Post Office, the agents requested assistance from the latter's Chief Security. On August 27, 1987,
appellant, while claiming his mail at the Central Post Office, was invited by the NBI to shed light on the attempted
was in turn derived almost verbatim from the Fourth Amendment ** to the United States Constitution. As such, the
shipment of the seized dried leaves. On the same day the Narcotics Section of the NBI submitted the dried leaves to
Court may turn to the pronouncements of the United States Federal Supreme Court and State Appellate Courts
the Forensic Chemistry Section for laboratory examination. It turned out that the dried leaves were marijuana
which are considered doctrinal in this jurisdiction.
flowering tops as certified by the forensic chemist. (Appellee's Brief, pp. 9-11, Rollo, pp. 132-134).

Thereafter, an Information was filed against appellant for violation of RA 6425, otherwise known as the Dangerous
Drugs Act.
After trial, the court a quo rendered the assailed decision.
In this appeal, accused/appellant assigns the following errors, to wit:
THE LOWER COURT ERRED IN ADMITTING IN EVIDENCE THE ILLEGALLY SEARCHED AND SEIZED
OBJECTS CONTAINED IN THE FOUR PARCELS.
THE LOWER COURT ERRED IN CONVICTING APPELLANT DESPITE THE UNDISPUTED FACT THAT
HIS RIGHTS UNDER THE CONSTITUTION WHILE UNDER CUSTODIAL PROCEEDINGS WERE NOT
OBSERVED.
Thus, following the exclusionary rule laid down in Mapp v. Ohio by the US Federal Supreme Court (367 US 643, 81
S.Ct. 1684, 6 L.Ed. 1081 [1961]), this Court, in Stonehill v. Diokno (20 SCRA 383 [1967]), declared as inadmissible
any evidence obtained by virtue of a defective search and seizure warrant, abandoning in the process the ruling
earlier adopted in Moncado v. People's Court (80 Phil. 1 [1948]) wherein the admissibility of evidence was not
affected by the illegality of its seizure. The 1973 Charter (Sec. 4 [2], Art. IV) constitutionalized the Stonehill ruling and
is carried over up to the present with the advent of the 1987 Constitution.
In a number of cases, the Court strictly adhered to the exclusionary rule and has struck down the admissibility of
evidence obtained in violation of the constitutional safeguard against unreasonable searches and seizures. (Bache &
Co., (Phil.), Inc., v. Ruiz, 37 SCRA 823 [1971]; Lim v. Ponce de Leon, 66 SCRA 299 [1975]; People v. Burgos, 144
SCRA 1 [1986]; Roan v. Gonzales, 145 SCRA 687 [1987]; See also Salazar v. Hon. Achacoso, et al., GR No. 81510,
March 14, 1990).
It must be noted, however, that in all those cases adverted to, the evidence so obtained were invariably procured by
the State acting through the medium of its law enforcers or other authorized government agencies.

THE LOWER COURT ERRED IN NOT GIVING CREDENCE TO THE EXPLANATION OF THE
On the other hand, the case at bar assumes a peculiar character since the evidence sought to be excluded was
APPELLANT ON HOW THE FOUR PARCELS CAME INTO HIS POSSESSION (Appellant's Brief, p.
primarily discovered and obtained by a private person, acting in a private capacity and without the intervention and
1; Rollo, p. 55)
participation of State authorities. Under the circumstances, can accused/appellant validly claim that his constitutional
right against unreasonable searches and seizure has been violated? Stated otherwise, may an act of a private
1. Appellant contends that the evidence subject of the imputed offense had been obtained in violation of his individual, allegedly in violation of appellant's constitutional rights, be invoked against the State?
constitutional rights against unreasonable search and seizure and privacy of communication (Sec. 2 and 3, Art. III,
Constitution) and therefore argues that the same should be held inadmissible in evidence (Sec. 3 (2), Art. III).
We hold in the negative. In the absence of governmental interference, the liberties guaranteed by the Constitution
cannot be invoked against the State.
Sections 2 and 3, Article III of the Constitution provide:
As this Court held in Villanueva v. Querubin (48 SCRA 345 [1972]:
Sec. 2. The right of the people to be secure in their persons, houses, papers and effects against
unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no
1. This constitutional right (against unreasonable search and seizure) refers to the immunity of one's
search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by
person, whether citizen or alien, from interference by government, included in which is his residence, his
the judge after examination under oath or affirmation of the complainant and the witnesses he may
papers, and other possessions. . . .
produce, and particularly describing the place to be searched and the persons or things to be seized.

. . . There the state, however powerful, does not as such have the access except under the circumstances
above noted, for in the traditional formulation, his house, however humble, is his castle. Thus is outlawed
 any unwarranted intrusion by government, which is called upon to refrain from any invasion of his dwelling
and to respect the privacies of his life. . . . (Cf. Schermerber v. California, 384 US 757 [1966] and Boyd v.
United States, 116 US 616 [1886]; Emphasis supplied).
In Burdeau v. McDowell (256 US 465 (1921), 41 S Ct. 547; 65 L.Ed. 1048), the Court there in construing the right
against unreasonable searches and seizures declared that:
(t)he Fourth Amendment gives protection against unlawful searches and seizures, and as shown in
previous cases, its protection applies to governmental action. Its origin and history clearly show that it was
intended as a restraint upon the activities of sovereign authority, and was not intended to be a limitation
upon other than governmental agencies; as against such authority it was the purpose of the Fourth
Amendment to secure the citizen in the right of unmolested occupation of his dwelling and the possession
of his property, subject to the right of seizure by process duly served.
The above ruling was reiterated in State v. Bryan (457 P.2d 661 [1968]) where a parking attendant who searched the
automobile to ascertain the owner thereof found marijuana instead, without the knowledge and participation of police
authorities, was declared admissible in prosecution for illegal possession of narcotics.
And again in the 1969 case of Walker v. State (429 S.W.2d 121), it was held that the search and seizure clauses are
restraints upon the government and its agents, not upon private individuals (citing People v. Potter, 240 Cal. App.2d
621, 49 Cap. Rptr, 892 (1966); State v. Brown, Mo., 391 S.W.2d 903 (1965); State v. Olsen, Or., 317 P.2d 938
(1957).
Likewise appropos is the case of Bernas v. US (373 F.2d 517 (1967). The Court there said:
The search of which appellant complains, however, was made by a private citizen — the owner of a motel
in which appellant stayed overnight and in which he left behind a travel case containing the
evidence***complained of. The search was made on the motel owner's own initiative. Because of it, he
became suspicious, called the local police, informed them of the bag's contents, and made it available to
the authorities.
The fourth amendment and the case law applying it do not require exclusion of evidence obtained through
a search by a private citizen. Rather, the amendment only proscribes governmental action."
The contraband in the case at bar having come into possession of the Government without the latter transgressing
appellant's rights against unreasonable search and seizure, the Court sees no cogent reason why the same should
not be admitted against him in the prosecution of the offense charged.
Appellant, however, would like this court to believe that NBI agents made an illegal search and seizure of the
evidence later on used in prosecuting the case which resulted in his conviction.
The postulate advanced by accused/appellant needs to be clarified in two days. In both instances, the argument
stands to fall on its own weight, or the lack of it.
First, the factual considerations of the case at bar readily foreclose the proposition that NBI agents conducted an
illegal search and seizure of the prohibited merchandise. Records of the case clearly indicate that it was Mr. Job
Reyes, the proprietor of the forwarding agency, who made search/inspection of the packages. Said inspection was
reasonable and a standard operating procedure on the part of Mr. Reyes as a precautionary measure before delivery
of packages to the Bureau of Customs or the Bureau of Posts (TSN, October 6 & 7, 1987, pp. 15-18; pp. 7-8;
Original Records, pp. 119-122; 167-168).
It will be recalled that after Reyes opened the box containing the illicit cargo, he took samples of the same to the NBI
and later summoned the agents to his place of business. Thereafter, he opened the parcel containing the rest of the
shipment and entrusted the care and custody thereof to the NBI agents. Clearly, the NBI agents made no search and
seizure, much less an illegal one, contrary to the postulate of accused/appellant.
Second, the mere presence of the NBI agents did not convert the reasonable search effected by Reyes into a
warrantless search and seizure proscribed by the Constitution. Merely to observe and look at that which is in plain
sight is not a search. Having observed that which is open, where no trespass has been committed in aid thereof, is
not search (Chadwick v. State, 429 SW2d 135). Where the contraband articles are identified without a trespass on
the part of the arresting officer, there is not the search that is prohibited by the constitution (US v. Lee 274 US 559,
71 L.Ed. 1202 [1927]; Ker v. State of California 374 US 23, 10 L.Ed.2d. 726 [1963]; Moore v. State, 429 SW2d 122
[1968]).
In Gandy v. Watkins (237 F. Supp. 266 [1964]), it was likewise held that where the property was taken into custody of
the police at the specific request of the manager and where the search was initially made by the owner there is no
unreasonable search and seizure within the constitutional meaning of the term.
That the Bill of Rights embodied in the Constitution is not meant to be invoked against acts of private individuals finds
support in the deliberations of the Constitutional Commission. True, the liberties guaranteed by the fundamental law
of the land must always be subject to protection. But protection against whom? Commissioner Bernas in his
sponsorship speech in the Bill of Rights answers the query which he himself posed, as follows:
First, the general reflections. The protection of fundamental liberties in the essence of constitutional
democracy. Protection against whom? Protection against the state. The Bill of Rights governs the
relationship between the individual and the state. Its concern is not the relation between individuals,
between a private individual and other individuals. What the Bill of Rights does is to declare some
forbidden zones in the private sphere inaccessible to any power holder. (Sponsorship Speech of
Commissioner Bernas , Record of the Constitutional Commission, Vol. 1, p. 674; July 17, 1986; Emphasis
supplied)
The constitutional proscription against unlawful searches and seizures therefore applies as a restraint directed only
against the government and its agencies tasked with the enforcement of the law. Thus, it could only be invoked
against the State to whom the restraint against arbitrary and unreasonable exercise of power is imposed.
If the search is made upon the request of law enforcers, a warrant must generally be first secured if it is to pass the
test of constitutionality. However, if the search is made at the behest or initiative of the proprietor of a private
establishment for its own and private purposes, as in the case at bar, and without the intervention of police
authorities, the right against unreasonable search and seizure cannot be invoked for only the act of private individual,
not the law enforcers, is involved. In sum, the protection against unreasonable searches and seizures cannot be
extended to acts committed by private individuals so as to bring it within the ambit of alleged unlawful intrusion by the
government.
Appellant argues, however, that since the provisions of the 1935 Constitution has been modified by the present
phraseology found in the 1987 Charter, expressly declaring as inadmissible any evidence obtained in violation of the
constitutional prohibition against illegal search and seizure, it matters not whether the evidence was procured by
police authorities or private individuals (Appellant's Brief, p. 8, Rollo, p. 62).
The argument is untenable. For one thing, the constitution, in laying down the principles of the government and
fundamental liberties of the people, does not govern relationships between individuals. Moreover, it must be
emphasized that the modifications introduced in the 1987 Constitution (re: Sec. 2, Art. III) relate to the issuance of
either a search warrant or warrant of arrest vis-a-vis the responsibility of the judge in the issuance thereof
(SeeSoliven v. Makasiar, 167 SCRA 393 [1988]; Circular No. 13 [October 1, 1985] and Circular No. 12 [June 30,
1987]. The modifications introduced deviate in no manner as to whom the restriction or inhibition against
unreasonable search and seizure is directed against. The restraint stayed with the State and did not shift to anyone
else.
Corolarilly, alleged violations against unreasonable search and seizure may only be invoked against the State by an
individual unjustly traduced by the exercise of sovereign authority. To agree with appellant that an act of a private
individual in violation of the Bill of Rights should also be construed as an act of the State would result in serious legal
complications and an absurd interpretation of the constitution.
Similarly, the admissibility of the evidence procured by an individual effected through private seizure equally applies,
in pari passu, to the alleged violation, non-governmental as it is, of appellant's constitutional rights to privacy and
communication.
2. In his second assignment of error, appellant contends that the lower court erred in convicting him despite the
undisputed fact that his rights under the constitution while under custodial investigation were not observed.
Again, the contention is without merit, We have carefully examined the records of the case and found nothing to
indicate, as an "undisputed fact", that appellant was not informed of his constitutional rights or that he gave
statements without the assistance of counsel. The law enforcers testified that accused/appellant was informed of his
constitutional rights. It is presumed that they have regularly performed their duties (See. 5(m), Rule 131) and their
testimonies should be given full faith and credence, there being no evidence to the contrary. What is clear from the
records, on the other hand, is that appellant refused to give any written statement while under investigation as
testified by Atty. Lastimoso of the NBI, Thus:
Fiscal Formoso:
You said that you investigated Mr. and Mrs. Job Reyes. What about the accused here, did you investigate
the accused together with the girl?
WITNESS:
Yes, we have interviewed the accused together with the girl but the accused availed of his constitutional
right not to give any written statement, sir. (TSN, October 8, 1987, p. 62; Original Records, p. 240)
The above testimony of the witness for the prosecution was not contradicted by the defense on cross-examination.
As borne out by the records, neither was there any proof by the defense that appellant gave uncounselled confession
while being investigated. What is more, we have examined the assailed judgment of the trial court and nowhere is
there any reference made to the testimony of appellant while under custodial investigation which was utilized in the
finding of conviction. Appellant's second assignment of error is therefore misplaced.
3. Coming now to appellant's third assignment of error, appellant would like us to believe that he was not the owner
of the packages which contained prohibited drugs but rather a certain Michael, a German national, whom appellant
met in a pub along Ermita, Manila: that in the course of their 30-minute conversation, Michael requested him to ship
the packages and gave him P2,000.00 for the cost of the shipment since the German national was about to leave the
country the next day (October 15, 1987, TSN, pp. 2-10).
Rather than give the appearance of veracity, we find appellant's disclaimer as incredulous, self-serving and contrary
to human experience. It can easily be fabricated. An acquaintance with a complete stranger struck in half an hour
could not have pushed a man to entrust the shipment of four (4) parcels and shell out P2,000.00 for the purpose and
for appellant to readily accede to comply with the undertaking without first ascertaining its contents. As stated by the
trial court, "(a) person would not simply entrust contraband and of considerable value at that as the marijuana
flowering tops, and the cash amount of P2,000.00 to a complete stranger like the Accused. The Accused, on the
other hand, would not simply accept such undertaking to take custody of the packages and ship the same from a
complete stranger on his mere say-so" (Decision, p. 19, Rollo, p. 91). As to why he readily agreed to do the errand,
appellant failed to explain. Denials, if unsubstantiated by clear and convincing evidence, are negative self-serving
evidence which deserve no weight in law and cannot be given greater evidentiary weight than the testimony of
credible witnesses who testify on affirmative matters (People v. Esquillo, 171 SCRA 571 [1989]; People vs. Sariol,
174 SCRA 237 [1989]).
Appellant's bare denial is even made more suspect considering that, as per records of the Interpol, he was previously
convicted of possession of hashish by the Kleve Court in the Federal Republic of Germany on January 1, 1982 and
that the consignee of the frustrated shipment, Walter Fierz, also a Swiss national, was likewise convicted for drug
abuse and is just about an hour's drive from appellant's residence in Zurich, Switzerland (TSN, October 8, 1987, p.
66; Original Records, p. 244; Decision, p. 21; Rollo, p. 93).
Evidence to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in itself
such as the common experience and observation of mankind can approve as probable under the circumstances
(People v. Alto, 26 SCRA 342 [1968], citing Daggers v. Van Dyke, 37 N.J. Eg. 130; see also People v. Sarda, 172
SCRA 651 [1989]; People v. Sunga, 123 SCRA 327 [1983]); Castañares v. CA, 92 SCRA 567 [1979]). As records
further show, appellant did not even bother to ask Michael's full name, his complete address or passport number.
Furthermore, if indeed, the German national was the owner of the merchandise, appellant should have so indicated
in the contract of shipment (Exh. "B", Original Records, p. 40). On the contrary, appellant signed the contract as the
owner and shipper thereof giving more weight to the presumption that things which a person possesses, or exercises
acts of ownership over, are owned by him (Sec. 5 [j], Rule 131). At this point, appellant is therefore estopped to claim
otherwise.
Premises considered, we see no error committed by the trial court in rendering the assailed judgment.
WHEREFORE, the judgment of conviction finding appellant guilty beyond reasonable doubt of the crime charged is
hereby AFFIRMED. No costs.
SO ORDERED.
G.R. No. 181881 October 18, 2011
BRICCIO "Ricky" A. POLLO, Petitioner,
vs.
CHAIRPERSON KARINA CONSTANTINO-DAVID, DIRECTOR IV RACQUEL DE GUZMAN BUENSALIDA,
DIRECTOR IV LYDIA A. CASTILLO, DIRECTOR III ENGELBERT ANTHONY D. UNITE AND THE CIVIL SERVICE
COMMISSION, Respondents.
DECISION
VILLARAMA, JR., J.:
This case involves a search of office computer assigned to a government employee who was charged
administratively and eventually dismissed from the service. The employee’s personal files stored in the computer
were used by the government employer as evidence of misconduct.
Before us is a petition for review on certiorari under Rule 45 which seeks to reverse and set aside the Decision1dated
October 11, 2007 and Resolution2 dated February 29, 2008 of the Court of Appeals (CA). The CA dismissed the
petition for certiorari (CA-G.R. SP No. 98224) filed by petitioner Briccio "Ricky" A. Pollo to nullify the proceedings
conducted by the Civil Service Commission (CSC) which found him guilty of dishonesty, grave misconduct, conduct
prejudicial to the best interest of the service, and violation of Republic Act (R.A.) No. 6713 and penalized him with
dismissal.
The factual antecedents:
Petitioner is a former Supervising Personnel Specialist of the CSC Regional Office No. IV and also the Officer-in-
Charge of the Public Assistance and Liaison Division (PALD) under the "Mamamayan Muna Hindi Mamaya Na"
program of the CSC.
On January 3, 2007 at around 2:30 p.m., an unsigned letter-complaint addressed to respondent CSC Chairperson
Karina Constantino-David which was marked "Confidential" and sent through a courier service (LBC) from a certain
"Alan San Pascual" of Bagong Silang, Caloocan City, was received by the Integrated Records Management Office
(IRMO) at the CSC Central Office. Following office practice in which documents marked "Confidential" are left
unopened and instead sent to the addressee, the aforesaid letter was given directly to Chairperson David.
The letter-complaint reads:
The Chairwoman
Civil Service Commission
Batasan Hills, Quezon City
Dear Madam Chairwoman,
Belated Merry Christmas and Advance Happy New Year!
As a concerned citizen of my beloved country, I would like to ask from you personally if it is just alright for an
employee of your agency to be a lawyer of an accused gov’t employee having a pending case in the csc. I honestly
think this is a violation of law and unfair to others and your office.
I have known that a person have been lawyered by one of your attorny in the region 4 office. He is the chief of the
Mamamayan muna hindi mamaya na division. He have been helping many who have pending cases in the Csc. The
justice in our govt system will not be served if this will continue. Please investigate this anomaly because our
perception of your clean and good office is being tainted.
Concerned Govt employee3
Chairperson David immediately formed a team of four personnel with background in information technology (IT), and
issued a memo directing them to conduct an investigation and specifically "to back up all the files in the computers
found in the Mamamayan Muna (PALD) and Legal divisions."4 After some briefing, the team proceeded at once to
the CSC-ROIV office at Panay Avenue, Quezon City. Upon their arrival thereat around 5:30 p.m., the team informed
the officials of the CSC-ROIV, respondents Director IV Lydia Castillo (Director Castillo) and Director III Engelbert
Unite (Director Unite) of Chairperson David’s directive.
The backing-up of all files in the hard disk of computers at the PALD and Legal Services Division (LSD) was
witnessed by several employees, together with Directors Castillo and Unite who closely monitored said activity. At
around 6:00 p.m., Director Unite sent text messages to petitioner and the head of LSD, who were both out of the
office at the time, informing them of the ongoing copying of computer files in their divisions upon orders of the CSC
Chair. The text messages received by petitioner read:
"Gud p.m. This is Atty. Unite FYI: Co people are going over the PCs of PALD and LSD per instruction of
the Chairman. If you can make it here now it would be better."
"All PCs Of PALD and LSD are being backed up per memo of the chair."
"CO IT people arrived just now for this purpose. We were not also informed about this.
"We can’t do anything about … it … it’s a directive from chair."
"Memo of the chair was referring to an anonymous complaint"; "ill send a copy of the memo via mms"5
Petitioner replied also thru text message that he was leaving the matter to Director Unite and that he will just get a
lawyer. Another text message received by petitioner from PALD staff also reported the presence of the team from
CSC main office: "Sir may mga taga C.O. daw sa kuarto natin."6 At around 10:00 p.m. of the same day, the
investigating team finished their task. The next day, all the computers in the PALD were sealed and secured for the
purpose of preserving all the files stored therein. Several diskettes containing the back-up files sourced from the hard
disk of PALD and LSD computers were turned over to Chairperson David. The contents of the diskettes were
examined by the CSC’s Office for Legal Affairs (OLA). It was found that most of the files in the 17 diskettes
containing files copied from the computer assigned to and being used by the petitioner, numbering about 40 to 42
documents, were draft pleadings or letters7 in connection with administrative cases in the CSC and other tribunals.
On the basis of this finding, Chairperson David issued the Show-Cause Order8 dated January 11, 2007, requiring the
petitioner, who had gone on extended leave, to submit his explanation or counter-affidavit within five days from
notice.
Evaluating the subject documents obtained from petitioner’s personal files, Chairperson David made the following
observations:
Most of the foregoing files are drafts of legal pleadings or documents that are related to or connected with
administrative cases that may broadly be lumped as pending either in the CSCRO No. IV, the CSC-NCR, the CSC-
Central Office or other tribunals. It is also of note that most of these draft pleadings are for and on behalves of
parties, who are facing charges as respondents in administrative cases. This gives rise to the inference that the one
who prepared them was knowingly, deliberately and willfully aiding and advancing interests adverse and inimical to
the interest of the CSC as the central personnel agency of the government tasked to discipline misfeasance and
malfeasance in the government service. The number of pleadings so prepared further demonstrates that such
person is not merely engaged in an isolated practice but pursues it with seeming regularity. It would also be the
height of naivete or credulity, and certainly against common human experience, to believe that the person concerned
had engaged in this customary practice without any consideration, and in fact, one of the retrieved files (item 13
above) appears to insinuate the collection of fees. That these draft pleadings were obtained from the computer
assigned to Pollo invariably raises the presumption that he was the one responsible or had a hand in their drafting or
preparation since the computer of origin was within his direct control and disposition. 9
Petitioner filed his Comment, denying that he is the person referred to in the anonymous letter-complaint which had
no attachments to it, because he is not a lawyer and neither is he "lawyering" for people with cases in the CSC. He
accused CSC officials of conducting a "fishing expedition" when they unlawfully copied and printed personal files in
his computer, and subsequently asking him to submit his comment which violated his right against self-incrimination.
He asserted that he had protested the unlawful taking of his computer done while he was on leave, citing the letter
dated January 8, 2007 in which he informed Director Castillo that the files in his computer were his personal files and
those of his sister, relatives, friends and some associates and that he is not authorizing their sealing, copying,
duplicating and printing as these would violate his constitutional right to privacy and protection against self-
incrimination and warrantless search and seizure. He pointed out that though government property, the temporary
use and ownership of the computer issued under a Memorandum of Receipt (MR) is ceded to the employee who
may exercise all attributes of ownership, including its use for personal purposes. As to the anonymous letter,
petitioner argued that it is not actionable as it failed to comply with the requirements of a formal complaint under the
Uniform Rules on Administrative Cases in the Civil Service (URACC). In view of the illegal search, the
files/documents copied from his computer without his consent is thus inadmissible as evidence, being "fruits of a
poisonous tree."10
On February 26, 2007, the CSC issued Resolution No. 07038211 finding prima facie case against the petitioner and
charging him with Dishonesty, Grave Misconduct, Conduct Prejudicial to the Best Interest of the Service and
Violation of R.A. No. 6713 (Code of Conduct and Ethical Standards for Public Officials and Employees). Petitioner
was directed to submit his answer under oath within five days from notice and indicate whether he elects a formal
investigation. Since the charges fall under Section 19 of the URACC, petitioner was likewise placed under 90 days
preventive suspension effective immediately upon receipt of the resolution. Petitioner received a copy of Resolution
No. 070382 on March 1, 2007.
Petitioner filed an Omnibus Motion (For Reconsideration, to Dismiss and/or to Defer) assailing the formal charge as
without basis having proceeded from an illegal search which is beyond the authority of the CSC Chairman, such
power pertaining solely to the court. Petitioner reiterated that he never aided any people with pending cases at the
CSC and alleged that those files found in his computer were prepared not by him but by certain persons whom he
permitted, at one time or another, to make use of his computer out of close association or friendship. Attached to the
motion were the affidavit of Atty. Ponciano R. Solosa who entrusted his own files to be kept at petitioner’s CPU and
Atty. Eric N. Estrellado, the latter being Atty. Solosa’s client who attested that petitioner had nothing to do with the
pleadings or bill for legal fees because in truth he owed legal fees to Atty. Solosa and not to petitioner. Petitioner
contended that the case should be deferred in view of the prejudicial question raised in the criminal complaint he filed
before the Ombudsman against Director Buensalida, whom petitioner believes had instigated this administrative
case. He also prayed for the lifting of the preventive suspension imposed on him. In its Resolution No.
07051912 dated March 19, 2007, the CSC denied the omnibus motion. The CSC resolved to treat the said motion as
petitioner’s answer.
On March 14, 2007, petitioner filed an Urgent Petition13 under Rule 65 of the Rules of Court, docketed as CA-G.R.
SP No. 98224, assailing both the January 11, 2007 Show-Cause Order and Resolution No. 070382 dated February
26, 2007 as having been issued with grave abuse of discretion amounting to excess or total absence of jurisdiction.
Prior to this, however, petitioner lodged an administrative/criminal complaint against respondents Directors Racquel
D.G. Buensalida (Chief of Staff, Office of the CSC Chairman) and Lydia A. Castillo (CSC-RO IV) before the Office of
the Ombudsman, and a separate complaint for disbarment against Director Buensalida. 14
On April 17, 2007, petitioner received a notice of hearing from the CSC setting the formal investigation of the case on
April 30, 2007. On April 25, 2007, he filed in the CA an Urgent Motion for the issuance of TRO and preliminary
injunction.15 Since he failed to attend the pre-hearing conference scheduled on April 30, 2007, the CSC reset the
same to May 17, 2007 with warning that the failure of petitioner and/or his counsel to appear in the said pre-hearing
conference shall entitle the prosecution to proceed with the formal investigation ex-parte.16 Petitioner moved to defer
or to reset the pre-hearing conference, claiming that the investigation proceedings should be held in abeyance
pending the resolution of his petition by the CA. The CSC denied his request and again scheduled the pre-hearing
conference on May 18, 2007 with similar warning on the consequences of petitioner and/or his counsel’s non-
appearance.17 This prompted petitioner to file another motion in the CA, to cite the respondents, including the hearing
officer, in indirect contempt.18
On June 12, 2007, the CSC issued Resolution No. 07113419 denying petitioner’s motion to set aside the denial of his
motion to defer the proceedings and to inhibit the designated hearing officer, Atty. Bernard G. Jimenez. The hearing
officer was directed to proceed with the investigation proper with dispatch.
In view of the absence of petitioner and his counsel, and upon the motion of the prosecution, petitioner was deemed
to have waived his right to the formal investigation which then proceeded ex parte.
On July 24, 2007, the CSC issued Resolution No. 071420,20 the dispositive part of which reads:
WHEREFORE, foregoing premises considered, the Commission hereby finds Briccio A. Pollo, a.k.a. Ricky A. Pollo
GUILTY of Dishonesty, Grave Misconduct, Conduct Prejudicial to the Best Interest of the Service and Violation of
Republic Act 6713. He is meted the penalty of DISMISSAL FROM THE SERVICE with all its accessory penalties,
namely, disqualification to hold public office, forfeiture of retirement benefits, cancellation of civil service eligibilities
and bar from taking future civil service examinations.21
On the paramount issue of the legality of the search conducted on petitioner’s computer, the CSC noted the dearth of
jurisprudence relevant to the factual milieu of this case where the government as employer invades the private files
of an employee stored in the computer assigned to him for his official use, in the course of initial investigation of
possible misconduct committed by said employee and without the latter’s consent or participation. The CSC thus
turned to relevant rulings of the United States Supreme Court, and cited the leading case of O’Connor v. Ortega22as
authority for the view that government agencies, in their capacity as employers, rather than law enforcers, could
validly conduct search and seizure in the governmental workplace without meeting the "probable cause" or warrant
requirement for search and seizure. Another ruling cited by the CSC is the more recent case of United States v. Mark
L. Simons23 which declared that the federal agency’s computer use policy foreclosed any inference of reasonable
expectation of privacy on the part of its employees. Though the Court therein recognized that such policy did not, at
the same time, erode the respondent’s legitimate expectation of privacy in the office in which the computer was
installed, still, the warrantless search of the employee’s office was upheld as valid because a government employer
is entitled to conduct a warrantless search pursuant to an investigation of work-related misconduct provided the
search is reasonable in its inception and scope.
With the foregoing American jurisprudence as benchmark, the CSC held that petitioner has no reasonable
expectation of privacy with regard to the computer he was using in the regional office in view of the CSC computer
use policy which unequivocally declared that a CSC employee cannot assert any privacy right to a computer
assigned to him. Even assuming that there was no such administrative policy, the CSC was of the view that the
search of petitioner’s computer successfully passed the test of reasonableness for warrantless searches in the
workplace as enunciated in the aforecited authorities. The CSC stressed that it pursued the search in its capacity as
government employer and that it was undertaken in connection with an investigation involving work-related
misconduct, which exempts it from the warrant requirement under the Constitution. With the matter of admissibility of
the evidence having been resolved, the CSC then ruled that the totality of evidence adequately supports the charges
of grave misconduct, dishonesty, conduct prejudicial to the best interest of the service and violation of R.A. No. 6713
against the petitioner. These grave infractions justified petitioner’s dismissal from the service with all its accessory
penalties.
In his Memorandum24 filed in the CA, petitioner moved to incorporate the above resolution dismissing him from the
service in his main petition, in lieu of the filing of an appeal via a Rule 43 petition. In a subsequent motion, he
likewise prayed for the inclusion of Resolution No. 07180025 which denied his motion for reconsideration.
By Decision dated October 11, 2007, the CA dismissed the petition for certiorari after finding no grave abuse of
discretion committed by respondents CSC officials. The CA held that: (1) petitioner was not charged on the basis of
the anonymous letter but from the initiative of the CSC after a fact-finding investigation was conducted and the
results thereof yielded a prima facie case against him; (2) it could not be said that in ordering the back-up of files in
petitioner’s computer and later confiscating the same, Chairperson David had encroached on the authority of a judge
in view of the CSC computer policy declaring the computers as government property and that employee-users
thereof have no reasonable expectation of privacy in anything they create, store, send, or receive on the computer
system; and (3) there is nothing contemptuous in CSC’s act of proceeding with the formal investigation as there was
no restraining order or injunction issued by the CA.
His motion for reconsideration having been denied by the CA, petitioner brought this appeal arguing that –
I
THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED AND COMMITTED SERIOUS
IRREGULARITY AND BLATANT ERRORS IN LAW AMOUNTING TO GRAVE ABUSE OF DISCRETION
WHEN IT RULED THAT ANONYMOUS COMPLAINT IS ACTIONABLE UNDER E.O. 292 WHEN IN
TRUTH AND IN FACT THE CONTRARY IS EXPLICITLY PROVIDED UNDER 2nd PARAGRAPH OF
SECTION 8 OF CSC RESOLUTION NO. 99-1936, WHICH IS AN [AMENDMENT] TO THE ORIGINAL
RULES PER CSC RESOLUTION NO. 94-0521;
II
THE HONORABLE COURT GRIEVOUSLY ERRED AND COMMITTED PALPABLE ERRORS IN LAW
AMOUNTING TO GRAVE ABUSE OF DISCRETION WHEN IT RULED THAT PETITIONER CANNOT
INVOKE HIS RIGHT TO PRIVACY, TO UNREASONABLE SEARCH AND SEIZURE, AGAINST SELF-
 INCRIMINATION, BY VIRTUE OF OFFICE MEMORANDUM NO. 10 S. 2002, A MERE INTERNAL
MEMORANDUM SIGNED SOLELY AND EXCLUSIVELY BY RESPONDENT DAVID AND NOT BY THE
COLLEGIAL COMMISSION CONSIDERING THAT POLICY MATTERS INVOLVING SUB[S]TANTIAL
RIGHTS CANNOT BE COVERED BY AN OFFICE MEMORANDUM WHICH IS LIMITED TO
PROCEDURAL AND ROUTINARY INSTRUCTION;
III
THE HONORABLE COURT GRAVELY ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION
WHEN IT RULED THAT MEMO SEARCH DATED JANUARY 3, 2007 AND THE TAKING OF
DOCUMENTS IN THE EVENING THEREOF FROM 7:00 TO 10:00 P.M. IS NOT GRAVE ABUSE OF
DISCRETION LIMITING THE DEFINITION [OF] GRAVE ABUSE OF DISCRETION TO ONE INVOLVING
AND TAINTED WITH PERSONAL HOSTILITY. IT LIKEWISE ERRED IN HOLDING THAT DATA STORED
IN THE GOVERNMENT COMPUTERS ARE GOVERNMENT PROPERTIES INCLUDING THE
PERSONAL FILES WHEN THE CONTRARY IS PROVIDED UNDER SECTION 14 OF OM. 10 s. 2002.
AND GRIEVOUSLY ERRED STILL WHEN IT RULED THAT RESPONDENT DAVID BY VIRTUE OF O.M.
10 DID NOT ENCROACH ON THE DUTIES AND FUNCTIONS OF A JUDGE PURSUANT TO ARTICLE
III, SECTION 2 OF THE 1987 PHILIPPINE CONSTITUTION;
IV
THE HONORABLE COURT ERRED WHEN IT FAILED TO CONSIDER ALL OTHER NEW ARGUMENTS,
ADDITIONAL EVIDENCE HEREUNTO SUBMITTED AS WELL AS ITS FAILURE TO EVALUATE AND
TAKE ACTION ON THE 2 MOTIONS TO ADMIT AND INCORPORATE CSC RESOLUTION NOS. 07-
1420 DATED JULY 24, 2007 AND CSC RESOLUTION 07-1800 DATED SEPTEMBER 10, 2007. IT DID
NOT RULE LIKEWISE ON THE FOUR URGENT MOTION TO RESOLVE ANCILLARY PRAYER FOR
TRO.26
Squarely raised by the petitioner is the legality of the search conducted on his office computer and the copying of his
personal files without his knowledge and consent, alleged as a transgression on his constitutional right to privacy.
The right to privacy has been accorded recognition in this jurisdiction as a facet of the right protected by the
guarantee against unreasonable search and seizure under Section 2, Article III of the 1987 Constitution, 27 which
provides:
Sec. 2. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable
searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant
of arrest shall issue except upon probable cause to be determined personally by the judge after examination under
oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be
searched and the persons or things to be seized.
The constitutional guarantee is not a prohibition of all searches and seizures but only of "unreasonable" searches
and seizures.28 But to fully understand this concept and application for the purpose of resolving the issue at hand, it
is essential that we examine the doctrine in the light of pronouncements in another jurisdiction. As the Court declared
in People v. Marti29 :
Our present constitutional provision on the guarantee against unreasonable search and seizure had its origin in the
1935 Charter which, worded as follows:
"The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches
and seizures shall not be violated, and no warrants shall issue but upon probable cause, to be determined by the
judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched, and the persons or things to be seized." (Sec. 1[3], Article III)
was in turn derived almost verbatim from the Fourth Amendment to the United States Constitution. As such, the
Court may turn to the pronouncements of the United States Federal Supreme Court and State Appellate Courts
which are considered doctrinal in this jurisdiction.30
In the 1967 case of Katz v. United States,31 the US Supreme Court held that the act of FBI agents in electronically
recording a conversation made by petitioner in an enclosed public telephone booth violated his right to privacy and
constituted a "search and seizure". Because the petitioner had a reasonable expectation of privacy in using the
enclosed booth to make a personal telephone call, the protection of the Fourth Amendment extends to such area. In
the concurring opinion of Mr. Justice Harlan, it was further noted that the existence of privacy right under prior
decisions involved a two-fold requirement: first, that a person has exhibited an actual (subjective) expectation of
privacy; and second, that the expectation be one that society is prepared to recognize as reasonable (objective). 32
In Mancusi v. DeForte33 which addressed the reasonable expectations of private employees in the workplace, the US
Supreme Court held that a union employee had Fourth Amendment rights with regard to an office at union
headquarters that he shared with other union officials, even as the latter or their guests could enter the office. The
Court thus "recognized that employees may have a reasonable expectation of privacy against intrusions by police."
That the Fourth Amendment equally applies to a government workplace was addressed in the 1987 case of
O’Connor v. Ortega34 where a physician, Dr. Magno Ortega, who was employed by a state hospital, claimed a
violation of his Fourth Amendment rights when hospital officials investigating charges of mismanagement of the
psychiatric residency program, sexual harassment of female hospital employees and other irregularities involving his
private patients under the state medical aid program, searched his office and seized personal items from his desk
and filing cabinets. In that case, the Court categorically declared that "[i]ndividuals do not lose Fourth Amendment
rights merely because they work for the government instead of a private employer."35 A plurality of four Justices
concurred that the correct analysis has two steps: first, because "some government offices may be so open to fellow
employees or the public that no expectation of privacy is reasonable", a court must consider "[t]he operational
realities of the workplace" in order to determine whether an employee’s Fourth Amendment rights are implicated; and
next, where an employee has a legitimate privacy expectation, an employer’s intrusion on that expectation "for
noninvestigatory, work-related purposes, as well as for investigations of work-related misconduct, should be judged
by the standard of reasonableness under all the circumstances."36
On the matter of government employees’ reasonable expectations of privacy in their workplace, O’Connor teaches:
x x x Public employees’ expectations of privacy in their offices, desks, and file cabinets, like similar expectations of
employees in the private sector, may be reduced by virtue of actual office practices and procedures, or by legitimate
regulation. x x x The employee’s expectation of privacy must be assessed in the context of the employment relation.
An office is seldom a private enclave free from entry by supervisors, other employees, and business and personal
invitees. Instead, in many cases offices are continually entered by fellow employees and other visitors during the
workday for conferences, consultations, and other work-related visits. Simply put, it is the nature of government
offices that others – such as fellow employees, supervisors, consensual visitors, and the general public – may have
frequent access to an individual’s office. We agree with JUSTICE SCALIA that "[c]onstitutional protection against
unreasonable searches by the government does not disappear merely because the government has the right to
make reasonable intrusions in its capacity as employer," x x x but some government offices may be so open to
fellow employees or the public that no expectation of privacy is reasonable. x x x Given the great variety of
work environments in the public sector, the question of whether an employee has a reasonable expectation
of privacy must be addressed on a case-by-case basis.37 (Citations omitted; emphasis supplied.)
On the basis of the established rule in previous cases, the US Supreme Court declared that Dr. Ortega’s Fourth
Amendment rights are implicated only if the conduct of the hospital officials infringed "an expectation of privacy that
society is prepared to consider as reasonable." Given the undisputed evidence that respondent Dr. Ortega did not
share his desk or file cabinets with any other employees, kept personal correspondence and other private items in
his own office while those work-related files (on physicians in residency training) were stored outside his office, and
there being no evidence that the hospital had established any reasonable regulation or policy discouraging
employees from storing personal papers and effects in their desks or file cabinets (although the absence of such a
policy does not create any expectation of privacy where it would not otherwise exist), the Court concluded that Dr.
Ortega has a reasonable expectation of privacy at least in his desk and file cabinets. 38
Proceeding to the next inquiry as to whether the search conducted by hospital officials was reasonable, the
O’Connor plurality decision discussed the following principles:
Having determined that Dr. Ortega had a reasonable expectation of privacy in his office, the Court of Appeals simply
concluded without discussion that the "search…was not a reasonable search under the fourth amendment." x x x
"[t]o hold that the Fourth Amendment applies to searches conducted by [public employers] is only to begin the inquiry
into the standards governing such searches…[W]hat is reasonable depends on the context within which a search
takes place. x x x Thus, we must determine the appropriate standard of reasonableness applicable to the search. A
determination of the standard of reasonableness applicable to a particular class of searches requires "balanc[ing] the
nature and quality of the intrusion on the individual’s Fourth Amendment interests against the importance of the
governmental interests alleged to justify the intrusion." x x x In the case of searches conducted by a public
employer, we must balance the invasion of the employees’ legitimate expectations of privacy against the
government’s need for supervision, control, and the efficient operation of the workplace.
xxxx
In our view, requiring an employer to obtain a warrant whenever the employer wished to enter an employee’s office,
desk, or file cabinets for a work-related purpose would seriously disrupt the routine conduct of business and would
be unduly burdensome. Imposing unwieldy warrant procedures in such cases upon supervisors, who would
otherwise have no reason to be familiar with such procedures, is simply unreasonable. In contrast to other
circumstances in which we have required warrants, supervisors in offices such as at the Hospital are hardly in the
business of investigating the violation of criminal laws. Rather, work-related searches are merely incident to the
primary business of the agency. Under these circumstances, the imposition of a warrant requirement would conflict
with the "common-sense realization that government offices could not function if every employment decision became
a constitutional matter." x x x
xxxx
The governmental interest justifying work-related intrusions by public employers is the efficient and proper operation
of the workplace. Government agencies provide myriad services to the public, and the work of these agencies would
suffer if employers were required to have probable cause before they entered an employee’s desk for the purpose of
finding a file or piece of office correspondence. Indeed, it is difficult to give the concept of probable cause, rooted as
it is in the criminal investigatory context, much meaning when the purpose of a search is to retrieve a file for work-
related reasons. Similarly, the concept of probable cause has little meaning for a routine inventory conducted by
public employers for the purpose of securing state property. x x x To ensure the efficient and proper operation of the
agency, therefore, public employers must be given wide latitude to enter employee offices for work-related,
noninvestigatory reasons.
We come to a similar conclusion for searches conducted pursuant to an investigation of work-related employee
misconduct. Even when employers conduct an investigation, they have an interest substantially different from "the
normal need for law enforcement." x x x Public employers have an interest in ensuring that their agencies operate in
an effective and efficient manner, and the work of these agencies inevitably suffers from the inefficiency,
incompetence, mismanagement, or other work-related misfeasance of its employees. Indeed, in many cases, public
employees are entrusted with tremendous responsibility, and the consequences of their misconduct or incompetence
to both the agency and the public interest can be severe. In contrast to law enforcement officials, therefore, public
employers are not enforcers of the criminal law; instead, public employers have a direct and overriding interest in
ensuring that the work of the agency is conducted in a proper and efficient manner. In our view, therefore, a
probable cause requirement for searches of the type at issue here would impose intolerable burdens on
public employers. The delay in correcting the employee misconduct caused by the need for probable cause
rather than reasonable suspicion will be translated into tangible and often irreparable damage to the
agency’s work, and ultimately to the public interest. x x x
xxxx
In sum, we conclude that the "special needs, beyond the normal need for law enforcement make
the…probable-cause requirement impracticable," x x x for legitimate, work-related noninvestigatory
intrusions as well as investigations of work-related misconduct. A standard of reasonableness will neither
unduly burden the efforts of government employers to ensure the efficient and proper operation of the workplace, nor
authorize arbitrary intrusions upon the privacy of public employees. We hold, therefore, that public employer
intrusions on the constitutionally protected privacy interests of government employees for noninvestigatory,
work-related purposes, as well as for investigations of work-related misconduct, should be judged by
the standard of reasonableness under all the circumstances. Under this reasonableness standard, both the
inception and the scope of the intrusion must be reasonable:
"Determining the reasonableness of any search involves a twofold inquiry: first, one must consider ‘whether
the…action was justified at its inception,’ x x x ; second, one must determine whether the search as actually
conducted ‘was reasonably related in scope to the circumstances which justified the interference in the first place,’" x
xx
Ordinarily, a search of an employee’s office by a supervisor will be "justified at its inception" when there are
reasonable grounds for suspecting that the search will turn up evidence that the employee is guilty of work-
related misconduct, or that the search is necessary for a noninvestigatory work-related purpose such as to
retrieve a needed file. x x x The search will be permissible in its scope when "the measures adopted are
reasonably related to the objectives of the search and not excessively intrusive in light of …the nature of the
[misconduct]." x x x39 (Citations omitted; emphasis supplied.)
Since the District Court granted summary judgment without a hearing on the factual dispute as to the character of the
search and neither was there any finding made as to the scope of the search that was undertaken, the case was
remanded to said court for the determination of the justification for the search and seizure, and evaluation of the
reasonableness of both the inception of the search and its scope.
In O’Connor the Court recognized that "special needs" authorize warrantless searches involving public employees for
work-related reasons. The Court thus laid down a balancing test under which government interests are weighed
against the employee’s reasonable expectation of privacy. This reasonableness test implicates neither probable
cause nor the warrant requirement, which are related to law enforcement. 40
O’Connor was applied in subsequent cases raising issues on employees’ privacy rights in the workplace. One of
these cases involved a government employer’s search of an office computer, United States v. Mark L.
Simons41where the defendant Simons, an employee of a division of the Central Intelligence Agency (CIA), was
convicted of receiving and possessing materials containing child pornography. Simons was provided with an office
which he did not share with anyone, and a computer with Internet access. The agency had instituted a policy on
computer use stating that employees were to use the Internet for official government business only and that
accessing unlawful material was specifically prohibited. The policy also stated that users shall understand that the
agency will periodically audit, inspect, and/or monitor the user’s Internet access as deemed appropriate. CIA agents
instructed its contractor for the management of the agency’s computer network, upon initial discovery of prohibited
internet activity originating from Simons’ computer, to conduct a remote monitoring and examination of Simons’
computer. After confirming that Simons had indeed downloaded pictures that were pornographic in nature, all the
files on the hard drive of Simon’s computer were copied from a remote work station. Days later, the contractor’s
representative finally entered Simon’s office, removed the original hard drive on Simon’s computer, replaced it with a
copy, and gave the original to the agency security officer. Thereafter, the agency secured warrants and searched
Simons’ office in the evening when Simons was not around. The search team copied the contents of Simons’
computer; computer diskettes found in Simons’ desk drawer; computer files stored on the zip drive or on zip drive
diskettes; videotapes; and various documents, including personal correspondence. At his trial, Simons moved to
suppress these evidence, arguing that the searches of his office and computer violated his Fourth Amendment rights.
After a hearing, the district court denied the motion and Simons was found guilty as charged.
Simons appealed his convictions. The US Supreme Court ruled that the searches of Simons’ computer and office did
not violate his Fourth Amendment rights and the first search warrant was valid. It held that the search remains valid
under the O’Connor exception to the warrant requirement because evidence of the crime was discovered in the
course of an otherwise proper administrative inspection. Simons’ violation of the agency’s Internet policy happened
also to be a violation of criminal law; this does not mean that said employer lost the capacity and interests of an
employer. The warrantless entry into Simons’ office was reasonable under the Fourth Amendment standard
announced in O’Connor because at the inception of the search, the employer had "reasonable grounds for
suspecting" that the hard drive would yield evidence of misconduct, as the employer was already aware that Simons
had misused his Internet access to download over a thousand pornographic images. The retrieval of the hard drive
was reasonably related to the objective of the search, and the search was not excessively intrusive. Thus, while
Simons had a reasonable expectation of privacy in his office, he did not have such legitimate expectation of privacy
with regard to the files in his computer.
x x x To establish a violation of his rights under the Fourth Amendment, Simons must first prove that he had a
legitimate expectation of privacy in the place searched or the item seized. x x x And, in order to prove a legitimate
expectation of privacy, Simons must show that his subjective expectation of privacy is one that society is prepared to
accept as objectively reasonable. x x x
xxxx
x x x We conclude that the remote searches of Simons’ computer did not violate his Fourth Amendment rights
because, in light of the Internet policy, Simons lacked a legitimate expectation of privacy in the files downloaded from
the Internet. Additionally, we conclude that Simons’ Fourth Amendment rights were not violated by FBIS’ retrieval of
Simons’ hard drive from his office.
Simons did not have a legitimate expectation of privacy with regard to the record or fruits of his Internet use
in light of the FBIS Internet policy. The policy clearly stated that FBIS would "audit, inspect, and/or monitor"
employees’ use of the Internet, including all file transfers, all websites visited, and all e-mail messages, "as
deemed appropriate." x x x This policy placed employees on notice that they could not reasonably expect that their
Internet activity would be private. Therefore, regardless of whether Simons subjectively believed that the files he
transferred from the Internet were private, such a belief was not objectively reasonable after FBIS notified him that it
would be overseeing his Internet use. x x x Accordingly, FBIS’ actions in remotely searching and seizing the
computer files Simons downloaded from the Internet did not violate the Fourth Amendment.
xxxx
The burden is on Simons to prove that he had a legitimate expectation of privacy in his office. x x x Here,
Simons has shown that he had an office that he did not share. As noted above, the operational realities of Simons’
workplace may have diminished his legitimate privacy expectations. However, there is no evidence in the record of
any workplace practices, procedures, or regulations that had such an effect. We therefore conclude that, on this
record, Simons possessed a legitimate expectation of privacy in his office.
xxxx
In the final analysis, this case involves an employee’s supervisor entering the employee’s government office and
retrieving a piece of government equipment in which the employee had absolutely no expectation of privacy –
equipment that the employer knew contained evidence of crimes committed by the employee in the employee’s
office. This situation may be contrasted with one in which the criminal acts of a government employee were unrelated
to his employment. Here, there was a conjunction of the conduct that violated the employer’s policy and the conduct
that violated the criminal law. We consider that FBIS’ intrusion into Simons’ office to retrieve the hard drive is one in
which a reasonable employer might engage. x x x42 (Citations omitted; emphasis supplied.)
This Court, in Social Justice Society (SJS) v. Dangerous Drugs Board43 which involved the constitutionality of a
provision in R.A. No. 9165 requiring mandatory drug testing of candidates for public office, students of secondary
and tertiary schools, officers and employees of public and private offices, and persons charged before the
prosecutor’s office with certain offenses, have also recognized the fact that there may be such legitimate intrusion of
privacy in the workplace.
The first factor to consider in the matter of reasonableness is the nature of the privacy interest upon which the drug
testing, which effects a search within the meaning of Sec. 2, Art. III of the Constitution, intrudes. In this case, the
office or workplace serves as the backdrop for the analysis of the privacy expectation of the employees and the
reasonableness of drug testing requirement. The employees’ privacy interest in an office is to a large extent
circumscribed by the company’s work policies, the collective bargaining agreement, if any, entered into by
management and the bargaining unit, and the inherent right of the employer to maintain discipline and efficiency in
the workplace. Their privacy expectation in a regulated office environment is, in fine, reduced; and a degree of
impingement upon such privacy has been upheld. (Emphasis supplied.)
Applying the analysis and principles announced in O’Connor and Simons to the case at bar, we now address the
following questions: (1) Did petitioner have a reasonable expectation of privacy in his office and computer files?; and
(2) Was the search authorized by the CSC Chair, the copying of the contents of the hard drive on petitioner’s
computer reasonable in its inception and scope?
In this inquiry, the relevant surrounding circumstances to consider include "(1) the employee’s relationship to the item
seized; (2) whether the item was in the immediate control of the employee when it was seized; and (3) whether the
employee took actions to maintain his privacy in the item." These factors are relevant to both the subjective and
objective prongs of the reasonableness inquiry, and we consider the two questions together. 44 Thus, where the
employee used a password on his computer, did not share his office with co-workers and kept the same locked, he
had a legitimate expectation of privacy and any search of that space and items located therein must comply with the
Fourth Amendment.45
We answer the first in the negative. Petitioner failed to prove that he had an actual (subjective) expectation of privacy
either in his office or government-issued computer which contained his personal files. Petitioner did not allege that he
had a separate enclosed office which he did not share with anyone, or that his office was always locked and not
open to other employees or visitors. Neither did he allege that he used passwords or adopted any means to prevent
other employees from accessing his computer files. On the contrary, he submits that being in the public assistance
office of the CSC-ROIV, he normally would have visitors in his office like friends, associates and even unknown
people, whom he even allowed to use his computer which to him seemed a trivial request. He described his office as
"full of people, his friends, unknown people" and that in the past 22 years he had been discharging his functions at
the PALD, he is "personally assisting incoming clients, receiving documents, drafting cases on appeals, in charge of
accomplishment report, Mamamayan Muna Program, Public Sector Unionism, Correction of name, accreditation of
service, and hardly had anytime for himself alone, that in fact he stays in the office as a paying customer." 46 Under
this scenario, it can hardly be deduced that petitioner had such expectation of privacy that society would recognize
as reasonable.
Moreover, even assuming arguendo, in the absence of allegation or proof of the aforementioned factual
circumstances, that petitioner had at least a subjective expectation of privacy in his computer as he claims, such is
negated by the presence of policy regulating the use of office computers, as in Simons.
Office Memorandum No. 10, S. 2002 "Computer Use Policy (CUP)" explicitly provides:
POLICY
1. The Computer Resources are the property of the Civil Service Commission and may be used only for
legitimate business purposes.
2. Users shall be permitted access to Computer Resources to assist them in the performance of their
respective jobs.
 3. Use of the Computer Resources is a privilege that may be revoked at any given time.
xxxx
No Expectation of Privacy
4. No expectation of privacy. Users except the Members of the Commission shall not have an expectation
of privacy in anything they create, store, send, or receive on the computer system.
The Head of the Office for Recruitment, Examination and Placement shall select and assign Users to
handle the confidential examination data and processes.
5. Waiver of privacy rights. Users expressly waive any right to privacy in anything they create, store, send,
or receive on the computer through the Internet or any other computer network. Users understand that
the CSC may use human or automated means to monitor the use of its Computer Resources.
6. Non-exclusivity of Computer Resources. A computer resource is not a personal property or for the
exclusive use of a User to whom a memorandum of receipt (MR) has been issued. It can be shared or
operated by other users. However, he is accountable therefor and must insure its care and maintenance.
xxxx
Passwords
12. Responsibility for passwords. Users shall be responsible for safeguarding their passwords for access
to the computer system. Individual passwords shall not be printed, stored online, or given to others. Users
shall be responsible for all transactions made using their passwords. No User may access the computer
system with another User’s password or account.
13. Passwords do not imply privacy. Use of passwords to gain access to the computer system or to
encode particular files or messages does not imply that Users have an expectation of privacy in the
material they create or receive on the computer system. The Civil Service Commission has global
passwords that permit access to all materials stored on its networked computer system regardless of
whether those materials have been encoded with a particular User’s password. Only members of the
Commission shall authorize the application of the said global passwords.
x x x x47 (Emphasis supplied.)
The CSC in this case had implemented a policy that put its employees on notice that they have no expectation of
privacy in anything they create, store, send or receive on the office computers, and that the CSC may monitor the
use of the computer resources using both automated or human means. This implies that on-the-spot inspections may
be done to ensure that the computer resources were used only for such legitimate business purposes.
One of the factors stated in O’Connor which are relevant in determining whether an employee’s expectation of
privacy in the workplace is reasonable is the existence of a workplace privacy policy. 48 In one case, the US Court of
Appeals Eighth Circuit held that a state university employee has not shown that he had a reasonable expectation of
privacy in his computer files where the university’s computer policy, the computer user is informed not to expect
privacy if the university has a legitimate reason to conduct a search. The user is specifically told that computer files,
including e-mail, can be searched when the university is responding to a discovery request in the course of litigation.
Petitioner employee thus cannot claim a violation of Fourth Amendment rights when university officials conducted a
warrantless search of his computer for work-related materials.49
As to the second point of inquiry on the reasonableness of the search conducted on petitioner’s computer, we
answer in the affirmative.
The search of petitioner’s computer files was conducted in connection with investigation of work-related misconduct
prompted by an anonymous letter-complaint addressed to Chairperson David regarding anomalies in the CSC-ROIV
where the head of the Mamamayan Muna Hindi Mamaya Na division is supposedly "lawyering" for individuals with
pending cases in the CSC. Chairperson David stated in her sworn affidavit:
8. That prior to this, as early as 2006, the undersigned has received several text messages from unknown sources
adverting to certain anomalies in Civil Service Commission Regional Office IV (CSCRO IV) such as, staff working in
another government agency, "selling" cases and aiding parties with pending cases, all done during office hours and
involved the use of government properties;
9. That said text messages were not investigated for lack of any verifiable leads and details sufficient to warrant an
investigation;
10. That the anonymous letter provided the lead and details as it pinpointed the persons and divisions involved in the
alleged irregularities happening in CSCRO IV;
11. That in view of the seriousness of the allegations of irregularities happening in CSCRO IV and its effect on the
integrity of the Commission, I decided to form a team of Central Office staff to back up the files in the computers of
the Public Assistance and Liaison Division (PALD) and Legal Division;
x x x x50
A search by a government employer of an employee’s office is justified at inception when there are reasonable
grounds for suspecting that it will turn up evidence that the employee is guilty of work-related misconduct.51 Thus, in
the 2004 case decided by the US Court of Appeals Eighth Circuit, it was held that where a government agency’s
computer use policy prohibited electronic messages with pornographic content and in addition expressly provided
that employees do not have any personal privacy rights regarding their use of the agency information systems and
technology, the government employee had no legitimate expectation of privacy as to the use and contents of his
office computer, and therefore evidence found during warrantless search of the computer was admissible in
prosecution for child pornography. In that case, the defendant employee’s computer hard drive was first remotely
examined by a computer information technician after his supervisor received complaints that he was inaccessible
and had copied and distributed non-work-related e-mail messages throughout the office. When the supervisor
confirmed that defendant had used his computer to access the prohibited websites, in contravention of the express
policy of the agency, his computer tower and floppy disks were taken and examined. A formal administrative
investigation ensued and later search warrants were secured by the police department. The initial remote search of
the hard drive of petitioner’s computer, as well as the subsequent warrantless searches was held as valid under the
O’Connor ruling that a public employer can investigate work-related misconduct so long as any search is justified at
inception and is reasonably related in scope to the circumstances that justified it in the first place. 52
Under the facts obtaining, the search conducted on petitioner’s computer was justified at its inception and scope. We
quote with approval the CSC’s discussion on the reasonableness of its actions, consistent as it were with the
guidelines established by O’Connor:
Even conceding for a moment that there is no such administrative policy, there is no doubt in the mind of the
Commission that the search of Pollo’s computer has successfully passed the test of reasonableness for warrantless
searches in the workplace as enunciated in the above-discussed American authorities. It bears emphasis that the
Commission pursued the search in its capacity as a government employer and that it was undertaken in
connection with an investigation involving a work-related misconduct, one of the circumstances exempted from
the warrant requirement. At the inception of the search, a complaint was received recounting that a certain division
chief in the CSCRO No. IV was "lawyering" for parties having pending cases with the said regional office or in the
Commission. The nature of the imputation was serious, as it was grievously disturbing. If, indeed, a CSC
employee was found to be furtively engaged in the practice of "lawyering" for parties with pending cases before the pleadings, retrieved from the unduly confiscated personal computer of Atty. Morales, to hold him administratively
Commission would be a highly repugnant scenario, then such a case would have shattering repercussions. It would liable, the Court had no choice but to dismiss the charges against him for insufficiency of evidence.
undeniably cast clouds of doubt upon the institutional integrity of the Commission as a quasi-judicial agency, and in
the process, render it less effective in fulfilling its mandate as an impartial and objective dispenser of administrative
The above case is to be distinguished from the case at bar because, unlike the former which involved a personal
justice. It is settled that a court or an administrative tribunal must not only be actually impartial but must be seen to
computer of a court employee, the computer from which the personal files of herein petitioner were retrieved is a
be so, otherwise the general public would not have any trust and confidence in it.
government-issued computer, hence government property the use of which the CSC has absolute right to regulate
and monitor. Such relationship of the petitioner with the item seized (office computer) and other relevant factors and
Considering the damaging nature of the accusation, the Commission had to act fast, if only to arrest or limit circumstances under American Fourth Amendment jurisprudence, notably the existence of CSC MO 10, S. 2007 on
any possible adverse consequence or fall-out. Thus, on the same date that the complaint was received, a search Computer Use Policy, failed to establish that petitioner had a reasonable expectation of privacy in the office
was forthwith conducted involving the computer resources in the concerned regional office. That it was the computer assigned to him.
computers that were subjected to the search was justified since these furnished the easiest means for an
employee to encode and store documents. Indeed, the computers would be a likely starting point in ferreting
Having determined that the personal files copied from the office computer of petitioner are admissible in the
out incriminating evidence. Concomitantly, the ephemeral nature of computer files, that is, they could easily
administrative case against him, we now proceed to the issue of whether the CSC was correct in finding the
be destroyed at a click of a button, necessitated drastic and immediate action. Pointedly, to impose the need to
petitioner guilty of the charges and dismissing him from the service.
comply with the probable cause requirement would invariably defeat the purpose of the wok-related investigation.

Well-settled is the rule that the findings of fact of quasi-judicial agencies, like the CSC, are accorded not only respect
Worthy to mention, too, is the fact that the Commission effected the warrantless search in an open and transparent
but even finality if such findings are supported by substantial evidence. Substantial evidence is such amount of
manner. Officials and some employees of the regional office, who happened to be in the vicinity, were on hand to
relevant evidence which a reasonable mind might accept as adequate to support a conclusion, even if other equally
observe the process until its completion. In addition, the respondent himself was duly notified, through text
reasonable minds might conceivably opine otherwise.55
messaging, of the search and the concomitant retrieval of files from his computer.

All in all, the Commission is convinced that the warrantless search done on computer assigned to Pollo was not, in
any way, vitiated with unconstitutionality. It was a reasonable exercise of the managerial prerogative of the
Commission as an employer aimed at ensuring its operational effectiveness and efficiency by going after the work-
related misfeasance of its employees. Consequently, the evidence derived from the questioned search are deemed
admissible.53
Petitioner’s claim of violation of his constitutional right to privacy must necessarily fail. His other argument invoking
the privacy of communication and correspondence under Section 3(1), Article III of the 1987 Constitution is also
untenable considering the recognition accorded to certain legitimate intrusions into the privacy of employees in the
government workplace under the aforecited authorities. We likewise find no merit in his contention that O’Connor and
Simons are not relevant because the present case does not involve a criminal offense like child pornography. As
already mentioned, the search of petitioner’s computer was justified there being reasonable ground for suspecting
that the files stored therein would yield incriminating evidence relevant to the investigation being conducted by CSC
as government employer of such misconduct subject of the anonymous complaint. This situation clearly falls under
the exception to the warrantless requirement in administrative searches defined in O’Connor.
The Court is not unaware of our decision in Anonymous Letter-Complaint against Atty. Miguel Morales, Clerk of
Court, Metropolitan Trial Court of Manila54 involving a branch clerk (Atty. Morales) who was investigated on the basis
of an anonymous letter alleging that he was consuming his working hours filing and attending to personal cases,
using office supplies, equipment and utilities. The OCA conducted a spot investigation aided by NBI agents. The
team was able to access Atty. Morales’ personal computer and print two documents stored in its hard drive, which
turned out to be two pleadings, one filed in the CA and another in the RTC of Manila, both in the name of another
lawyer. Atty. Morales’ computer was seized and taken in custody of the OCA but was later ordered released on his
motion, but with order to the MISO to first retrieve the files stored therein. The OCA disagreed with the report of the
Investigating Judge that there was no evidence to support the charge against Atty. Morales as no one from the OCC
personnel who were interviewed would give a categorical and positive statement affirming the charges against Atty.
Morales, along with other court personnel also charged in the same case. The OCA recommended that Atty. Morales
should be found guilty of gross misconduct. The Court En Banc held that while Atty. Morales may have fallen short of
the exacting standards required of every court employee, the Court cannot use the evidence obtained from his
personal computer against him for it violated his constitutional right against unreasonable searches and seizures.
The Court found no evidence to support the claim of OCA that they were able to obtain the subject pleadings with the
consent of Atty. Morales, as in fact the latter immediately filed an administrative case against the persons who
conducted the spot investigation, questioning the validity of the investigation and specifically invoking his
constitutional right against unreasonable search and seizure. And as there is no other evidence, apart from the
The CSC based its findings on evidence consisting of a substantial number of drafts of legal pleadings and
documents stored in his office computer, as well as the sworn affidavits and testimonies of the witnesses it presented
during the formal investigation. According to the CSC, these documents were confirmed to be similar or exactly the
same content-wise with those on the case records of some cases pending either with CSCRO No. IV, CSC-NCR or
the Commission Proper. There were also substantially similar copies of those pleadings filed with the CA and duly
furnished the Commission. Further, the CSC found the explanation given by petitioner, to the effect that those files
retrieved from his computer hard drive actually belonged to his lawyer friends Estrellado and Solosa whom he
allowed the use of his computer for drafting their pleadings in the cases they handle, as implausible and doubtful
under the circumstances. We hold that the CSC’s factual finding regarding the authorship of the subject pleadings
and misuse of the office computer is well-supported by the evidence on record, thus:
It is also striking to note that some of these documents were in the nature of pleadings responding to the orders,
decisions or resolutions of these offices or directly in opposition to them such as a petition for certiorari or a motion
for reconsideration of CSC Resolution. This indicates that the author thereof knowingly and willingly participated in
the promotion or advancement of the interests of parties contrary or antagonistic to the Commission. Worse, the
appearance in one of the retrieved documents the phrase, "Eric N. Estr[e]llado, Epal kulang ang bayad mo," lends
plausibility to an inference that the preparation or drafting of the legal pleadings was pursued with less than a
laudable motivation. Whoever was responsible for these documents was simply doing the same for the money – a
"legal mercenary" selling or purveying his expertise to the highest bidder, so to speak.
Inevitably, the fact that these documents were retrieved from the computer of Pollo raises the presumption that he
was the author thereof. This is because he had a control of the said computer. More significantly, one of the
witnesses, Margarita Reyes, categorically testified seeing a written copy of one of the pleadings found in the case
records lying on the table of the respondent. This was the Petition for Review in the case of Estrellado addressed to
the Court of Appeals. The said circumstances indubitably demonstrate that Pollo was secretly undermining the
interest of the Commission, his very own employer.
To deflect any culpability, Pollo would, however, want the Commission to believe that the documents were the
personal files of some of his friends, including one Attorney Ponciano Solosa, who incidentally served as his counsel
of record during the formal investigation of this case. In fact, Atty. Solosa himself executed a sworn affidavit to this
effect. Unfortunately, this contention of the respondent was directly rebutted by the prosecution witness, Reyes, who
testified that during her entire stay in the PALD, she never saw Atty. Solosa using the computer assigned to the
respondent. Reyes more particularly stated that she worked in close proximity with Pollo and would have known if
Atty. Solosa, whom she personally knows, was using the computer in question. Further, Atty. Solosa himself was
never presented during the formal investigation to confirm his sworn statement such that the same constitutes self-
serving evidence unworthy of weight and credence. The same is true with the other supporting affidavits, which Pollo
submitted.
At any rate, even admitting for a moment the said contention of the respondent, it evinces the fact that he was
unlawfully authorizing private persons to use the computer assigned to him for official purpose, not only once but
several times gauging by the number of pleadings, for ends not in conformity with the interests of the Commission.
He was, in effect, acting as a principal by indispensable cooperation…Or at the very least, he should be responsible
for serious misconduct for repeatedly allowing CSC resources, that is, the computer and the electricity, to be utilized
for purposes other than what they were officially intended.
Further, the Commission cannot lend credence to the posturing of the appellant that the line appearing in one of the
documents, "Eric N. Estrellado, Epal kulang ang bayad mo," was a private joke between the person alluded to
therein, Eric N. Estrellado, and his counsel, Atty. Solosa, and not indicative of anything more sinister. The same is
too preposterous to be believed. Why would such a statement appear in a legal pleading stored in the computer
assigned to the respondent, unless he had something to do with it?56
Petitioner assails the CA in not ruling that the CSC should not have entertained an anonymous complaint since
Section 8 of CSC Resolution No. 99-1936 (URACC) requires a verified complaint:
Rule II – Disciplinary Cases
SEC. 8. Complaint. - A complaint against a civil service official or employee shall not be given due course unless it is
in writing and subscribed and sworn to by the complainant. However, in cases initiated by the proper disciplining
authority, the complaint need not be under oath.
No anonymous complaint shall be entertained unless there is obvious truth or merit to the allegation therein or
supported by documentary or direct evidence, in which case the person complained of may be required to comment.
xxxx
We need not belabor this point raised by petitioner. The administrative complaint is deemed to have been initiated by
the CSC itself when Chairperson David, after a spot inspection and search of the files stored in the hard drive of
computers in the two divisions adverted to in the anonymous letter -- as part of the disciplining authority’s own fact-
finding investigation and information-gathering -- found a prima facie case against the petitioner who was then
directed to file his comment. As this Court held in Civil Service Commission v. Court of Appeals 57 --
Under Sections 46 and 48 (1), Chapter 6, Subtitle A, Book V of E.O. No. 292 and Section 8, Rule II of Uniform Rules
on Administrative Cases in the Civil Service, a complaint may be initiated against a civil service officer or employee
by the appropriate disciplining authority, even without being subscribed and sworn to. Considering that the CSC, as
the disciplining authority for Dumlao, filed the complaint, jurisdiction over Dumlao was validly acquired. (Emphasis
supplied.)
As to petitioner’s challenge on the validity of CSC OM 10, S. 2002 (CUP), the same deserves scant consideration.
The alleged infirmity due to the said memorandum order having been issued solely by the CSC Chair and not the
Commission as a collegial body, upon which the dissent of Commissioner Buenaflor is partly anchored, was already
explained by Chairperson David in her Reply to the Addendum to Commissioner Buenaflor’s previous memo
expressing his dissent to the actions and disposition of the Commission in this case. According to Chairperson
David, said memorandum order was in fact exhaustively discussed, provision by provision in the January 23, 2002
Commission Meeting, attended by her and former Commissioners Erestain, Jr. and Valmores. Hence, the
Commission En Banc at the time saw no need to issue a Resolution for the purpose and further because the CUP
being for internal use of the Commission, the practice had been to issue a memorandum order. 58 Moreover, being an
administrative rule that is merely internal in nature, or which regulates only the personnel of the CSC and not the
public, the CUP need not be published prior to its effectivity.59
In fine, no error or grave abuse of discretion was committed by the CA in affirming the CSC’s ruling that petitioner is
guilty of grave misconduct, dishonesty, conduct prejudicial to the best interest of the service, and violation of R.A.
No. 6713. The gravity of these offenses justified the imposition on petitioner of the ultimate penalty of dismissal with
all its accessory penalties, pursuant to existing rules and regulations.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated October 11, 2007 and
Resolutiondated February 29, 2008 of the Court of Appeals in CA-G.R. SP No. 98224 are AFFIRMED.
With costs against the petitioner.
SO ORDERED.
[G.R. NO. 114974 : June 16, 2004]
STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), Petitioner, v. The Honorable MA. NIEVES R.
CONFESOR, in her capacity as SECRETARY OF LABOR AND EMPLOYMENT; and the STANDARD
CHARTERED BANK, Respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for certiorari under Rule 65 of the Rules of Court filed by the Standard Chartered Bank Employees
Union, seeking the nullification of the October 29, 1993 Order1 of then Secretary of Labor and Employment Nieves R.
Confesor and her resolutions dated December 16, 1993 and February 10, 1994.
The Antecedents
Standard Chartered Bank (the Bank, for brevity) is a foreign banking corporation doing business in the
Philippines.The exclusive bargaining agent of the rank and file employees of the Bank is the Standard Chartered
Bank Employees Union (the Union, for brevity).
In August of 1990, the Bank and the Union signed a five-year collective bargaining agreement (CBA) with a provision
to renegotiate the terms thereof on the third year. Prior to the expiration of the three-year period2but within the sixty-
day freedom period, the Union initiated the negotiations. On February 18, 1993, the Union, through its President,
Eddie L. Divinagracia, sent a letter3 containing its proposals4 covering political provisions5 and thirty-four (34)
economic provisions.6 Included therein was a list of the names of the members of the Unions negotiating
panel.7 cralawred
In a Letter dated February 24, 1993, the Bank, through its Country Manager Peter H. Harris, took note of the Unions
proposals.The Bank attached its counter-proposal to the non-economic provisions proposed by the Union.8 The Bank
posited that it would be in a better position to present its counter-proposals on the economic items after the Union
had presented its justifications for the economic proposals. 9 The Bank, likewise, listed the members of its negotiating
panel.10 The parties agreed to set meetings to settle their differences on the proposed CBA.
Before the commencement of the negotiation, the Union, through Divinagracia, suggested to the Banks Human
Resource Manager and head of the negotiating panel, Cielito Diokno, that the bank lawyers should be excluded from
the negotiating team. The Bank acceded.11 Meanwhile, Diokno suggested to Divinagracia that Jose P. Umali, Jr., the
President of the National Union of Bank Employees (NUBE), the federation to which the Union was affiliated, be
excluded from the Unions negotiating panel.12 However, Umali was retained as a member thereof.
On March 12, 1993, the parties met and set the ground rules for the negotiation.Diokno suggested that the Group Hospitalization Insurance
negotiation be kept a family affair. The proposed non-economic provisions of the CBA were discussed first.13Even
during the final reading of the non-economic provisions on May 4, 1993, there were still provisions on which the
From: P35,000.00 per illness
Union and the Bank could not agree. Temporarily, the notation DEFERRED was placed therein.Towards the end of
the meeting, the Union manifested that the same should be changed to DEADLOCKED to indicate that such items
remained unresolved. Both parties agreed to place the notation DEFERRED/DEADLOCKED. 14 cralawred To: P35,000.00 per illness per year

On May 18, 1993, the negotiation for economic provisions commenced. A presentation of the basis of the Unions Death Assistance For employee
economic proposals was made.The next meeting, the Bank made a similar presentation. Towards the end of the
Banks presentation, Umali requested the Bank to validate the Unions guestimates, especially the figures for the rank
From: P20,000.00
and file staff.15 In the succeeding meetings, Umali chided the Bank for the insufficiency of its counter-proposal on the
provisions on salary increase, group hospitalization, death assistance and dental benefits. He reminded the Bank,
how the Union got what it wanted in 1987, and stated that if need be, the Union would go through the same route to To: P25,000.00
get what it wanted.16 cralawred
Dental Retainer Original offer remains the same21 cralawred
Upon the Banks insistence, the parties agreed to tackle the economic package item by item.Upon the Unions
suggestion, the Bank indicated which provisions it would accept, reject, retain and agree to discuss. 17 The Bank
suggested that the Union prioritize its economic proposals, considering that many of such economic provisions The Union, for its part, made the following counter-proposal:chanroblesvirtua1awlibrary
remained unresolved.The Union, however, demanded that the Bank make a revised itemized proposal.
Wage Increase:1st Year - 40%
In the succeeding meetings, the Union made the following proposals:chanroblesvirtua1awlibrary
2nd Year - 19.5%
Wage Increase:
Group Hospitalization Insurance
st
1 Year Reduced from 45% to 40%
From: P60,000.00 per year
2nd Year -Retain at 20%
To:P50,000.00 per year
Total = 60%
Dental:
Group Hospitalization Insurance:
Temporary Filling/ P150.00
Maximum disability benefit reduced from P75,000.00 to P60,000.00 per illness annually
Tooth Extraction
Death Assistance:
Permanent Filling 200.00
For the employee -- Reduced from P50,000.00 to P45,000.00
Prophylaxis 250.00
For Immediate Family Member -- Reduced from P30,000.00 to P25,000.00
Root Canal From P2,000 per tooth
Dental and all others -- No change from the original demand.18 cralawred
To: 1,800.00 per tooth
In the morning of the June 15, 1993 meeting, the Union suggested that if the Bank would not make the necessary
revisions on its counter-proposal, it would be best to seek a third party assistance.19 After the break, the Bank Death Assistance:
presented its revised counter-proposal20 as follows:chanroblesvirtua1awlibrary
For Employees: From P45,000.00 to P40,000.00
Wage Increase : 1st Year from P1,000 to P1,050.00
For Immediate Family Member: From P25,000.00 to P20,000.00.22 cralawred
2nd Year P800.00 no change
The Unions original proposals, aside from the above-quoted, remained the same. The SOLEgave the following economic awards:chanroblesvirtua1awlibrary

Another set of counter-offer followed:chanroblesvirtua1awlibrary 1.Wage Increase:chanroblesvirtua1awlibrary

Management Union a) To be incorporated to present salary rates:

Wage Increase Fourth year : 7% of basic monthly salary

1st Year P1,050.00 40% Fifth year: 5% of basic monthly salary based on the 4th year adjusted salary

2nd Year -850.00 19.0%23 cralawred b) Additional fixed amount:

Diokno stated that, in order for the Bank to make a better offer, the Union should clearly identify what it wanted to be Fourth year :P600.00 per month
included in the total economic package.Umali replied that it was impossible to do so because the Banks counter-
proposal was unacceptable.He furthered asserted that it would have been easier to bargain if the atmosphere was
Fifth year:P400.00 per month
the same as before, where both panels trusted each other.Diokno requested the Union panel to refrain from involving
personalities and to instead focus on the negotiations.24 He suggested that in order to break the impasse, the Union
should prioritize the items it wanted to iron out.Divinagracia stated that the Bank should make the first move and 2.Group Insurance
make a list of items it wanted to beincluded in the economic package.Except for the provisions on signing bonus and
uniforms, the Union and the Bank failed to agree on the remaining economic provisions of the CBA. The Union
declared a deadlock25and filed a Notice of Strike before the National Conciliation and Mediation Board (NCMB) on a) Hospitalization : P45,000.00
June 21, 1993, docketed as NCMB-NCR-NS-06-380-93.26 cralawred
b) Life: P130,000.00
On the other hand, the Bank filed a complaint for Unfair Labor Practice (ULP) and Damages before the Arbitration
Branch of the National Labor Relations Commission (NLRC) in Manila, docketed as NLRC Case No. 00-06-04191-93 c) Accident: P130,000.00
against the Union on June 28, 1993.The Bank alleged that the Union violated its duty to bargain, as it did not bargain
in good faith.It contended that the Union demanded sky high economic demands, indicative of blue-sky
bargaining.27 Further, the Union violated its no strike- no lockout clause by filing a notice of strike before the 3.Medicine Allowance
NCMB.Considering that the filing of notice of strike was an illegal act, the Union officers should be dismissed.Finally,
the Bank alleged that as a consequence of the illegal act, the Bank suffered nominal and actual damages and was Fourth year : P5,500.00
forced to litigate and hire the services of the lawyer.28 cralawred
Fifth year: P6,000.00
On July 21, 1993, then Secretary of Labor and Employment (SOLE) Nieves R. Confesor, pursuant to Article 263(g)
of the Labor Code, issued an Order assuming jurisdiction over the labor dispute at the Bank.The complaint for ULP
filed by the Bank before the NLRC was consolidated with the complaint over which the SOLE assumed 4.Dental Benefits
jurisdiction.After the parties submitted their respective position papers, the SOLE issued an Order on October 29,
1993, the dispositive portion of which is herein quoted:chanroblesvirtua1awlibrary Provision of dental retainer as proposed by the Bank, but without diminishing existing benefits

WHEREFORE, the Standard Chartered Bank and the Standard Chartered Bank Employees Union NUBE are hereby 5.Optical Allowance
ordered to execute a collective bargaining agreement incorporating the dispositions contained herein.The CBA shall
be retroactive to 01 April 1993 and shall remain effective for two years thereafter, or until such time as a new CBA
has superseded it.All provisions in the expired CBA not expressly modified or not passed upon herein are deemed Fourth year:P2,000.00
retained while all new provisions which are being demanded by either party are deemed denied, but without
prejudice to such agreements as the parties may have arrived at in the meantime. Fifth year:P2,500.00

The Banks charge for unfair labor practice which it originally filed with the NLRC as NLRC-NCR Case No. 00-06- 6.Death Assistance
04191-93 but which is deemed consolidated herein, is dismissed for lack of merit.On the other hand, the Unions
charge for unfair labor practice is similarly dismissed.
a) Employee :P30,000.00

Let a copy of this order be furnished the Labor Arbiter in whose sala NLRC-NCR Case No. 00-06-04191-93 is
pending for his guidance and appropriate action.29 cralawred b) Immediate Family Member :P5,000.00
7.Emergency Leave Five (5) days for each contingency begin from a clean slate.It argued that the Bank opened the political provisions up for grabs, which had the effect of
diminishing or obliterating the gains that the Union had made.
8.Loans
The Union also accused the Bank of refusing to disclose material and necessary data, even after a request was
made by the Union to validate its guestimates.
a) Car Loan : P200,000.00

In its Comment, the Bank prayed that the petition be dismissed as the Union was estopped, considering that it signed
b) Housing Loan :It cannot be denied that the costs attendant to having ones own home have tremendously gone
the Collective Bargaining Agreement (CBA) on April 22, 1994.It asserted that contrary to the Unions allegations, it
up.The need, therefore, to improve on this benefit cannot be overemphasized.Thus, the management is urged to
was the Union that committed ULP when negotiator Jose Umali, Jr. hurled invectives at the Banks head negotiator,
increase the existing and allowable housing loan that the Bank extends to its employees to an amount that will give
Cielito Diokno, and demanded that she be excluded from the Banks negotiating team.Moreover, the Union engaged
meaning and substance to this CBA benefit.30 cralawred
in blue-sky bargaining and isolated the no strike-no lockout clause of the existing CBA.

The SOLE dismissed the charges of ULP of both the Union and the Bank, explaining that both parties failed to
The Office of the Solicitor General, in representation of the public respondent, prayed that the petition be dismissed.It
substantiate their claims.Citing National Labor Union v. Insular-Yebana Tobacco Corporation,31 the SOLE stated that
asserted that the Union failed to prove its ULP charges and that the public respondent did not commit any grave
ULP charges would prosper only if shown to have directly prejudiced the public interest.
abuse of discretion in issuing the assailed order and resolutions.

Dissatisfied, the Union filed a motion for reconsideration with clarification, while the Bank filed a motion for
The Issues
reconsideration.On December 16, 1993, the SOLE issued a Resolution denying the motions.The Union filed a
second motion for reconsideration, which was, likewise, denied on February 10, 1994.
The issues presented for resolution arethe following: (a) whether or not the Union was able to substantiate its claim
of unfair labor practice against the Bank arising from the latters alleged interference with its choice of negotiator;
On March 22, 1994, the Bank and the Union signed the CBA.32 Immediately thereafter, the wage increase was
surface bargaining; making bad faith non-economic proposals; and refusal to furnish the Union with copies of the
effected and the signing bonuses based on the increased wage were distributed to the employees covered by the
relevant data; (b) whether or not the public respondent acted with grave abuse of discretion amounting to lack or
CBA.
excess of jurisdiction when she issued the assailed order and resolutions; and, (c) whether or not the petitioner is
estopped from filing the instant action.
The Present Petition
The Courts Ruling
On April 28, 1994, the Union filed this petition for certiorari under Rule 65 of the Rules of Procedure alleging as
follows:chanroblesvirtua1awlibrary
The petition is bereft of merit.

A.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

Interference under Article
LACK OF JURISDICTION IN DISMISSING THE UNIONS CHARGE OF UNFAIR LABOR PRACTICE IN VIEW OF
THE CLEAR EVIDENCE OF RECORD AND ADMISSIONS PROVING THE UNFAIR LABOR PRACTICES
CHARGED.33 cralawred 248 (a) of the Labor Code

B.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION IN FAILING TO RULE ON OTHER UNFAIR LABOR PRACTICES CHARGED. 34 cralawred
C.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION IN DISMISSING THE CHARGES OF UNFAIR LABOR PRACTICES ON THE GROUND
THAT NO PROOF OF INJURY TO THE PUBLIC INTEREST WAS PRESENTED.35 cralawred
The petitioner asserts that the private respondent committed ULP, i.e., interference in the selection of the Unions
negotiating panel, when Cielito Diokno, the Banks Human Resource Manager, suggested to the Unions President
Eddie L. Divinagracia that Jose P. Umali, Jr., President of the NUBE, be excluded from the Unions negotiating
panel.In support of its claim, Divinagracia executed an affidavit, stating that prior to the commencement of the
negotiation, Diokno approached him and suggested the exclusion of Umali from the Unions negotiating panel, and
that during the first meeting, Diokno stated that the negotiation be kept a family affair.

The Union alleges that the SOLE acted with grave abuse of discretion amounting to lack or excess of jurisdiction
when it found that the Bank did not commit unfair labor practice when it interfered with the Unions choice of
negotiator.It argued that, Dioknos suggestion that the negotiation be limited as a family affair was tantamount to
suggesting that Federation President Jose Umali, Jr. be excluded from the Unions negotiating panel.It further argued
that contrary to the ruling of the public respondent, damage or injury to the public interest need not be present in
order for unfair labor practice to prosper.
The Union, likewise, pointed out that the public respondent failed to rule on the ULP charges arising from the Banks
surface bargaining.The Union contended that the Bank merely went through the motions of collective bargaining
without the intent to reach an agreement, and made bad faith proposals when it announced that the parties should
Citing the cases of U.S. Postal Service36 and Harley Davidson Motor Co., Inc., AMF,37 the Union claims that
interference in the choice of the Unions bargaining panel is tantamount to ULP.
In the aforecited cases, the alleged ULP was based on the employers violation of Section 8(a) (1) and (5) of the
National Labor Relations Act (NLRA),38 which pertain to the interference, restraint or coercion of the employer in the
employees exercise of their rights to self-organization and to bargain collectively through representatives of their own
choosing; and the refusal of the employer to bargain collectively with the employees representatives.In both cases,
the National Labor Relations Board held that upon the employers refusal to engage in negotiations with the Union for
collective-bargaining contract when the Union includes a person who is not an employee, or one who is a member or
an official of other labor organizations, such employer is engaged in unfair labor practice under Section 8(a) (1) and
(5) of the NLRA.
The Union further cited the case of Insular Life Assurance Co., Ltd. Employees Association NATU v. Insular Life Parenthetically, if an employer interferes in the selection of its negotiators or coerces the Union to exclude from its
Assurance Co., Ltd.,39 wherein this Court said that the test of whether an employer has interfered with and coerced panel of negotiators a representative of the Union, and if it can be inferred that the employer adopted the said act to
employees in the exercise of their right to self-organization within the meaning of subsection (a) (1) is whether the yield adverse effects on the free exercise to right to self-organization or on the right to collective bargaining of the
employer has engaged in conduct which it may reasonably be said, tends to interfere with the free exercise of employees, ULP under Article 248(a) in connection with Article 243 of the Labor Code is committed.
employees rights under Section 3 of the Act.40 Further, it is not necessary that there be direct evidence that any
employee was in fact intimidated or coerced by statements of threats of the employer if there is a reasonable
In order to show that the employer committed ULP under the Labor Code, substantial evidence is required to support
inference that anti-union conduct of the employer does have an adverse effect on self-organization and collective
the claim.Substantial evidence has been defined as such relevant evidence as a reasonable mind might accept as
bargaining.41 cralawred
adequate to support a conclusion.48 In the case at bar, the Union bases its claim of interference on the alleged
suggestions of Diokno to exclude Umali from the Unions negotiating panel.
Under the International Labor Organization Convention (ILO) No. 87 FREEDOM OF ASSOCIATION AND
PROTECTION OF THE RIGHT TO ORGANIZE to which the Philippines is a signatory, workers and employers,
The circumstances that occurred during the negotiation do not show that the suggestion made by Diokno to
without distinction whatsoever, shall have the right to establish and, subject only to the rules of the organization
Divinagracia is an anti-union conduct from which it can be inferred that the Bank consciously adopted such act to
concerned, to job organizations of their own choosing without previous authorization. 42 Workers and employers
yield adverse effects on the free exercise of the right to self-organization and collective bargaining of the employees,
organizations shall have the right to draw up their constitutions and rules, to elect their representatives in full freedom
especially considering that such was undertaken previous to the commencement of the negotiation and
to organize their administration and activities and to formulate their programs. 43 Article 2 of ILO Convention No. 98
simultaneously with Divinagracias suggestion that the bank lawyers be excluded from its negotiating panel.
pertaining to the Right to Organize and Collective Bargaining, provides:chanroblesvirtua1awlibrary

Article 2
1.Workers and employers organizations shall enjoy adequate protection against any acts or interference by each
other or each others agents or members in their establishment, functioning or administration.
2.In particular, acts which are designed to promote the establishment of workers organizations under the domination
of employers or employers organizations or to support workers organizations by financial or other means, with the
object of placing such organizations under the control of employers or employers organizations within the meaning of
this Article.
The aforcited ILO Conventions are incorporated in our Labor Code, particularly in Article 243 thereof, which
provides:chanroblesvirtua1awlibrary
The records show that after the initiation of the collective bargaining process, with the inclusion of Umali in the
Unions negotiating panel, the negotiations pushed through. The complaint was made only on August 16, 1993 after a
deadlock was declared by the Union on June 15, 1993.
It is clear that such ULP charge was merely an afterthought.The accusation occurred after the arguments and
differences over the economic provisions became heated and the parties had become frustrated.It happened after
the parties started to involve personalities. As the public respondent noted, passions may rise, and as a result,
suggestions given under less adversarial situations may be colored with unintended meanings.49 Such is what
appears to have happened in this case.
The Duty to Bargain
Collectively

ART. 243. COVERAGE AND EMPLOYEES RIGHT TO SELF-ORGANIZATION. All persons employed in
If at all, the suggestion made by Diokno to Divinagracia should be construed as part of the normal relations and
commercial, industrial and agricultural enterprises and in religious, charitable, medical or educational institutions
innocent communications, which are all part of the friendly relations between the Union and Bank.
whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective bargaining.Ambulant, intermittent and itinerant
workers, self-employed people, rural workers and those without any definite employers may form labor organizations The Union alleges that the Bank violated its duty to bargain; hence, committed ULP under Article 248(g) when it
for their mutual aid and protection. engaged in surface bargaining. It alleged that the Bank just went through the motions of bargaining without any intent
of reaching an agreement, as evident in the Banks counter-proposals.It explained that of the 34 economic provisions
it made, the Bank only made 6 economic counterproposals.Further, as borne by the minutes of the meetings, the
and Articles 248 and 249 respecting ULP of employers and labor organizations.
Bank, after indicating the economic provisions it had rejected, accepted, retained or were open for discussion,
refused to make a list of items it agreed to include in the economic package.
The said ILO Conventions were ratified on December 29, 1953. However, even as early as the 1935
Constitution,44 the State had already expressly bestowed protection to labor as part of the general provisions. The
Surface bargaining is defined as going through the motions of negotiating without any legal intent to reach an
1973 Constitution,45 on the other hand, declared it as a policy of the state to afford protection to labor, specifying that
agreement.50 The resolution of surface bargaining allegations never presents an easy issue. The determination of
the workers rights to self-organization, collective bargaining, security of tenure, and just and humane conditions of
whether a party has engaged in unlawful surface bargaining is usually a difficult one because it involves, at bottom, a
work would be assured. For its part, the 1987 Constitution, aside from making it a policy to protect the rights of
question of the intent of the party in question, and usually such intent can only be inferred from the totality of the
workers and promote their welfare,46 devotes an entire section, emphasizing its mandate to afford protection to labor,
challenged partys conduct both at and away from the bargaining table.51 It involves the question of whether an
and highlights the principle of shared responsibility between workers and employers to promote industrial
employers conduct demonstrates an unwillingness to bargain in good faith or is merely hard bargaining. 52 cralawred
peace.47 cralawred

The minutes of meetings from March 12, 1993 to June 15, 1993 do not show that the Bank had any intention of
Article 248(a) of the Labor Code, considers it an unfair labor practice when an employer interferes, restrains or
violating its duty to bargain with the Union. Records show that after the Union sent its proposal to the Bank on
coerces employees in the exercise of their right to self-organization or the right to form association.The right to self-
February 17, 1993, the latter replied with a list of its counter-proposals on February 24, 1993.Thereafter, meetings
organization necessarily includes the right to collective bargaining.
were set for the settlement of their differences.The minutes of the meetings show that both the Bank and the Union
exchanged economic and non-economic proposals and counter-proposals.
The Union has not been able to show that the Bank had done acts, both at and away from the bargaining table,
which tend to show that it did not want to reach an agreement with the Union or to settle the differences between it
and the Union.Admittedly, the parties were not able to agree and reached a deadlock.However, it is herein
emphasized that the duty to bargain does not compel either party to agree to a proposal or require the making of a
concession.53 Hence, the parties failure to agree did not amount to ULP under Article 248(g) for violation of the duty
to bargain.
We can hardly dispute this finding, for it finds support in the evidence.The inference that respondents did not refuse
to bargain collectively with the complaining union because they accepted some of the demands while they refused
the others even leaving open other demands for future discussion is correct, especially so when those demands
were discussed at a meeting called by respondents themselves precisely in view of the letter sent by the union on
April 29, 196054 cralawred
In view of the finding of lack of ULP based on Article 248(g), the accusation that the Bank made bad faith provisions
has no leg to stand on.The records show that the Banks counter-proposals on the non-economic provisions or
political provisions did not put up for grabs the entire work of the Union and its predecessors.As can be gleaned from
the Banks counter-proposal, there were many provisions which it proposed to be retained.The revisions on the other
provisions were made after the parties had come to an agreement.Far from buttressing the Unions claim that the
Bank made bad-faith proposals on the non-economic provisions, all these, on the contrary, disprove such
allegations.
We, likewise, find that the Union failed to substantiate its claim that the Bank refused to furnish the information it
needed.
While the refusal to furnish requested information is in itself an unfair labor practice, and also supports the inference
of surface bargaining,55 in the case at bar, Umali, in a meeting dated May 18, 1993, requested the Bank to validate
its guestimates on the data of the rank and file.However, Umali failed to put his request in writing as provided for in
Article 242(c) of the Labor Code:
Article 242.Rights of Legitimate Labor Organization
(c) To be furnished by the employer, upon written request, with the 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
representatives 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 negotiation;chanroblesvirtuallawlibrary
The Union, did not, as the Labor Code requires, send a written request for the issuance of a copy of the data about
the Banks rank and file employees.Moreover, as alleged by the Union, the fact that the Bank made use of the
aforesaid guestimates, amounts to a validation of the data it had used in its presentation.
No Grave Abuse of Discretion
On the Part of the Public Respondent
The special civil action for certiorari may be availed of when the tribunal, board, or officer exercising judicial or quasi-
judicial functions has acted without or in excess of jurisdiction and there is no appeal or any plain, speedy, and
adequate remedy in the ordinary course of law for the purpose of annulling the proceeding. 56Grave abuse of
discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or
where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility which
must be so patent and gross as to amount to an invasion of positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law.Mere abuse of discretion is not enough. 57 cralawred
While it is true that a showing of prejudice to public interest is not a requisite for ULP charges to prosper, it cannot be
said that the public respondent acted in capricious and whimsical exercise of judgment, equivalent to lack of
jurisdiction or excess thereof. Neither was it shown that the public respondent exercised its power in an arbitrary and
despotic manner by reason of passion or personal hostility.
Estoppel not Applicable
In the Case at Bar
The respondent Bank argues that the petitioner is estopped from raising the issue of ULP when it signed the new
CBA.
Article 1431 of the Civil Code provides:chanroblesvirtua1awlibrary
Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon.
A person, who by his deed or conduct has induced another to act in a particular manner, is barred from adopting an
inconsistent position, attitude or course of conduct that thereby causes loss or injury to another. 58 cralawred
In the case, however, the approval of the CBA and the release of signing bonus do not necessarily mean that the
Union waived its ULP claim against the Bank during the past negotiations.After all, the conclusion of the CBA was
included in the order of the SOLE, while the signing bonus was included in the CBA itself.Moreover, the Union twice
filed a motion for reconsideration respecting its ULP charges against the Bank before the SOLE.
The Union Did Not Engage
In Blue-Sky Bargaining
We, likewise, do not agree that the Union is guilty of ULP for engaging in blue-sky bargaining or making exaggerated
or unreasonable proposals.59 The Bank failed to show that the economic demands made by the Union were
exaggerated or unreasonable.The minutes of the meeting show that the Union based its economic proposals on data
of rank and file employees and the prevailing economic benefits received by bank employees from other foreign
banks doing business in the Philippines and other branches of the Bank in the Asian region.
In sum, we find that the public respondent did not act with grave abuse of discretion amounting to lack or excess of
jurisdiction when it issued the questioned order and resolutions.While the approval of the CBA and the release of the
signing bonus did not estop the Union from pursuing its claims of ULP against the Bank, we find that the latter did not
engage in ULP.We, likewise, hold that the Union is not guilty of ULP.
In light of the foregoing, the October 29, 1993 Order and December 16, 1993 and February 10, 1994 Resolutions
of then Secretary of Labor Nieves R. Confesor are AFFIRMED.The Petition is hereby DISMISSED.
SO ORDERED.
G.R. Nos. 182978-79 April 7, 2009
BECMEN SERVICE EXPORTER AND PROMOTION, INC., Petitioner,
vs.
SPOUSES SIMPLICIO and MILA CUARESMA (for and in behalf of their daughter, Jasmin G. Cuaresma),
WHITE FALCON SERVICES, INC. and JAIME ORTIZ (President,White Falcon Services, Inc.), Respondents. Address : Al-Birk Genrl. Hospital Birth Place: The Philippines

DECISION
YNARES-SANTIAGO, J.:
These consolidated petitions assail the Amended Decision1 of the Court of Appeals dated May 14, 2008 in CA-G.R.
SP No. 80619 and CA-G.R. SP No. 81030 finding White Falcon Services, Inc. and Becmen Service Exporter and
Promotion, Inc. solidarily liable to indemnify spouses Simplicio and Mila Cuaresma the amount of US$4,686.73 in
actual damages with interest.
On January 6, 1997, Jasmin Cuaresma (Jasmin) was deployed by Becmen Service Exporter and Promotion,
Inc.2(Becmen) to serve as assistant nurse in Al-Birk Hospital in the Kingdom of Saudi Arabia (KSA), for a contract
duration of three years, with a corresponding salary of US$247.00 per month.
Over a year later, she died allegedly of poisoning.
Jessie Fajardo, a co-worker of Jasmin, narrated that on June 21, 1998, Jasmin was found dead by a female cleaner
lying on the floor inside her dormitory room with her mouth foaming and smelling of poison. 3
On 27.2.1419H, Dr. Tariq Abdulminnem and Dr. Ashoki Komar, both have examined the dead body of Jasmin
Cuaresma, at 12.20 P.M., Sunday, 22.2.14189H, and the result was:
1. Report of the Police on the death
2. Medical Examination: Blue skin and paleness on the Extrimes (sic), total halt to blood circulation and
respiratory system and brain damage. There were no external injuries. Likely poisoning by taking
poisonous substance, yet not determined. There was a bad smell in the mouth and unknown to
us.5 (Emphasis supplied)
Jasmin’s body was repatriated to Manila on September 3, 1998. The following day, the City Health Officer of
Cabanatuan City conducted an autopsy and the resulting medical report indicated that Jasmin died under violent
circumstances, and not poisoning as originally found by the KSA examining physician. The City Health Officer found
that Jasmin had abrasions at her inner lip and gums; lacerated wounds and abrasions on her left and right ears;
lacerated wounds and hematoma (contusions) on her elbows; abrasions and hematoma on her thigh and legs; intra-
muscular hemorrhage at the anterior chest; rib fracture; puncture wounds; and abrasions on the labia minora of the
vaginal area.6

On March 11, 1999, Jasmin’s remains were exhumed and examined by the National Bureau of Investigation (NBI).
Based on the police report and the medical report of the examining physician of the Al-Birk Hospital, who conducted The toxicology report of the NBI, however, tested negative for non-volatile, metallic poison and insecticides.7
an autopsy of Jasmin’s body, the likely cause of her death was poisoning. Thus:

Simplicio and Mila Cuaresma (the Cuaresmas), Jasmin’s parents and her surviving heirs, received from the
According to letter No. 199, dated 27.2.1419H, issued by Al-Birk Police Station, for examining the corpse of Jasmin Overseas Workers Welfare Administration (OWWA) the following amounts: P50,000.00 for death benefits;
Cuaresma, 12.20 P.M. 27.2.1419H, Sunday, at Al-Birk Hospital. P50,000.00 for loss of life; P20,000.00 for funeral expenses; and P10,000.00 for medical reimbursement.

1. The Police Report on the Death On November 22, 1999, the Cuaresmas filed a complaint against Becmen and its principal in the KSA, Rajab &
Silsilah Company (Rajab), claiming death and insurance benefits, as well as moral and exemplary damages for
2. The Medical Diagnosis Jasmin’s death.8

Sex: Female Age: 25 years Relg: Christian
The said person was brought to the Emergency Room of the hospital; time 12.20 P.M. and she was
unconscious, blue, no pulse, no respiration and the first aid esd undertaken but without success.
In their complaint, the Cuaresmas claim that Jasmin’s death was work-related, having occurred at the employer’s
premises;9 that under Jasmin’s contract with Becmen, she is entitled to "iqama insurance" coverage; that Jasmin is
entitled to compensatory damages in the amount of US$103,740.00, which is the sum total of her monthly salary of
US$247.00 per month under her employment contract, multiplied by 35 years (or the remaining years of her
productive life had death not supervened at age 25, assuming that she lived and would have retired at age 60).

3. Diagnosis and Opinion: Halt in blood circulation respiratory system and brain damage due to The Cuaresmas assert that as a result of Jasmin’s death under mysterious circumstances, they suffered sleepless
an apparentpoisoning which is under investigation.4 nights and mental anguish. The situation, they claim, was aggravated by findings in the autopsy and exhumation
reports which evidently show that a grave injustice has been committed against them and their daughter, for which
those responsible should likewise be made to pay moral and exemplary damages and attorney’s fees.
Name : Jasmin Cuaresma
In their position paper, Becmen and Rajab insist that Jasmin committed suicide, citing a prior unsuccessful suicide
Sex : Female attempt sometime in March or April 1998 and relying on the medical report of the examining physician of the Al-Birk
Hospital. They likewise deny liability because the Cuaresmas already recovered death and other benefits totaling
Marital Status : Single Nationality: Philipino (sic) P130,000.00 from the OWWA. They insist that the Cuaresmas are not entitled to "iqama insurance" because this
refers to the "issuance" – not insurance – of iqama, or residency/work permit required in the KSA. On the issue of
Religion : Christian moral and exemplary damages, they claim that the Cuaresmas are not entitled to the same because they have not
acted with fraud, nor have they been in bad faith in handling Jasmin’s case.
Profession : Nurse
While the case was pending, Becmen filed a manifestation and motion for substitution alleging that Rajab terminated
their agency relationship and had appointed White Falcon Services, Inc. (White Falcon) as its new recruitment agent
in the Philippines. Thus, White Falcon was impleaded as respondent as well, and it adopted and reiterated Becmen’s
arguments in the position paper it subsequently filed.
On February 28, 2001, the Labor Arbiter rendered a Decision10 dismissing the complaint for lack of merit. Giving
weight to the medical report of the Al-Birk Hospital finding that Jasmin died of poisoning, the Labor Arbiter concluded
that Jasmin committed suicide. In any case, Jasmin’s death was not service-connected, nor was it shown that it
occurred while she was on duty; besides, her parents have received all corresponding benefits they were entitled to
under the law. In regard to damages, the Labor Arbiter found no legal basis to warrant a grant thereof.
On appeal, the National Labor Relations Commission (Commission) reversed the decision of the Labor Arbiter.
Relying on the findings of the City Health Officer of Cabanatuan City and the NBI as contained in their autopsy and
toxicology report, respectively, the Commission, via its November 22, 2002 Resolution11 declared that, based on
substantial evidence adduced, Jasmin was the victim of compensable work-connected criminal aggression. It
disregarded the Al-Birk Hospital attending physician’s report as well as the KSA police report, finding the same to be
inconclusive. It declared that Jasmin’s death was the result of an "accident" occurring within the employer’s premises
that is attributable to her employment, or to the conditions under which she lived, and thus arose out of and in the
course of her employment as nurse. Thus, the Cuaresmas are entitled to actual damages in the form of Jasmin’s lost
earnings, including future earnings, in the total amount of US$113,000.00. The Commission, however, dismissed all
other claims in the complaint.
Becmen, Rajab and White Falcon moved for reconsideration, whereupon the Commission issued its October 9, 2003
Resolution12 reducing the award of US$113,000.00 as actual damages to US$80,000.00. 13 The NLRC likewise
declared Becmen and White Falcon as solidarily liable for payment of the award.
Becmen and White Falcon brought separate petitions for certiorari to the Court of Appeals. 14 On June 28, 2006, the
appellate court rendered its Decision,15 the dispositive portion of which reads, as follows:
WHEREFORE, the subject petitions are DENIED but in the execution of the decision, it should first be enforced
against White Falcon Services and then against Becmen Services when it is already impossible, impractical and
futile to go against it (White Falcon).
SO ORDERED.16
The appellate court affirmed the NLRC’s findings that Jasmin’s death was compensable, the same having occurred
at the dormitory, which was contractually provided by the employer. Thus her death should be considered to have
occurred within the employer’s premises, arising out of and in the course of her employment.
Becmen and White Falcon moved for reconsideration. On May 14, 2008, the appellate court rendered the assailed
Amended Decision, the dispositive portion of which reads, as follows:
WHEREFORE, the motions for reconsideration are GRANTED. Accordingly, the award of US$80,000.00 in actual
damages is hereby reduced to US$4,686.73 plus interest at the legal rate computed from the time it became due
until fully paid. Petitioners are hereby adjudged jointly and solidarily liable with the employer for the monetary awards
with Becmen Service Exporter and Promotions, Inc. having a right of reimbursement from White Falcon Services,
Inc.
SO ORDERED.17
In the Amended Decision, the Court of Appeals found that although Jasmin’s death was compensable, however,
there is no evidentiary basis to support an award of actual damages in the amount of US$80,000.00. Nor may lost
earnings be collected, because the same may be charged only against the perpetrator of the crime or quasi-delict.
Instead, the appellate court held that Jasmin’s beneficiaries should be entitled only to the sum equivalent of the
remainder of her 36-month employment contract, or her monthly salary of US$247.00 multiplied by nineteen (19)
months, with legal interest.
Becmen filed the instant petition for review on certiorari (G.R. Nos. 182978-79). The Cuaresmas, on the other hand,
moved for a reconsideration of the amended decision, but it was denied. They are now before us via G.R. Nos.
184298-99.
On October 6, 2008, the Court resolved to consolidate G.R. Nos. 184298-99 with G.R. Nos. 182978-79.
In G.R. Nos. 182978-79, Becmen raises the following issues for our resolution:
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT GAVE MORE CREDENCE AND WEIGHT TO THE
AUTOPSY REPORT CONDUCTED BY THE CABANATUAN CITY HEALTH OFFICE THAN THE MEDICAL AND
POLICE REPORTS ISSUED BY THE MINISTRY OF HEALTH OF KINGDOM OF SAUDI ARABIA AND AL-BIRK
HOSPITAL.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN ON THE BASIS OF THE POSITION PAPERS AND
ANNEXES THERETO INCLUDING THE AUTOPSY REPORT, IT CONCLUDED THAT THE DEATH OF JASMIN
CUARESMA WAS CAUSED BY CRIMINAL AGGRESSION.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD THAT THE DEATH OF JASMIN CUARESMA
WAS COMPENSABLE PURSUANT TO THE RULING OF THE SUPREME COURT IN TALLER VS. YNCHAUSTI,
G.R. NO. 35741, DECEMBER 20, 1932, WHICH IT FOUND TO BE STILL GOOD LAW.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN LIABLE FOR THE DEATH OF JASMIN
CUARESMA NOTWITHSTANDING ITS ADMISSIONS THAT "IQAMA INSURANCE" WAS A TYPOGRAPHICAL
ERROR SINCE "IQAMA" IS NOT AN INSURANCE.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT CONCLUDED THAT THE DEATH OF JASMIN WAS
WORK RELATED.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN LIABLE TO JASMIN’S
BENEFICIARIES FOR THE REMAINDER OF HER 36-MONTH CONTRACT COMPUTED IN THIS MANNER:
MONTHLY SALARY OF US$246.67 MULTIPLIED BY 19 MONTHS, THE REMAINDER OF THE TERM OF
JASMIN’S EMPLOYMENT CONTRACT, IS EQUAL TO US$4,686.73.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN LIABLE TO PAY INTEREST AT THE
LEGAL RATE FROM THE TIME IT WAS DUE UNTIL FULLY PAID.
(THE COURT OF APPEALS) GRAVELY ERRED WHEN IT HELD BECMEN AND WHITE FALCON JOINTLY AND
SEVERALLY LIABLE WITH THE EMPLOYER NOTWITHSTANDING THE ASSUMPTION OF LIABILITY
EXECUTED BY WHITE FALCON IN FAVOR OF BECMEN.
On the other hand, in G.R. Nos. 184298-99, the Cuaresmas raise the following issues:
(THE COURT OF APPEALS) GRAVELY ERRED IN APPLYING THE PROVISIONS OF THE CIVIL CODE
CONSIDERED GENERAL LAW DESPITE THE CASE BEING COVERED BY E.O. 247, R.A. 8042 AND LABOR
CODE CONSIDERED AS SPECIAL LAWS.
(THE COURT OF APPEALS) GRAVELY ERRED IN NOT APPLYING THE DECEASED’S FUTURE EARNINGS
WHICH IS (AN) INHERENT FACTOR IN THE COMPUTATION OF DEATH BENEFITS OF OVERSEAS FILIPINO
CONTRACT WORKERS.
(THE COURT OF APPEALS) GRAVELY ERRED IN REDUCING THE DEATH BENEFITS AWARDED BY NLRC
CONSIDERED FINDINGS OF FACT THAT CANNOT BE DISTURBED THROUGH CERTIORARI UNDER RULE 65
OF THE RULES OF COURT.
The issue for resolution is whether the Cuaresmas are entitled to monetary claims, by way of benefits and damages,
for the death of their daughter Jasmin.
The terms and conditions of Jasmin’s 1996 Employment Agreement which she and her employer Rajab freely
entered into constitute the law between them. As a rule, stipulations in an employment contract not contrary to
statutes, public policy, public order or morals have the force of law between the contracting parties. 18 An examination
of said employment agreement shows that it provides for no other monetary or other benefits/privileges than the
following:
1. 1,300 rials (or US$247.00) monthly salary;
2. Free air tickets to KSA at the start of her contract and to the Philippines at the end thereof, as well as for
her vacation at the end of each twenty four-month service;
3. Transportation to and from work;
4. Free living accommodations;
5. Free medical treatment, except for optical and dental operations, plastic surgery charges and lenses,
and medical treatment obtained outside of KSA;
6. Entry visa fees will be shared equally between her and her employer, but the exit/re-entry visa fees, fees
for Iqama issuance, renewal, replacement, passport renewal, sponsorship transfer and other liabilities shall
be borne by her;
7. Thirty days paid vacation leave with round trip tickets to Manila after twenty four-months of continuous
service;
8. Eight days public holidays per year;
9. The indemnity benefit due her at the end of her service will be calculated as per labor laws of KSA.
Thus, the agreement does not include provisions for insurance, or for accident, death or other benefits that the
Cuaresmas seek to recover, and which the labor tribunals and appellate court granted variably in the guise of
compensatory damages.
However, the absence of provisions for social security and other benefits does not make Jasmin’s employment
contract infirm. Under KSA law, her foreign employer is not obliged to provide her these benefits; and neither is
Jasmin entitled to minimum wage – unless of course the KSA labor laws have been amended to the opposite effect,
or that a bilateral wage agreement has been entered into.
Our next inquiry is, should Jasmin’s death be considered as work-connected and thus compensable? The evidence
indicates that it is not. At the time of her death, she was not on duty, or else evidence to the contrary would have
been adduced. Neither was she within hospital premises at the time. Instead, she was at her dormitory room on
personal time when she died. Neither has it been shown, nor does the evidence suggest, that at the time she died,
Jasmin was performing an act reasonably necessary or incidental to her employment as nurse, because she was at
her dormitory room. It is reasonable to suppose that all her work is performed at the Al-birk Hospital, and not at her
dormitory room.
We cannot expect that the foreign employer should ensure her safety even while she is not on duty. It is not fair to
require employers to answer even for their employees’ personal time away from work, which the latter are free to
spend of their own choosing. Whether they choose to spend their free time in the pursuit of safe or perilous
undertakings, in the company of friends or strangers, lovers or enemies, this is not one area which their employers
should be made accountable for. While we have emphasized the need to observe official work time strictly, 19 what an
employee does on free time is beyond the employer’s sphere of inquiry.
While the "employer’s premises" may be defined very broadly not only to include premises owned by it, but also
premises it leases, hires, supplies or uses,20 we are not prepared to rule that the dormitory wherein Jasmin stayed
should constitute employer’s premises as would allow a finding that death or injury therein is considered to have
been incurred or sustained in the course of or arose out of her employment. There are certainly exceptions, 21 but
they do not appear to apply here. Moreover, a complete determination would have to depend on the unique
circumstances obtaining and the overall factual environment of the case, which are here lacking.
But, did Jasmin commit suicide? Rajab, Becmen and White Falcon vehemently insist that she did; thus, her heirs
may not claim benefits or damages based on criminal aggression. On the other hand, the Cuaresmas do not believe
so.
The Court cannot subscribe to the idea that Jasmin committed suicide while halfway into her employment contract. It
is beyond human comprehension that a 25-year old Filipina, in the prime of her life and working abroad with a
chance at making a decent living with a high-paying job which she could not find in her own country, would simply
commit suicide for no compelling reason.
The Saudi police and autopsy reports – which state that Jasmin is a likely/or apparent victim of poisoning –
are patently inconclusive. They are thus unreliable as evidence.
On the contrary, the autopsy report of the Cabanatuan City Health Officer and the exhumation report of the NBI
categorically and unqualifiedly show that Jasmin sustained external and internal injuries, specifically abrasions at
her inner lip and gums; lacerated wounds and abrasions on her left and right ears; lacerated wounds and
hematoma (contusions) on her elbows; abrasions and hematoma on her thigh and legs; intra-muscular
hemorrhage at the anterior chest; a fractured rib; puncture wounds; and abrasions on the labia minora of the
vaginal area. The NBI toxicology report came up negative on the presence of poison.
All these show that Jasmin was manhandled – and possibly raped – prior to her death.
Even if we were to agree with the Saudi police and autopsy reports that indicate Jasmin was poisoned to death, we
do not believe that it was self-induced. If ever Jasmin was poisoned, the assailants who beat her up – and possibly
raped her – are certainly responsible therefor.
We are not exactly ignorant of what goes on with our OFWs. Nor is the rest of the world blind to the realities of life
being suffered by migrant workers in the hands of some foreign employers. It is inconceivable that our Filipina
women would seek employment abroad and face uncertainty in a foreign land, only to commit suicide for
unexplained reasons. Deciding to leave their family, loved ones, and the comfort and safety of home, to work in a
strange land requires unrivaled strength and courage. Indeed, many of our women OFWs who are unfortunate to end
up with undesirable employers have been there more times than they care to, beaten up and broken in body – yet
they have remained strong in mind, refusing to give up the will to live. Raped, burned with cigarettes, kicked in the
chest with sharp high-heeled shoes, starved for days or even weeks, stabbed, slaved with incessant work, locked in
their rooms, forced to serve their masters naked, grossly debased, dehumanized and insulted, their spirits fought on
and they lived for the day that they would once again be reunited with their families and loved ones. Their bodies
surrendered, but their will to survive remained strong.
It is surprising, therefore, that Rajab, Becmen and White Falcon should insist on suicide, without even lifting a finger
to help solve the mystery of Jasmin’s death. Being in the business of sending OFWs to work abroad, Becmen and
White Falcon should know what happens to some of our OFWs. It is impossible for them to be completely unaware
that cruelties and inhumanities are inflicted on OFWs who are unfortunate to be employed by vicious employers, or
upon those who work in communities or environments where they are liable to become victims of crime. By now they
should know that our women OFWs do not readily succumb to the temptation of killing themselves even when
assaulted, abused, starved, debased and, worst, raped.
Indeed, what we have seen is Rajab and Becmen’s revolting scheme of conveniently avoiding responsibility by
clinging to the absurd theory that Jasmin took her own life. Abandoning their legal, moral and social obligation (as
employer and recruiter) to assist Jasmin’s family in obtaining justice for her death, they immediately gave up on
Jasmin’s case, which has remained under investigation as the autopsy and police reports themselves indicate.
Instead of taking the cudgels for Jasmin, who had no relative or representative in the KSA who would naturally
demand and seek an investigation of her case, Rajab and Becmen chose to take the most convenient route to
avoiding and denying liability, by casting Jasmin’s fate to oblivion. It appears from the record that to this date, no
follow up of Jasmin’s case was ever made at all by them, and they seem to have expediently treated Jasmin’s death
as a closed case. Despite being given the lead via the autopsy and toxicology reports of the Philippine authorities,
they failed and refused to act and pursue justice for Jasmin’s sake and to restore honor to her name.
Indeed, their nonchalant and uncaring attitude may be seen from how Jasmin’s remains were repatriated. No official
representative from Rajab or Becmen was kind enough to make personal representations with Jasmin’s parents, if
only to extend their condolences or sympathies; instead, a mere colleague, nurse Jessie Fajardo, was designated to
accompany Jasmin’s body home.
Of all life’s tragedies, the death of one’s own child must be the most painful for a parent. Not knowing why or how
Jasmin’s life was snuffed out makes the pain doubly unbearable for Jasmin’s parents, and further aggravated by
Rajab, Becmen, and White Falcon’s baseless insistence and accusation that it was a self-inflicted death, a mortal sin
by any religious standard.
Thus we categorically hold, based on the evidence; the actual experiences of our OFWs; and the resilient and
courageous spirit of the Filipina that transcends the vilest desecration of her physical self, that Jasmin did not commit
suicide but a victim of murderous aggression.
Rajab, Becmen, and White Falcon’s indifference to Jasmin’s case has caused unfathomable pain and suffering upon
her parents. They have turned away from their moral obligation, as employer and recruiter and as entities laden with
social and civic obligations in society, to pursue justice for and in behalf of Jasmin, her parents and those she left
behind. Possessed with the resources to determine the truth and to pursue justice, they chose to stand idly for the
sake of convenience and in order that they may avoid pecuniary liability, turning a blind eye to the Philippine
authorities’ autopsy and toxicology reports instead of taking action upon them as leads in pursuing justice for
Jasmin’s death. They have placed their own financial and corporate interests above their moral and social
obligations, and chose to secure and insulate themselves from the perceived responsibility of having to answer for
and indemnify Jasmin’s heirs for her death.
Under Republic Act No. 8042 (R.A. 8042), or the Migrant Workers and Overseas Filipinos Act of 1995, 22 the State
shall, at all times, uphold the dignity of its citizens whether in country or overseas, in general, and Filipino migrant
workers, in particular.23 The State shall provide adequate and timely social, economic and legal services to Filipino
migrant workers.24 The rights and interest of distressed25 overseas Filipinos, in general, and Filipino migrant workers,
in particular, documented or undocumented, are adequately protected and safeguarded. 26
Becmen and White Falcon, as licensed local recruitment agencies, miserably failed to abide by the provisions of R.A.
8042. Recruitment agencies are expected to extend assistance to their deployed OFWs, especially those in distress.
Instead, they abandoned Jasmin’s case and allowed it to remain unsolved to further their interests and avoid
anticipated liability which parents or relatives of Jasmin would certainly exact from them. They willfully refused to
protect and tend to the welfare of the deceased Jasmin, treating her case as just one of those unsolved crimes that is
not worth wasting their time and resources on. The evidence does not even show that Becmen and Rajab lifted a
finger to provide legal representation and seek an investigation of Jasmin’s case. Worst of all, they unnecessarily
trampled upon the person and dignity of Jasmin by standing pat on the argument that Jasmin committed suicide,
which is a grave accusation given its un-Christian nature.
We cannot reasonably expect that Jasmin’s parents should be the ones to actively pursue a just resolution of her
case in the KSA, unless they are provided with the finances to undertake this herculean task. Sadly, Becmen and
Rajab did not lend any assistance at all in this respect. The most Jasmin’s parents can do is to coordinate with
Philippine authorities as mandated under R.A. 8042, obtain free legal assistance and secure the aid of the
Department of Foreign Affairs, the Department of Labor and Employment, the POEA and the OWWA in trying to
solve the case or obtain relief, in accordance with Section 2327 of R.A. 8042. To our mind, the Cuaresmas did all that
was within their power, short of actually flying to the KSA. Indeed, the Cuaresmas went even further. To the best of
their abilities and capacities, they ventured to investigate Jasmin’s case on their own: they caused another autopsy
on Jasmin’s remains as soon as it arrived to inquire into the true cause of her death. Beyond that, they subjected
themselves to the painful and distressful experience of exhuming Jasmin’s remains in order to obtain another
autopsy for the sole purpose of determining whether or not their daughter was poisoned. Their quest for the truth and
justice is equally to be expected of all loving parents. All this time, Rajab and Becmen – instead of extending their full
cooperation to the Cuaresma family – merely sat on their laurels in seeming unconcern.
In Interorient Maritime Enterprises, Inc. v. NLRC,28 a seaman who was being repatriated after his employment
contract expired, failed to make his Bangkok to Manila connecting flight as he began to wander the streets of
Bangkok aimlessly. He was shot to death by Thai police four days after, on account of running amuck with a knife in
hand and threatening to harm anybody within sight. The employer, sued for death and other benefits as well as
damages, interposed as defense the provision in the seafarer agreement which provides that "no compensation shall
be payable in respect of any injury, incapacity, disability or death resulting from a willful act on his own life by the
seaman." The Court rejected the defense on the view, among others, that the recruitment agency should have
observed some precautionary measures and should not have allowed the seaman, who was later on found to be
mentally ill, to travel home alone, and its failure to do so rendered it liable for the seaman’s death. We ruled therein
that –
The foreign employer may not have been obligated by its contract to provide a companion for a returning employee,
but it cannot deny that it was expressly tasked by its agreement to assure the safe return of said worker. The
uncaring attitude displayed by petitioners who, knowing fully well that its employee had been suffering from
some mental disorder, nevertheless still allowed him to travel home alone, is appalling to say the least. Such
attitude harks back to another time when the landed gentry practically owned the serfs, and disposed of
them when the latter had grown old, sick or otherwise lost their usefulness.29 (Emphasis supplied)
Thus, more than just recruiting and deploying OFWs to their foreign principals, recruitment agencies have equally
significant responsibilities. In a foreign land where OFWs are likely to encounter uneven if not discriminatory
treatment from the foreign government, and certainly a delayed access to language interpretation, legal aid, and the
Philippine consulate, the recruitment agencies should be the first to come to the rescue of our distressed OFWs
since they know the employers and the addresses where they are deployed or stationed. Upon them lies the primary
obligation to protect the rights and ensure the welfare of our OFWs, whether distressed or not. Who else is in a better
position, if not these recruitment agencies, to render immediate aid to their deployed OFWs abroad?
Article 19 of the Civil Code provides that every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good faith. Article 21 of the Code states
that any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage. And, lastly, Article 24 requires that in all contractual,
property or other relations, when one of the parties is at a disadvantage on account of his moral dependence,
ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.
Clearly, Rajab, Becmen and White Falcon’s acts and omissions are against public policy because they undermine
and subvert the interest and general welfare of our OFWs abroad, who are entitled to full protection under the law.
They set an awful example of how foreign employers and recruitment agencies should treat and act with respect to
their distressed employees and workers abroad. Their shabby and callous treatment of Jasmin’s case; their uncaring
attitude; their unjustified failure and refusal to assist in the determination of the true circumstances surrounding her
mysterious death, and instead finding satisfaction in the unreasonable insistence that she committed suicide just so
they can conveniently avoid pecuniary liability; placing their own corporate interests above of the welfare of their
employee’s – all these are contrary to morals, good customs and public policy, and constitute taking advantage of
the poor employee and her family’s ignorance, helplessness, indigence and lack of power and resources to seek the
truth and obtain justice for the death of a loved one.
Giving in handily to the idea that Jasmin committed suicide, and adamantly insisting on it just to protect Rajab and
Becmen’s material interest – despite evidence to the contrary – is against the moral law and runs contrary to the
good custom of not denouncing one’s fellowmen for alleged grave wrongdoings that undermine their good name and
honor.30
Whether employed locally or overseas, all Filipino workers enjoy the protective mantle of Philippine labor and social
legislation, contract stipulations to the contrary notwithstanding. This pronouncement is in keeping with the basic
public policy of the State to afford protection to labor, promote full employment, ensure equal work opportunities
regardless of sex, race or creed, and regulate the relations between workers and employers. This ruling is likewise
rendered imperative by Article 17 of the Civil Code which states that laws which have for their object public order,
public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by
determinations or conventions agreed upon in a foreign country.31
The relations between capital and labor are so impressed with public interest, 32 and neither shall act oppressively
against the other, or impair the interest or convenience of the public.33 In case of doubt, all labor legislation and all
labor contracts shall be construed in favor of the safety and decent living for the laborer.34
The grant of moral damages to the employee by reason of misconduct on the part of the employer is sanctioned by
Article 2219 (10)35 of the Civil Code, which allows recovery of such damages in actions referred to in Article 21. 36
Thus, in view of the foregoing, the Court holds that the Cuaresmas are entitled to moral damages, which Becmen
and White Falcon are jointly and solidarily liable to pay, together with exemplary damages for wanton and oppressive
behavior, and by way of example for the public good.
Private employment agencies are held jointly and severally liable with the foreign-based employer for any violation of
the recruitment agreement or contract of employment. This joint and solidary liability imposed by law against
recruitment agencies and foreign employers is meant to assure the aggrieved worker of immediate and sufficient
payment of what is due him.37 If the recruitment/placement agency is a juridical being, the corporate officers and
directors and partners as the case may be, shall themselves be jointly and solidarily liable with the corporation or
partnership for the aforesaid claims and damages.38
White Falcon’s assumption of Becmen’s liability does not automatically result in Becmen’s freedom or release from
liability. This has been ruled in ABD Overseas Manpower Corporation v. NLRC.39 Instead, both Becmen and White
Falcon should be held liable solidarily, without prejudice to each having the right to be reimbursed under the
provision of the Civil Code that whoever pays for another may demand from the debtor what he has paid. 40
WHEREFORE, the Amended Decision of the Court of Appeals dated May 14, 2008 in CA-G.R. SP No. 80619 and
CA-G.R. SP No. 81030 is SET ASIDE. Rajab & Silsilah Company, White Falcon Services, Inc., Becmen Service
Exporter and Promotion, Inc., and their corporate directors and officers are found jointly and solidarily liable
and ORDERED to indemnify the heirs of Jasmin Cuaresma, spouses Simplicio and Mila Cuaresma, the following
amounts:
1) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as moral damages;
2) TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) as exemplary damages;
3) Attorney’s fees equivalent to ten percent (10%) of the total monetary award; and,
4) Costs of suit.
SO ORDERED.
G.R. No. 170351 March 30, 2011
LEYTE GEOTHERMAL POWER PROGRESSIVE EMPLOYEES UNION - ALU - TUCP, Petitioner,
vs.
PHILIPPINE NATIONAL OIL COMPANY - ENERGY DEVELOPMENT CORPORATION, Respondent.
DECISION
NACHURA, J.:
Under review is the Decision1 dated June 30, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 65760, which
dismissed the petition for certiorari filed by petitioner Leyte Geothermal Power Progressive Employees Union –
ALU―TUCP (petitioner Union) to annul and set aside the decision2 dated December 10, 1999 of the National Labor
Relations Commission (NLRC) in NLRC Certified Case No. V-02-99.
The facts, fairly summarized by the CA, follow.
[Respondent Philippine National Oil Corporation]-Energy Development Corporation [PNOC-EDC] is a government-
owned and controlled corporation engaged in exploration, development, utilization, generation and distribution of
energy resources like geothermal energy.
Petitioner is a legitimate labor organization, duly registered with the Department of Labor and Employment (DOLE)
Regional Office No. VIII, Tacloban City.
Among [respondent’s] geothermal projects is the Leyte Geothermal Power Project located at the Greater Tongonan
Geothermal Reservation in Leyte. The said Project is composed of the Tongonan 1 Geothermal Project (T1GP) and
the Leyte Geothermal Production Field Project (LGPF) which provide the power and electricity needed not only in the
provinces and cities of Central and Eastern Visayas (Region VII and VIII), but also in the island of Luzon as well.
Thus, the [respondent] hired and employed hundreds of employees on a contractual basis, whereby, their
employment was only good up to the completion or termination of the project and would automatically expire upon
the completion of such project.
Majority of the employees hired by [respondent] in its Leyte Geothermal Power Projects had become members of
petitioner. In view of that circumstance, the petitioner demands from the [respondent] for recognition of it as the
collective bargaining agent of said employees and for a CBA negotiation with it. However, the [respondent] did not
heed such demands of the petitioner. Sometime in 1998 when the project was about to be completed, the
[respondent] proceeded to serve Notices of Termination of Employment upon the employees who are members of
the petitioner.
On December 28, 1998, the petitioner filed a Notice of Strike with DOLE against the [respondent] on the ground of
purported commission by the latter of unfair labor practice for "refusal to bargain collectively, union busting and mass
termination." On the same day, the petitioner declared a strike and staged such strike.
To avert any work stoppage, then Secretary of Labor Bienvenido E. Laguesma intervened and issued the Order,
dated January 4, 1999, certifying the labor dispute to the NLRC for compulsory arbitration. Accordingly, all the
striking workers were directed to return to work within twelve (12) hours from receipt of the Order and for the
[respondent] to accept them back under the same terms and conditions of employment prior to the strike. Further,
the parties were directed to cease and desist from committing any act that would exacerbate the situation.
However, despite earnest efforts on the part of the Secretary of Labor and Employment to settle the dispute
amicably, the petitioner remained adamant and unreasonable in its position, causing the failure of the negotiation
towards a peaceful compromise. In effect, the petitioner did not abide by [the] assumption order issued by the
Secretary of Labor.
Consequently, on January 15, 1999, the [respondent] filed a Complaint for Strike Illegality, Declaration of Loss of
Employment and Damages at the NLRC-RAB VIII in Tacloban City and at the same time, filed a Petition for
Cancellation of Petitioner’s Certificate of Registration with DOLE, Regional Office No. VIII. The two cases were later
on consolidated pursuant to the New NLRC Rules of Procedure. The consolidated case was docketed as NLRC
Certified Case No. V-02-99 (NCMB-RAB VIII-NS-12-0190-98; RAB Case No. VIII-1-0019-99). The said certified case
was indorsed to the NLRC 4th Division in Cebu City on June 21, 1999 for the proper disposition thereof.3
In due course, the NLRC 4th Division rendered a decision in favor of respondent, to wit:
WHEREFORE, based on the foregoing premises, judgment is hereby rendered as follows:
1. Declaring the officers and members of [petitioner] Union as project employees;
2. Declaring the termination of their employment by reason of the completion of the project, or a phase or
portion thereof, to which they were assigned, as valid and legal;
3. Declaring the strike staged and conducted by [petitioner] Union through its officers and members on
December 28, 1998 to January 6, 1999 as illegal for failure to comply with the mandatory requirements of
the law on strike[;]
4. Declaring all the officers and members of the board of [petitioner] Union who instigated and
spearheaded the illegal strike to have lost their employment[;]
5. Dismissing the claim of [petitioner] Union against PNOC-EDC for unfair labor practice for lack of merit[;]
6. Dismissing both parties’ claims against each other for violation of the Assumption Order dated January
4, 1999 for lack of factual basis[;]
7. Dismissing all other claims for lack of merit.4
Petitioner Union filed a motion for reconsideration of the NLRC decision, which was subsequently denied. Posthaste,
petitioner Union filed a petition for certiorari before the CA, alleging grave abuse of discretion in the decision of the
NLRC. As previously adverted to, the CA dismissed the petition for certiorari, thus:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the Petition. The
assailed Decision dated December 10, 1999 of the NLRC 4th Division in NLRC Certified Case No. V-02-99 (NCMB-
RAB VIII-NS-12-0190-98; RAB Case No. VIII-1-0019-99) and its Order dated March 30, 2001 are hereby
AFFIRMED.
Costs against the Petitioner.5
Hence, this appeal by certiorari filed by petitioner Union, positing the following questions of law:
1. MAY THE HONORABLE COURT OF APPEALS SUSTAIN THE "PROJECT CONTRACTS" THAT ARE
DESIGNED TO DENY AND DEPRIVE THE EMPLOYEES’ THEIR RIGHT TO SECURITY OF TENURE BY MAKING
IT APPEAR THAT THEY ARE MERE PROJECT EMPLOYEES?
2. WHEN THERE ARE NO INTERVALS IN THE EMPLOYEES’ CONTRACT, SUCH THAT THE SO-CALLED
UNDERTAKING WAS CONTINUOUS, ARE THE EMPLOYEES PROPERLY TREATED AS PROJECT
EMPLOYEES?
3. MAY THE HONORABLE COURT OF APPEALS IGNORE THE FIRM’S OWN ESTIMATE OF JOB COMPLETION,
PROVING THAT THERE IS STILL 56.25% CIVIL/STRUCTURAL WORK TO BE ACCOMPLISHED, AND RULE
THAT THE EMPLOYEES WERE DISMISSED FOR COMPLETION [OF] THE "PROJECT?"
4. MAY A FIRM HIDE UNDER THE SPURIOUS CLOAK OF "PROJECT COMPLETION" TO DISMISS EN MASSE
THE EMPLOYEES WHO HAVE ORGANIZED AMONG THEMSELVES A LEGITIMATE LABOR ORGANIZATION
TO PROTECT THEIR RIGHTS?
5. WHEN THERE IS NO STOPPAGE OF WORK, MAY A PROTEST ACTIVITY BE CONSIDERED AS A STRIKE
CONTRARY TO ITS CONCEPTUAL DEFINITION UNDER ARTICLE 212 (O) OF THE LABOR CODE OF THE
PHILIPPINES?
6. WHEN THE DISMISSAL IS AIMED AT RIDDING THE COMPANY OF MEMBERS OF THE UNION, IS THIS
UNION BUSTING?6
Stripped of rhetoric, the issues for our resolution are:
1. Whether the officers and members of petitioner Union are project employees of respondent; and
2. Whether the officers and members of petitioner Union engaged in an illegal strike.
On the first issue, petitioner Union contends that its officers and members performed activities that were usually
necessary and desirable to respondent’s usual business. In fact, petitioner Union reiterates that its officers and
members were assigned to the Construction Department of respondent as carpenters and masons, and to other jobs
pursuant to civil works, which are usually necessary and desirable to the department. Petitioner Union likewise points
out that there was no interval in the employment contract of its officers and members, who were all employees of
respondent, which lack of interval, for petitioner Union, "manifests that the ‘undertaking’ is usually necessary and
desirable to the usual trade or business of the employer."
We cannot subscribe to the view taken by petitioner Union.
The distinction between a regular and a project employment is provided in Article 280, paragraph 1, of the Labor
Code:
ART. 280. Regular and Casual Employment.— The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall
continue while such actually exists.7
The foregoing contemplates four (4) kinds of employees: (a) regular employees or those who have been "engaged to
perform activities which are usually necessary or desirable in the usual business or trade of the employer"; (b) project
employees or those "whose employment has been fixed for a specific project or undertaking[,] the completion or
termination of which has been determined at the time of the engagement of the employee"; (c) seasonal employees
or those who work or perform services which are seasonal in nature, and the employment is for the duration of the
season;8 and (d) casual employees or those who are not regular, project, or seasonal employees. Jurisprudence has
added a fifth kind— a fixed-term employee.9
Article 280 of the Labor Code, as worded, establishes that the nature of the employment is determined by law,
regardless of any contract expressing otherwise. The supremacy of the law over the nomenclature of the contract
and the stipulations contained therein is to bring to life the policy enshrined in the Constitution to "afford full
protection to labor."10 Thus, labor contracts are placed on a higher plane than ordinary contracts; these are imbued
with public interest and therefore subject to the police power of the State. 11
However, notwithstanding the foregoing iterations, project employment contracts which fix the employment for a
specific project or undertaking remain valid under the law:
x x x By entering into such a contract, an employee is deemed to understand that his employment is coterminous
with the project. He may not expect to be employed continuously beyond the completion of the project. It is of judicial
notice that project employees engaged for manual services or those for special skills like those of carpenters or
masons, are, as a rule, unschooled. However, this fact alone is not a valid reason for bestowing special treatment on
them or for invalidating a contract of employment. Project employment contracts are not lopsided agreements in
favor of only one party thereto. The employer’s interest is equally important as that of the employee[s’] for theirs is
the interest that propels economic activity. While it may be true that it is the employer who drafts project employment
contracts with its business interest as overriding consideration, such contracts do not, of necessity, prejudice the
employee. Neither is the employee left helpless by a prejudicial employment contract. After all, under the law, the
interest of the worker is paramount.12
In the case at bar, the records reveal that the officers and the members of petitioner Union signed employment
contracts indicating the specific project or phase of work for which they were hired, with a fixed period of
employment. The NLRC correctly disposed of this issue:
A deeper examination also shows that [the individual members of petitioner Union] indeed signed and accepted the
[employment contracts] freely and voluntarily. No evidence was presented by [petitioner] Union to prove improper
pressure or undue influence when they entered, perfected and consummated [the employment] contracts. In fact, it
was clearly established in the course of the trial of this case, as explained by no less than the President of [petitioner]
Union, that the contracts of employment were read, comprehended, and voluntarily accepted by them. x x x.
xxxx
As clearly shown by [petitioner] Union’s own admission, both parties had executed the contracts freely and
voluntarily without force, duress or acts tending to vitiate the worker[s’] consent. Thus, we see no reason not to honor
and give effect to the terms and conditions stipulated therein. x x x.13
Thus, we are hard pressed to find cause to disturb the findings of the NLRC which are supported by substantial
evidence.
It is well-settled in jurisprudence that factual findings of administrative or quasi-judicial bodies, which are deemed to
have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but
even finality, and bind the Court when supported by substantial evidence.14 Rule 133, Section 5 defines substantial
evidence as "that amount of relevant evidence which a reasonable mind might accept as adequate to justify a
conclusion."
Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in labor
cases.15 We may take cognizance of and resolve factual issues, only when the findings of fact and conclusions of law
of the Labor Arbiter or the NLRC are inconsistent with those of the CA. 16
In the case at bar, both the NLRC and the CA were one in the conclusion that the officers and the members of
petitioner Union were project employees. Nonetheless, petitioner Union insists that they were regular employees
since they performed work which was usually necessary or desirable to the usual business or trade of the
Construction Department of respondent.
The landmark case of ALU-TUCP v. NLRC17 instructs on the two (2) categories of project employees:
It is evidently important to become clear about the meaning and scope of the term "project" in the present context.
The "project" for the carrying out of which "project employees" are hired would ordinarily have some relationship to
the usual business of the employer. Exceptionally, the "project" undertaking might not have an ordinary or normal
relationship to the usual business of the employer. In this latter case, the determination of the scope and parameters
of the "project" becomes fairly easy. x x x. From the viewpoint, however, of the legal characterization problem here
presented to the Court, there should be no difficulty in designating the employees who are retained or hired for the
purpose of undertaking fish culture or the production of vegetables as "project employees," as distinguished from
ordinary or "regular employees," so long as the duration and scope of the project were determined or specified at the
time of engagement of the "project employees." For, as is evident from the provisions of Article 280 of the Labor
Code, quoted earlier, the principal test for determining whether particular employees are properly characterized as
"project employees" as distinguished from "regular employees," is whether or not the "project employees" were
assigned to carry out a "specific project or undertaking," the duration (and scope) of which were specified at the time
the employees were engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the other of at least two (2)
distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is within the
regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from
the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable
times. The typical example of this first type of project is a particular construction job or project of a construction
company. A construction company ordinarily carries out two or more [distinct] identifiable construction projects: e.g.,
a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and a domestic air terminal in
Iloilo City. Employees who are hired for the carrying out of one of these separate projects, the scope and duration of
which has been determined and made known to the employees at the time of employment, are properly treated as
"project employees," and their services may be lawfully terminated at completion of the project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular business
of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or
regular business operations of the employer. The job or undertaking also begins and ends at determined or
determinable times.18
Plainly, the litmus test to determine whether an individual is a project employee lies in setting a fixed period of
employment involving a specific undertaking which completion or termination has been determined at the time of the
particular employee’s engagement.
In this case, as previously adverted to, the officers and the members of petitioner Union were specifically hired as
project employees for respondent’s Leyte Geothermal Power Project located at the Greater Tongonan Geothermal
Reservation in Leyte. Consequently, upon the completion of the project or substantial phase thereof, the officers and
the members of petitioner Union could be validly terminated.
Petitioner Union is adamant, however, that the lack of interval in the employment contracts of its officer and members
negates the latter’s status
as mere project employees. For petitioner Union, the lack of interval further drives home its point that its officers and
members are regular employees who performed work which was usually necessary or desirable to the usual
business or trade of respondent.
We are not persuaded.
Petitioner Union’s members’ employment for more than a year does equate to their regular employment with
respondent. In this regard, Mercado, Sr. v. NLRC19 illuminates:
The first paragraph [of Article 280 of the Labor Code] answers the question of who are regular employees. It states
that, regardless of any written or oral agreement to the contrary, an employee is deemed regular where he is
engaged in necessary or desirable activities in the usual business or trade of the employer, except for project
employees.
A project employee has been defined to be one whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time of the engagement of the
employee, or where the work or service to be performed is seasonal in nature and the employment is for the duration
of the season, as in the present case.
The second paragraph of Art. 280 demarcates as "casual" employees, all other employees who do not fall under the
definition of the preceding paragraph. The proviso, in said second paragraph, deems as regular employees those
"casual" employees who have rendered at least one year of service regardless of the fact that such service may be
continuous or broken.
Petitioners, in effect, contend that the proviso in the second paragraph of Art. 280 is applicable to their case and that
the Labor Arbiter should have considered them regular by virtue of said proviso. The contention is without merit.
The general rule is that the office of a proviso is to qualify or modify only the phrase immediately preceding it or
restrain or limit the generality of the clause that it immediately follows. Thus, it has been held that a proviso is to be
construed with reference to the immediately preceding part of the provision to which it is attached, and not to the
statute itself or to other sections thereof. The only exception to this rule is where the clear legislative intent is to
restrain or qualify not only the phrase immediately preceding it (the proviso) but also earlier provisions of the statute
or even the statute itself as a whole.
Policy Instruction No. 12 of the Department of Labor and Employment discloses that the concept of regular and
casual employees was designed to put an end to casual employment in regular jobs, which has been abused by
many employers to prevent so – called casuals from enjoying the benefits of regular employees or to prevent casuals
from joining unions. The same instructions show that the proviso in the second paragraph of Art. 280 was not
designed to stifle small-scale businesses nor to oppress agricultural land owners to further the interests of laborers,
whether agricultural or industrial. What it seeks to eliminate are abuses of employers against their employees and
not, as petitioners would have us believe, to prevent small-scale businesses from engaging in legitimate methods to
realize profit. Hence, the proviso is applicable only to the employees who are deemed "casuals" but not to the
"project" employees nor the regular employees treated in paragraph one of Art. 280.
Clearly, therefore, petitioners being project employees, or, to use the correct term, seasonal employees, their
employment legally ends upon completion of the project or the [end of the] season. The termination of their
employment cannot and should not constitute an illegal dismissal.
Considering our holding that the officers and the members of petitioner Union were project employees, its claim of
union busting is likewise dismissed.
On the second issue, petitioner Union contends that there was no stoppage of work; hence, they did not strike.
Euphemistically, petitioner Union avers that it "only engaged in picketing," 20 and maintains that "without any work
stoppage, [its officers and members] only engaged in xxx protest activity."
We are not convinced. Petitioner Union splits hairs.
To begin with, quite evident from the records is the undisputed fact that petitioner Union filed a Notice of Strike on
December 28, 1998 with the Department of Labor and Employment, grounded on respondent’s purported
unfair labor practices, i.e., "refusal to bargain collectively, union busting and mass termination." On even date,
petitioner Union declared and staged a strike.
Second, then Secretary of Labor, Bienvenido E. Laguesma, intervened and issued a Return-to-Work Order21 dated
January 4, 1999, certifying the labor dispute to the NLRC for compulsory arbitration. The Order narrates the facts
leading to the labor dispute, to wit:
On 28 December 1998, [petitioner Union] filed a Notice of Strike against [respondent] citing unfair labor practices,
specifically: refusal to bargain collectively, union busting and mass termination as the grounds [therefor]. On the
same day, [petitioner] Union went on strike and took control over [respondent’s] facilities of its Leyte Geothermal
Project.
Attempts by the National Conciliation and Mediation Board –RBVIII to forge a mutually acceptable solution proved
futile.
In the meantime, the strike continues with no settlement in sight placing in jeopardy the supply of much needed
power supply in the Luzon and Visayas grids.
xxxx
The on-going strike threatens the availability of continuous electricity to these areas which is critical to day-to-day life,
industry, commerce and trade. Without doubt, [respondent’s] operations [are] indispensable to the national interest
and falls (sic) within the purview of Article 263 (g) of the Labor Code, as amended, which warrants (sic) the
intervention of this Office.
Third, petitioner Union itself, in its pleadings, used the word "strike."
Ultimately, petitioner Union’s asseverations are belied by the factual findings of the NLRC, as affirmed by the CA:
The failure to comply with the mandatory requisites for the conduct of strike is both admitted and clearly shown on
record. Hence, it is undisputed that no strike vote was conducted; likewise, the cooling-off period was not observed
and that the 7-day strike ban after the submission of the strike vote was not complied with since there was no strike
vote taken.
xxxx
The factual issue of whether a notice of strike was timely filed by [petitioner] Union was resolved by the evidence on
record. The evidence revealed that [petitioner] Union struck even before it could file the required notice of strike.
Once again, this relied on [petitioner] Union’s proof. [Petitioner] Union[’s] witness said:
Atty. Sinsuat : You stated that you struck on 28 December 1998 is that correct?
Witness : Early in the morning of December 1998.
xxxx
Atty. Sinsuat : And you went there to conduct the strike did you not?
Witness : Our plan then was to strike at noon of December 28 and the strikers will be positioned at their respective
areas.22
Article 263 of the Labor Code enumerates the requisites for holding a strike:
Art. 263. Strikes, picketing, and lockouts. – (a) x x x.
x x x x.
(c) In cases of bargaining deadlocks, the duly certified or recognized bargaining agent may file a notice of
strike or the employer may file a notice of lockout with the Department at least 30 days before the intended
date thereof. In cases of unfair labor practice, the period of notice shall be 15 days and in the absence of a
duly certified bargaining agent, the notice of strike may be filed by any legitimate labor organization in
behalf of its members. However, in case of dismissal from employment of union officers duly elected in
accordance with the union constitution and by-laws, which may constitute union busting, where the
existence of the union is threatened, the 15-day cooling-off period shall not apply and the union may take
action immediately.
(d) The notice must be in accordance with such implementing rules and regulations as the Department of
Labor and Employment may promulgate.
(e) During the cooling-off period, it shall be the duty of the Department to exert all efforts at mediation and
conciliation to effect a voluntary settlement. Should the dispute remain unsettled until the lapse of the
requisite number of days from the mandatory filing of the notice, the labor union may strike or the employer
may declare a lockout.
(f) A decision to declare a strike must be approved by a majority of the total union membership in the
bargaining unit concerned, obtained by secret ballot in meetings or referenda called for that purpose. A
decision to declare a lockout must be approved by a majority of the board of directors of the corporation or
association or of the partners in a partnership, obtained by secret ballot in a meeting called for that
purpose. The decision shall be valid for the duration of the dispute based on substantially the same
grounds considered when the strike or lockout vote was taken. The Department may, at its own initiative or
upon the request of any affected party, supervise the conduct of the secret balloting. In every case, the
union or the employer shall furnish the Department the results of the voting at least seven days before the
intended strike or lockout, subject to the cooling-off period herein provided.
In fine, petitioner Union’s bare contention that it did not hold a strike cannot trump the factual findings of the NLRC
that petitioner Union indeed struck against respondent. In fact, and more importantly, petitioner Union failed to
comply with the requirements set by law prior to holding a strike.1avvphi1
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 65760 is
AFFIRMED. Costs against petitioner Union.
SO ORDERED.
G.R. No. 105963 August 22, 1996
PAL EMPLOYEES SAVING AND LOAN ASSOCIATION, INC. (PESALA), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND ANGEL V. ESQUEJO, respondents.
PANGANIBAN, J.:p
Is an employee entitled to overtime pay for work rendered in excess of eight hours a day, given the fact
that his employment contract specifies a twelve-hour workday at a fixed monthly salary rate that is above
the legal minimum wage? This is the principal question answered by this Court in resolving this petition
which challenges the validity and legality of the
Decision1 of public respondent National Labor Relations Commission2 promulgated on April 23, 1992 in
NLRC NCR CA No. 002522-91 entitled "Angel V. Esquejo vs. PAL Employees Savings and Loan
Association" which Decision modified (slightly as to amount) the earlier decision3 dated November 11,
1991 of the labor arbiter granting private respondent's claim of overtime pay.
The Facts and the Case Below
On October 10, 1990, private respondent filed with public respondent a complaint docketed as NLRC NCR
Case No. 10-05457-90 for non-payment of overtime pay and non-payment of the P25.00 statutory
minimum wage increase mandated by Republic Act No. 6727.
Subsequently, private respondent filed a supplemental complaint for illegal suspension with payer for
reinstatement and payment of backwages. However, before the case was submitted for resolution, private
respondent filed a "Motion to Withdraw Supplemental Complaint" on the ground that a separate action for
illegal suspension, illegal dismissal, etc. had been filed and was pending before another labor arbiter.
Hence, the issue decide by public respondent and which is under review by this Court in this petition
involves only his claim for overtime pay.
On November 26, 1990, private respondent filed his position paper4 with the labor arbiter alleging the
following facts constituting his cause of action:
Complaint (herein private respondent) started working with respondent (PESALA) sometime last
March 1, 1986 as a company guard and was receiving a monthly basic salary of P1,990.00 plus
an emergency allowance in the amount of P510.00. He was required to work a (sic) twelve (12)
hours a day, a (sic) xerox copies of his appointment are hereto attached and marked as
Annexes "C" and "D" of this position paper;
That on December 10, 1986, respondent Board of Directors in its board meeting held on
November 21, 1986 approved a salary adjustment for the complainant increasing his monthly
basic salary to P2,310.00 and an emergency allowance of P510.00, a xerox copy of the salary
adjustment is hereto attached and marked as Annex "E" hereof;
 That on August 25, 1987, because of his impressive performance on his assigned job, another Treasurer and the President of PESALA, in violation of
adjustment was approved by the President of the association increasing his monthly basic salary your duty and function that you should see to it that the
to P2,880.00, a xerox copy of the salary adjustment is hereto attached and marked as Annex "F" said checks should be properly signed by the two
hereof; PESALA officials before you send out said checks to
their addresses. As a result of which, there was a
substantial delay in the transmission of the checks to its
That from January 4, 1988 up to June 1990, several salary adjustments were made by the
owners resulting to an embarrassment on the part of
respondent on the monthly basic salary of the complainant including a letter of appreciation for
the PESALA officers and damage and injury to the
being as (sic) one of the outstanding performers during the first half of 1988, the latest salary
recipients (sic) of the checks since they needed the
prior to the filing of the complaint was P3,720.00, a (sic) xerox copies of all documents relative to
money badly.
the salary adjustments are hereto attached and marked as annexes "G", "H", and "K" of this
position paper;
2. Sometime in August, 1989, before you (complainant)
went on your vacation, you failed to leave or surrender
That during his entire period of employment with respondent, the former was required to perform
the keys of the office, especially the keys of the keys to
overtime work without any additional compensation from the latter. It was also at this point
the main and back doors which resulted to damage,
wherein the respondent refused to give the 25.00 increase on the minimum wage rates as
injury and embarrassment to PESALA. This is a gross
provided for by law. On October 12, 1990, complainant was suspended for the period of thirty
violation of your assigned duties and you disobeyed the
seven (37) days for an offense allegedly committed by the respondent sometime last August
instruction of your Superior.
1989.

xxx xxx xxx

On December 13, 1990, petitioner PESALA filed its position paper 5 alleging among other things:

Herein complainant was informed of the aforequoted charges against him and was given the
On 01 March, 1986, complainant was appointed in a permanent status as the company guard of
opportunity to be heard and present evidence in his behalf as shown by the Notice of Hearing
respondent. In the Appointment Memorandum dated February 24, 1986 which has the
(Annex "D" hereof) sent to him. Complainant did in fact appeared (sic) at the hearing, assisted
conformity of complaint, it is expressly stipulated therein that complainant is to receive a monthly
by his counsel, Atty. Mahinardo G. Mailig, and presented his evidence in the form of a Counter-
salary of P1,900.00 plus P510.00 emergency allowance for a twelve (12) hours work per day
Affidavit. A copy of said Counter-Affidavit is hereto attached as Annex "E" and made an integral
with one (1) day off. A copy of said appointment memorandum is hereto attached as Annex "A"
part hereof.
and made an integral part hereof.

On 12 October, 1990, after due deliberation on the merits of the administrative charges filed
On 01 December, 1986, the monthly salary of complainant was increased to P2,310,00 plus
against herein complainant, the Investigating Officer in the person of Capt. Rogelio Enverga
P510.00 emergency allowance. Latter, or on 01 January, 1988, the monthly salary of
resolved the same imposing a penalty of suspension of herein complainant, thus:
complainant was again increased to P3,420.00. And still later, or on 01 February, 1989,
complainant's monthly salary was increased are hereto attached as Annexes "B", "B-1" and "B-
2" and are made integral parts hereof. "PENALTY: 1. For the first offense,
you (referring to complaint
Esquejo) are suspended for a
On 29, November, 1989, the manager of respondent in the person of Sulpicio Jornales wrote to
period of thirty (30) working days
complainant informing the latter that the position of a guard will be abolished effective November
without pay effective October 15,
30, 1989, and that complainant will be re-assigned to the position of a ledger custodian effective
1990.
December 1, 1989.

2. For the second offense, your

Pursuant to the above-mentioned letter-agreement of Mr. Jornales, complaint was formally
(sic) are suspended for a period of
appointed by respondent as its ledger custodian on December 1, 1989. The monthly salary of
seven (7) working days whiteout
complainant as ledger custodian starting on December 1, 1989 was P3,720,00 for forty (40)
pay effective from the date first
working hours a week or eight (8) working hours a day. a copy of said Appointment
suspension will expire".
memorandum is hereto attached as Annex "C" and made an integral part hereof.

On March 7, 1991, private respondent filed a detailed and itemized computation of his money claims
On 29 August, 1990, complainant was administratively charged with a serious misconduct or
totaling P107,495.90, to which petitioner filed its comment on April 28, 1991. The computation filed on
disobedience of the lawful orders of respondent or its officers, and gross and habitual neglect of
March 7, 1991 was later reduced to P65,302.80. To such revised computation, the petitioner submitted its
his duties, committed as follows:
comment on April 28, 1991.

1. Sometime in August, 1989, you (referring to

WHEREFORE, judgment is hereby rendered:
complainant Esquejo) forwarded the checks
corresponding to the withdrawals of Mr. Jose Jimenez
and Mr. Anselmo dela Banda of Davao and Iloilo
Station, respectively, without the signature of the
 1. Granting the claim for overtime pay covering the
period October 10, 1987 to November 30, 1989 in the
amount of P28,344.55.
2. The claim for non-payment of P25.00 salary increase
pursuant to Republic Act No. 6727 is dismissed for lack
of merit.
Aggrieved by the aforesaid decision, petitioner appealed to public respondent NLRC only to be rejected on
April 23, 1992 via the herein assailed Decision, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, the award is reduced to an amount of TWENTY EIGHT
THOUSAND SIXTY-SIX PESOS AND 45/100 (P28,066.45). In all other respects, the Decision
under review is hereby AFFIRMED and the appeal DISMISSED for lack of merit.
No motion for reconsideration of the Decision was filed by the petitioner. 6
What transpired afterwards is narrated by the Solicitor General in his memorandum, 7 which we presume to
be correct since petitioner did not contradict the same in its memorandum:
. . . Petitioner did not appeal the Decision of respondent NLRC. When it became final, the parties
were called to a conference on June 29, 1992 to determine the possibility of the parties'
voluntary compliance with the Decision (Order of Labor Arbiter Linsangan. dated July 23, 1992).
. . . In their second conference, held on July 15, 1992, petitioner proposed to private respondent
a package compromise agreement in settlement of all pending claims. Private respondent for his
part demanded (P150,000.00 as settlement of his complaint which was turned down by
petitioner as too excessive. Unfortunately, no positive results were achieved.
As a result, pleading was filed by petitioner captioned: Motion to Defer Execution and Motion to
Re-Compute alleged overtime pay. Petitioner states that "quite recently, the Employee Payroll
Sheets pertaining to the salaries, overtime pay, vacation and sick leave of Angel Esquejo were
located".
. . . Petitioner's Motion to Defer Execution and Motion to Re-Compute respondent's overtime pay
was denied in an Order dated July 23, 1992.
. . . Petitioner moved to reconsider the Denial Order on July 27, 1992. Private respondent
opposed.
In the meantime, petitioner filed the instant special civil action for certiorari before this Court on July 10,
1992. Later, on July 17, 1992, citing as reason that ". . . quite recently, the Employee Payroll Sheets which
contained the salaries and overtime pay received by respondent Esquejo were located in the bodega of
the petitioner and based on said Payroll Sheets, it appears that substantial overtime pay have been paid to
respondent Esquejo in the amount of P24,238.22 for the period starting January 1987 up to November
1989". petitioner asked this Court for the issuance of a temporary restraining order or writ of preliminary
injunction. On the same date of July 17, 1992, a "Supplemental Petition Based On Newly Discovered
Evidence" was filed by petitioner to which was attached photocopies of payroll sheets of the aforestated
period.
On July 29, 1992, this court issued a temporary restraining order enjoining the respondents from enforcing
the Decision dated April 23, 1992 issued in NLRC NCR No. 002522-91, the case below subject of the
instant petition.
The Issues
Four issues have been raised by the petitioner in its effort to obtain a reversal of the assailed Decision, to
wit:
I
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF
DISCRETION WHEN IT RULED THAT PRIVATE RESPONDENT IS
ENTITLED TO OVERTIME PAY WHEN THE SAME IS A GROSS
CONTRAVENTION OF THE CONTRACT OF EMPLOYMENT BETWEEN
PETITIONER AND RESPONDENT ESQUEJO AND A PATENT
VIOLATION OF ARTICLES 1305, 1306 AND 1159 OF THE CIVIL CODE.
II
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF
DISCRETION IF AWARDING OVERTIME PAY OF P28,066.45 TO
PRIVATE RESPONDENT WHEN THE SAME IS A CLEAR VIOLATION OF
ARTICLE 22 OF THE CIVIL CODE ON UNJUST ENRICHMENT.
III
THE RESPONDENT NLRC COMMITTED A GRAVE ABUSED OF
DISCRETION WHEN IT RULED THAT PRIVATE RESPONDENT WAS
NOT PAID THE OVERTIME PAY BASED ON THE COMPUTATION OF
LABOR ARBITER CORNELIO LINSANGAN WHICH WAS AFFIRMED BY
SAID RESPONDENT NLRC WHEN THE SAME IS NOT SUPPORTED BY
SUBSTANTIAL EVIDENCE AND IT, THEREFORE, VIOLATED THE
CARDINAL PRIMARY RIGHTS OF PETITIONER AS PRESCRIBED IN
"AND TIBAY VS. CIR." 69 PHIL. 635.
IV
WHETHER OR NOT THE PETITIONER'S SUPPLEMENTAL PETITION
BASED ON NEWLY DISCOVERED EVIDENCE MAY BE ADMITTED AS
PART OF ITS EVIDENCE IT BEING VERY VITAL TO THE JUDICIOUS
DETERMINATION OF THE CASE. (Rollo, p. 367)
In essence the above issued boil down to this query: Is an employee entitled to overtime pay for work rendered in
excess of the regular eight hour day given the fact that he entered into a contract of labor specifying a work-day of
twelve hours at a fixed monthly rate above the legislated minimum wage?
The Court's Ruling
At the outset, we would like to rectify the statement made by the Solicitor General that the "petitioner did not appeal
from the Decision of (public) respondent NLRC". The elevation of the said case by appeal is not possible. The only
remedy available from an order or decision of the NLRC is a petition for certiorari under Rule 65 of the Rules of Court plus P510.00 emergency
alleging lack or excess of jurisdiction or grave abuse of discretion.8 The general rule now is that the special civil allowance
action of certiorari should be instituted within a period of three months.9 Hence, when the petition was filed on July
10, 1992, three months had not yet elapsed from petitioner's receipt of the assailed Decision (should really be from
SALARY :
receipt of the order denying the motion for reconsideration).
TO :

However, aside from failing to show clearly grave abuse of discretion on the part of respondent NLRC, which we REMARKS : To confirm permanent
shall discuss shortly, the petitioner also failed to comply with the mandatory requirement of filing a motion for appointment as company
reconsideration from the Decision of the public respondent before resorting to the remedy of certiorari. We have guard who will render 12
previously held that: hours a day with one (1)
day off
. . . The implementing rules of respondent NLRC are unequivocal in requiring that a motion for
RECOMMENDED BY: APPROVED BY:
reconsideration of the order, resolution, or decision of respondent commission should be
seasonably filed as a precondition for pursuing any further or subsequent remedy, otherwise the
said order, resolution, or decision shall become final and executory after ten calendar days from (Signed) (Signed)
receipts thereof. Obviously, the rationale therefor is that the law intends to afford the NLRC an SULPICIO B. JORNALES CATALINO F. BANEZ
opportunity to rectify such errors or mistakes it may have lapsed into before resort to the courts
of justice can be had. This merely adopts the rule that the function of a motion for
(Signed)
reconsideration is to point out to the court the error that it may have committed and to give it a
ANGEL V. ESQUEJO12
chance to correct itself.10

Petitioner faults the public respondent when it said that there was "no meeting of minds between the parties," since
Additionally, the allegations in the petition clearly show that petitioner failed to file a motion for
the employment contract "explicitly states without any equivocation" that the overtime pay for work rendered for four
reconsideration of the assailed Resolution before filing the instant petition. As correctly argued
(4) hours in excess of the eight (8) hour regular working period is already included in the P1,990.00 basic salary.
by private respondent Rolando Tan, such failure constitutes a fatal infirmity. . . . The
"This is very clear from the fact that the appointment states 12 hours a day work." 13 By its computations,14 petitioner
unquestioned rule in this jurisdiction is that certiorari will only if there is no appeal or any other
tried to illustrate the private respondent was paid more than the legally required minimum salary then prevailing.
plain, speedy an adequate remedy in the ordinary course of law against the acts of public
respondent. In the instant case, the plain and adequate remedy expressly provided by law was a
motion for reconsideration of the assailed decision, based on a palpable or patent errors, to be To prove its contention, petitioner argues that:
made under oath and filed within ten (10) calendar days from receipt of the questioned decision.
And for failure to avail of the correct remedy expressly provided by law, petitioner has permitted
the subject Resolution to become final and executory after the lapse of the ten day period within The legal minimum wage prescribed by our statutes, the legally computed overtime pay and
which to file such motion for reconsideration.11 monthly salaries being paid by petitioner to respondent Esquejo would show that indeed, the
overtime pay has always been absorbed and included in the said agreed monthly salaries.

In brief, the filing of the instant petition was premature and did not toll the running of the 3 month period. Thus, the
assailed Decision became final and executory. On this ground alone, this petition must therefore be dismissed. In 1986, the legal minimum salary of Esquejo is computed as follows (per Appointment
Memoranda dated February 4, 1986 and June 6, 1986 [Annex "C" and "D" of Annex "B" of this
Petition]):
However, in view of the importance of the substantial query raised in the petition, we have resolved to decide the
case on the merits also.
54 x 314 days
-------------
The First Issue: Was Overtime Pay Included? 12 months = P1,413.00 monthly salary

The main disagreement between the parties centers on how the contract of employment of the private respondent The hourly overtime pay is computed as follows:
should be interpreted. The terms and conditions thereof reads as follows:
54/8 hours = P6.75 x 4 hrs. = P27.00
Date: February 24, 1986 P27.00 x 1.25 = P33.75 x 20 (should be 26)days = P887.50
NAME : ESQUEJO, ANGEL (should be P877.50)
NATURE OF ACTION : APPOINTMENT
FROM :
P1,413.00 — legal minimum wage
POSITION TITLE : COMPANY GUARD
TO : + 887.50(877.50) — legal overtime pay
STATUS : PERMANENT ---------------
P2,290.50 — amount due to respondent
EFFECTIVE DATE : MARCH 1, 1986
FROM : P1,990.00 per month Esquejo under the law
 P2,500.00 — gross salary of Esquejo per contract
-2,290.50
----------
P209.50 — Difference (Rolllo, p. 371).
On the other hand, private respondent in his position paper claims that overtime pay is not so incorporated and
should be considered apart from the P1,990.00 basic salary. 15
We find for the private respondent and uphold the respondent NLRC's ruling that he is entitled to overtime pay.
Based on petitioner's own computation, it appears that the basic salary plus emergency allowance given to private
respondent did not actually include the overtime pay claimed by private respondent. Following the computations it
would appear that by adding the legal minimum monthly salary which at the time was P1,413.00 and the legal
overtime minimum monthly salary which at the time was P1,413.00 and the legal overtime pay of P877.50, the total
amount due the private respondent as basic salary should have been P2,290.50. By adding the emergency cost of
living allowance (ECOLA) of P510.00 as provided by the employment contract, the total basic salary plus emergency
allowance should have amounted to P2,800.50. However, petitioner admitted that it actually paid private respondent
P1,990.00 as basic salary plus P510.00 emergency allowance or a total of only P2,500.00. Undoubtedly, private
respondent was shortchanged in the amount of P300.50. Petitioner's own computations thus clearly establish that
private respondent's claim for overtime pay is valid.
Side Issue: Meeting of the Minds?
The petitioner contends that the employment contract between itself and the private respondent "perfectly satisfies"
the requirements of Article 1305 of the Civil Code as to the "meeting of the minds" such that there was a "legal and
valid contract" entered into by the parties. Thus, private respondent "cannot be allowed to question the said salary
arrangements for the extra 4 hours overtime pay after the lapse of 4 years and claim only now that the same is not
included in the terms of the employment contracts."16
We disagree. Public respondent correctly found no such agreement as to overtime pay. In fact. the contract was
definite only as to the number of hours of work to be rendered but vague as to what is covered by the salary
stipulated. Such ambiguity was resolved by the public respondent, thus:
In resolving the issue of whether or not complainant's overtime pay for the four (4) hours of work
rendered in excess of the normal eight hour work period is incorporated in the computation of his
monthly salary, respondent invokes its contract of employment with the complainant. Said
contract appears to be in the nature of a document identifiable as an appointment memorandum
which took effect on March 1, 1986 (Records, p. 56) by virtue of which complaint expressed
conformity to his appointment as company guard with a work period of twelve (12) hours a day
with one (1) day off. Attached to this post is a basic salary of P1,900.00 plus P510.00
emergency allowance. It is (a) cardinal rule in the interpretation of a contract that if the terms
thereof are clear and leave no doubt upon the intention of the contracting parties, then the literal
meaning of its stipulations shall control. (Art. 1370, Civil Code of the Philippines). To this,
respondent seeks refuge. Circumstances, however, do not allow us to consider this rule in the
light of complainant's claim for overtime pay which is an evident indication that as to this matter,
it cannot be said that there was a meeting of the minds between the parties, it appearing that
respondent considered the four (4) hours work in excess of the eight hours as overtime work and
compensated by way of complainant's monthly salary while on the latter's part, said work
rendered is likewise claimed as overtime work but yet unpaid in view of complainant's being
given only his basic salary. Complainant claims that the basic salary could not possibly include
therein the overtime pay for his work rendered in excess of eight hours. Hence, respondent's
Appointment Memorandum cannot be taken and accorded credit as it is so worded in view of
this ambiguity. We therefore proceeded to determine the issue in the light of existing law related
thereto. while it is true that the complainant received a salary rate which is higher that the
minimum provided by law, it does not however follow that any additional compensation due the
complainant can be offset by his salary in excess of the minimum, especially in the absence of
an express agreement to that effect. To consider otherwise would be in disregard of the rule of
non-diminution of benefits which are above the minimum being extended to the employees.
Furthermore, such arrangement is likewise in disregard of the manner required by the law on
how overtime compensation must be determined. There is further the possibility that in view of
subsequent increases in the minimum wage, the existing salary for twelve (12) hours could no
longer account for the increased wage level together with the overtime rate for work rendered in
excess of eight hours. This fertile ground for a violation of a labor standards provision can be
effectively thwarted if there is a clear and definite delineation between an employee's regular
and overtime compensation. It is, further noted that a reading of respondent's Appointment
Memoranda issued to the complainant on different dates (Records, pp. 56-60) shows that the
salary being referred to by the respondent which allegedly included complainant's overtime pay,
partakes of the nature of a basic salary and as such, does not contemplate any other
compensation above thereof including complaint's overtime pay. We therefore affirm
complainant's entitlement to the latter benefit.17
Petitioner also insists that private respondent's delay in asserting his right/claim demonstrates his agreement to the
inclusion of overtime pay in his monthly salary rate. This argument is specious. First of all, delay cannot be attributed
to the private respondent. He was hired on March 1, 1986. His twelve-hour work periods continued until November
30, 1989. On October 10, 1990 (just before he was suspended) he filed his money claims with the labor arbiter.
Thus, the public respondent in upholding the decision of the arbiter computed the money claims for the three years
period from the date claims were filed, with the computation starting as of October 10, 1987 onwards.
In connection with the foregoing, we should add that even if there had been a meeting of the minds in the instant
case, the employment contract could not have effectively shielded petitioner from the just and valid claims of private
respondent. Generally speaking, contracts are respected as the law between the contracting, parties, and they may
establish such stipulation, clause, terms and conditions as they may see fit; and for as long as such agreements are
not contrary to law, morals, good customs, public policy or public order, they shall have the fore of law between
them.18 However, ". . ., while it is the inherent and inalienable right of every man to have the most liberty of
contracting, and agreements voluntarily and fairly made will be held valid and enforced in the courts, the general right
to contract is subject to the limitation that the agreement must not be in violation of the Constitution, the statute of
some rule of law (12 Am. Jur. pp. 641-642)."19 And under the Civil Code, contracts of labor are explicitly subject to
the police power of the State because they are not ordinary contracts but are impressed with public
interest.20Inasmuch as in this particular instance the contract is question would have been deemed in violation of
pertinent labor laws, the provisions of said laws would prevail over the terms of the contract, and private respondent
would still be entitled to overtime pay.
Moreover, we cannot agree with petitioner's assertion that by judging the intention of the parties from their
contemporaneous acts it would appear that the "failure of respondent Esquejo to claim such alleged overtime pay
since 1986 clearly demonstrate(s) that the agreement on his gross salary as contained in his appointment paper is
conclusive on the matter of the inclusion of overtime pay." (Rollo, pp. 13-15; also, Rollo, pp. 378-380). This is simply
not the case here. The interpretation of the provision in question having been put in issue, the Court is constrained to
determine which interpretation is more in accord with the intent of the parties. 21 To ascertain the intent of the parties,
the Court is bound to look at their contemporaneous and subsequent acts. 22 Private respondent's silence and failure
to claim his overtime pay since 1986 cannot be considered as proving the understanding on his part that the rate
provided in his employment contract covers overtime pay. Precisely, that is the very question raised by private
respondent with the arbiter, because contrary to the claim of petitioner, private respondent believed that he was not
paid his overtime pay and that such pay is not covered by the rate agreed upon and stated in his Appointment
Memorandum. The subsequent act of private respondent in filing money claims negates the theory that there was
clear agreements as to the inclusion of his overtime pay in the contracted salary rate. When an employee fails to
assert his right immediately upon violation thereof, such failure cannot ipso facto be deemed as a waiver of the
oppression. We must recognize that the worker and his employer are not equally situated. When a worker keeps
silent inspite of flagrant violations of his rights, it may be because he is seriously fearful of losing his job. And the dire
consequences thereof on his family and his dependents prevent him from complaining. In short, his thoughts of
sheer survival weight heavily against launching an attack upon his more powerful employer.
The petitioner contends that the agreed salary rate in the employment contract should be deemed to cover overtime
pay, otherwise serious distortions in wages would result "since a mere company guard will be receiving a salary
much more that the salaries of other employees who are much higher in rank and position than him in the company."
(Rollo, p. 16) We find this argument flimsy and undeserving of consideration. How can paying an employee the
overtime pay due him cause serious distortions in salary rates or scales? And how can "other employees" be
aggrieved when they did not render any overtime service?
Petitioner's allegation that private respondent is guilty of laches is likewise devoid of merit. Laches is defined as
failure or neglect for an unreasonable and unexplained length of time to do that which, by exercising due diligence,
could or should have been done earlier. It is negligence or omission to assert a right within an unreasonable time,
warranting the presumption that the party entitled to assert it has either abandoned or declined to assert it 23 The
question of laches is addressed to the sound discretion of the court, and since it is an equitable doctrine, its
application is controlled by equitable considerations. It cannot work to defeat justice or to perpetrate fraud and
injustice.24 Laches cannot be charged against any worker when he has not incurred undue delay in the assertion of
his rights. Private respondent filed his complaint within the three-year reglementary period. He did not sleep on his
rights for an unreasonable length of time.25
Second Issue: Unjust Enrichment?
Petitioner contends that the award of overtime pay is "plain and simple unjust and illegal enrichment." Such award "in
effect sanctioned and approved the grant of payment to respondent Esquejo which will result in double payment for
the overtime work rendered by paid employee."26 Also, per petitioner, "(n)othing in the Labor Code nor in the Rules
and Regulations issued in the implementation thereof prohibits the manner of paying the overtime pay (by) including
the same in the salary."27
This is begging the issue. To reiterate, the main question raised before the labor tribunals is whether the provision on
wages in the contract of employment already included the overtime pay for four (4) working hours rendered six days
a week in excess of the regular eight-hour work. And we hold that the tribunals below were correct in ruling that the
stipulated pay did not include overtime. Hence, there can be no undue enrichment in claiming what legally belongs to
private respondent.
Third Issue: Basic of NLRC's Decision?
Petitioner assails respondent NLRC for adopting that portion of the decision of the labor arbiter, which reads as
follows:
. . . Our conclusion is quite clear considering the fact that at the time of his employment in March
1986, during which the minimum wage was P37.00 a day for 8 hours work, complaint's total
take-home-pay working 12 hours a day including ECOLA, was only P2,500.00 a month. And
immediately prior to his appointment as Ledger Custodian effective December 1, 1989, with the
working hours reduced to 8 hours a week, complainant's monthly salary was P3,420.00 (instead
of P5,161.01 minimum monthly with 4 hours overtime work everyday, or a difference of
P1,741.01 a month).
Accordingly, the claim for overtime pay reckoned from October 10, 1987 up to November 30,
1989 should be, as it is hereby, granted.28 (Rollo, p. 201).
Petitioner believes that by adopting the above-quoted portion of the arbiter's decision, respondent NLRC violated the
cardinal rule that its decisions must be supported by substantial evidence. In doing so, petitioner claims that the
NLRC violated is primary rights as enunciated in the case of Ang Tibay vs. CIR 29. In other words, petitioner holds
the view that the arbiter's decision failed to explain how the amount of P5,161.01 was arrived at. 30
Petitioner is in error. The public respondent did not adopt in toto the aforequoted portion of the arbiter's decision. It
made its own computations and arrived at a slightly different amount, with a difference of P278.10 from the award
granted by the labor arbiter. To refute petitioner's claim, public respondent attached (as Annexes "1", "1-A" "1-B" and
"1-C") to its Comment, the computations made by the labor arbiter in arriving at the sum of P5,161,00. On the other
hand, public respondent made its own computation in its assailed Decision and arrived at a slightly different figure
from the computed by the labor arbiter:
Respondent claims that the award of P28,344.55 is bereft of any factual basis. Records show
that as per computation of the office of the Fiscal Examiner, (Records, p. 116) the said amount
was arrived at. The computation was however based on the assumption that the complainant
regularly reported for work. Records however show that the complainant absented himself from
work for one day in August 1989. (Records, p. 63) For this unworked day, no overtime pay must
be due. As to the rest of his period of employment subject to the three year limitation rule which
dates from October 10, 1987 up to his appointment as Ledger Custodian on December 1, 1989
after which his regular work period was already reduced to eight hours, there being no showing
that the complainant absented himself from work, and he being then required to work for period
of twelve hours daily, We therefore rule on complainant's entitlement to overtime compensation
for the duration of the aforesaid period in excess of one working day. Consequently,
complainant's overtime pay shall be computed as follow:
OVERTIME PAY: (4 HRS/DAY)
October 10, 1987 — December 13, 1987 = 2.10 mos.
P54/8hrs. = P6.75 x 4 hrs. = P27.00
P27 x 1.25 = P33.75 x 26 x 2.10 mos. = P1,842.75
————
December 14, 1987 — June 30, 1989 = 18.53 mos.
P64/8 hrs. = P8 x 4 hrs. = P32.00
P32 x 1.25 = P40 x 26 x 18.53 = P19,271.20
—————
July 1, 1989 — November 30, 1989 = 5 mos.
P89/8 hrs. = P11.12 x 4 hrs. = P44.50
P44.50 x 1.25 = P55.62 x 25 x 5 mos. = P6,952.50 (P6,953.125)
————
TOTAL OVERTIME PAY
P28,066.45 (P28,067.075)" (Rollo, pp. 210-212)
Prescinding therefrom, it is evident that petitioner had no basis to argue that respondent NLRC committed any grave
abuse of discretion in quoting the questioned portion of the labor arbiter's holding.
Fourth Issue: Newly Discovered Evidence?
In its Supplemental Petition filed on July 17, 1996, petitioner alleges in part:
2. That only recently, the petitioner was able to locate the Employees Payroll Sheets which
contained the salaries, overtime pay, vacation and sick leaves of respondent Esquejo which
pertains to the period starting from January 1, 1987 up to November 1989. Therefore, said total
amount of overtime pay paid to and received by respondent Esquejo should be deducted from
the computed amount of P28,066.45 based on the questioned decision; (Rollo, p. 220).
 Contrary to petitioner's claim however, said documents consisting of payroll sheets, cannot be considered
as "newly-discovered evidence" since said papers were in its custody and possession all along, petitioner
being the employer of private respondent
Furthermore, petitioner offers no satisfactory explanation why these documents were unavailable at the
time the case was being heard by the labor arbiter. In its Memorandum, petitioner excused itself for its
failure to present such evidence before the labor arbiter and respondent NLRC by saying that "petitioner('s
office) appeared to be in disorder or in a state of confusion since the then officers (of petitioner) were
disqualified by the Monetary Board on grounds of misappropriation of funds of the association and other
serious irregularities. There was no formal turn-over of the documents from the disqualified set of officer to
the new officers of petitioner."31 We find such excuse weak and unacceptable, the same not being
substantiated by any evidence on record. Moreover, payroll records are normally not in the direct custody
and possession of corporate officers but of their subordinates, i.e., payroll clerks and the like. In the normal
course of business, such payroll sheets are not the subject of formal turnovers by outgoing officers to their
successors of office. And if indeed it is true that the petitioner had been looking for such records or
documents during the pendency of the case with the labor arbiter and with public respondent, petitioner
never alleged such search before the said labor tribunals a quo. Hence, such bare allegations of facts
cannot be fairly appreciated in this petition for certiorari, which is concerned only with grave abuse of
discretion of lack (or excess) of jurisdiction.
The Solicitor General quotes with approval a portion of private respondent's Opposition to petitioner's
motion for reconsideration thus:
It is clear from the payroll, although the substantial pages thereof do not show that the net
amount indicated therein have been received or duly acknowledged to have been received by
the complainant, THAT OVERTIME PAYMENTS THAT WERE MADE REFER TO WORK
RENDERED DURING COMPLAINANT'S OFF DAYS. What has been rightfully, claimed by the
complainant and awarded by this Honorable Office is the overtime works (sic) rendered by the
complainant daily for six (6) days a week computed at four (4) hours per day. This computation
is based on the evidence thus submitted by the parties. All appointment by the respondent
carries (sic) with it (sic) that the basic salary of the complainant is equivalent to 12 hours work
everyday for six (6) days a week, hence, the four (4) hours overtime daily was not considered
and therefore not paid by the respondent. (Rollo, p. 327).
It has been consistently held that factual issued are not proper subjects of a petition for certiorari, as the power of the
Supreme Court to review labor cases is limited to questions of jurisdiction and grave abuse of discretion.32 The
introduction in this petition of so-called newly discovered evidence is unwarranted. This Court is not a trier of facts
and it is not its function to examine and evaluate the evidence presented (or which ought to have been presented) in
the tribunals below.33
WHEREFORE, in view of the foregoing considerations, the Petition is DISMISSED, the temporary restraining order
issued on July 30, 1992 LIFTED, and the assailed decision of the public respondent AFFIRMED. Cost against
petitioner.
G.R. No. 137795 March 26, 2003
COLEGIO DE SAN JUAN DE LETRAN – CALAMBA, petitioner,
vs.
BELEN P. VILLAS, respondent.
CORONA, J.:
This is a petition for review on certiorari of the decision1 of the former Eleventh Division2 of the Court of Appeals
affirming the decision3 of Voluntary Arbitrator (VA) Apolonio S. Mayuga that respondent Belen P. Villas was illegally
dismissed by petitioner Colegio de San Juan de Letran (School) and thus, entitled to reinstatement and full
backwages.
The antecedent facts show that respondent Belen Villas was employed by the petitioner School as high school
teacher in September 1985. On May 15, 1995, she applied for a study leave for six months, from June to December
31, 1995. In a letter dated June 2, 1995, Mrs. Angelina Quiatchon, principal of the high school department, told Villas
that her request for study leave was granted for one school year subject to the following conditions:
1. The requested study leave takes effect on June 5, 1995 and ends on March 31, 1996;
2. The requested study leave involves no remuneration on the part of the School;
3. The documents that justify the requested study leave should be submitted upon return on April 1, 1996;
4. Faculty Manual – Section 40 Special Provisions on the Granting of Leave of Absence should be
observed:
a. Once proven beyond reasonable doubt during the period of the approved leave of absence
that the faculty member shall engage himself in employment outside the institution, the
administration shall regard the faculty member on leave as resigned;
b. The maximum length of leave of absence that may be applied for by the faculty member and
granted by administration is twelve (12) months. If, at the lapse of the period, the faculty member
fails to return for work, the administration shall regard the faculty member as resigned. 4
Respondent alleged that she intended to utilize the first semester of her study leave to finish her masteral degree at
the Philippine Women’s University (PWU). Unfortunately, it did not push through so she took up an Old Testament
course in a school of religion and at the same time utilized her free hours selling insurance and cookware to augment
her family’s income. However, during the second semester of her study leave, she studied and passed 12 units of
education subjects at the Golden Gate Colleges in Batangas City. In response to the letters sent her by petitioner to
justify her study leave, she submitted a certification from Golden Gate Colleges and a letter explaining why she took
up an Old Testament course instead of enrolling in her masteral class during the first semester.
On June 3, 1996, the President and Rector of the School, Fr. Ramonclaro G. Mendez, O. P., wrote her, stating that
her failure to enroll during the first semester was a violation of the conditions of the study leave and that the reasons
she advanced for failure to enroll during the first semester were not acceptable, thus:
In the first place, prudence dictates that you should have ascertained first that you are still eligible to study
at PWU to finish your masteral degree before applying and securing the approval of your leave by the
School. In the second place, you should have informed the School at once that you could not enroll in the
first semester so that your leave could have been adjusted for only one-half (1/2) year. Thirdly, your
engaging in some part-time business instead of studying in the first semester of your leave is sufficient
justification for the School to consider you as resigned under the Faculty Manual. And lastly, your failure to
study in the first semester of your study leave without informing the School beforehand constitutes
deception, to say the least, which is not a good example to the other teachers. 5
Her case was subsequently referred to the grievance committee, as provided for in the collective bargaining
agreement, and the report was submitted on July 12, 1996, both to the union and the School. However, since the
grievance committee could not reach a decision, the case was referred for voluntary arbitration.
Respondent then filed a case for illegal dismissal and the case was assigned to VA Mayuga who found that
respondent was illegally dismissed, thus:
WHEREFORE premises considered, we rule that complainant Mrs. BELEN P. VILLAS was illegally
dismissed from her employment by respondent, and as prayed for, respondent COLEGIO DE SAN JUAN
DE LETRAN-CALAMBA is hereby ordered to reinstate Mrs. Belen P. Villas to her former position or job in
said school without loss of seniority and with full backwages and other monetary benefits effective the start
of school year 1996-1997 up to the time she is reinstated.6
Upon denial of its motion for reconsideration, petitioner filed a petition for review with the Court of Appeals. This was
denied. Thus, this petition for review. The sole issue is whether or not respondent’s alleged violation of the conditions
of the study grant constituted serious misconduct which justified her termination from petitioner School.
Petitioner alleges that the dismissal of respondent was lawful inasmuch as (a) the requirements of due process were
followed and (b) she not only violated several lawful regulations but also breached her contractual obligations to the
School. All this constituted a valid ground for her dismissal. In assailing the decision of the Court of Appeals,
petitioner School basically questions the court a quo’s findings of fact on respondent’s alleged violation of petitioner
School’s policy on study leave grants.
The petition has no merit.
Under the Labor Code, there are twin requirements to justify a valid dismissal from employment: (a) the dismissal
must be for any of the causes provided in Article 282 of the Labor Code (substantive aspect) and (b) the employee
must be given an opportunity to be heard and to defend himself (procedural aspect). 7 The procedural aspect requires
that the employee be given two written notices before she is terminated consisting of a notice which apprises the
employee of the particular acts/omissions for which the dismissal is sought and the subsequent notice which informs
the employee of the employer’s decision to dismiss him.8
In the case at bar, the requirements for both substantive and procedural aspects were not satisfied.
According to petitioner, respondent violated the following conditions of her study leave: (a) she failed to report for
work on April 1, 1996, the day after the lapse of her leave period, which was violative of Section 40 of the Faculty
Manual; (b) she failed to submit proof of her studies during the first semester of her leave period, suggesting that she
was not enrolled during this period; and (c) she engaged in employment outside the School. In sum, petitioner
School argues that the conduct of respondent breached not only the provisions of the study grant (which was a
contractual obligation) but also the Faculty Manual. Respondent was thus guilty of serious misconduct which was a
ground for termination.
We affirm the findings of the Court of Appeals that there was no violation of the conditions of the study leave grant.
Thus, respondent could not be charged with serious misconduct warranting her dismissal as a teacher in petitioner
School. Petitioner has failed to convince us that the three alleged violations of the study leave grant constituted
serious misconduct which justified the termination of respondent’s employment.
Misconduct is improper or wrongful 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 of
judgment.9Under Article 282 of the Labor Code, the misconduct, to be a just cause for termination, must be serious.
This implies that it must be of such grave and aggravated character and not merely trivial or unimportant. 10 Examples
of serious misconduct justifying termination, as held in some of our decisions, include: sexual harassment (the
manager’s act of fondling the hands, massaging the shoulder and caressing the nape of a secretary); 11 fighting within
company premises;12 uttering obscene, insulting or offensive words against a superior;13 misrepresenting that a
student is his nephew and pressuring and intimidating a co-teacher to change that student’s failing grade to
passing.14
In this light, the alleged infractions of the respondent could hardly be considered serious misconduct.
With regard to respondent’s alleged failure to report for work on April 1, 1996 and failure to enroll during the first
semester, the Court of Appeals and the Voluntary Arbitrator found that she did in fact report for work on April 1, 1996
and that she was in fact enrolled during the first semester. Well–settled is the rule that the factual findings of the
Court of Appeals are conclusive on the parties and are not reviewable by the Supreme Court. And they carry even
more weight when the Court of Appeals affirms the factual findings of a lower fact-finding body, in this case the
Voluntary Arbitrator.15 Likewise, findings of fact of administrative agencies and quasi-judicial bodies which have
acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only great
respect but even finality. They are binding upon this Court unless there is a showing of grave abuse of discretion or
where it is clearly shown that they were arrived at arbitrarily or in utter disregard of the evidence on record.16
Assuming arguendo that she did fail to report for work on April 1, 1996 and enroll during the first semester, the most
respondent could be charged with was simple misconduct. In both instances, there was evidence of substantial
compliance by respondent.
Her alleged failure to report for work exactly on April 1, 1996 is not equivalent to "failure to return for work," a
sanctionable offense under the Faculty Manual. As correctly pointed out by the VA, petitioner failed to establish that
there was a distinct and definite assignment that needed to be done personally by respondent, and specifically on
April 1, 1996, which she failed to do on said date. Although we give credence to petitioner’s argument that a private
high school teacher still has work at the end of the schoolyear – to assist in the graduation preparations – and in the
beginning of the school year – to assist in the enrollment – such tasks cannot be considered a teacher’s main duties,
the failure to perform which would be tantamount to dereliction of duty or abandonment. Besides, there is no
disagreement that respondent reported for work on May 15, 1996 at which time petitioner School could have asked
her to assist in the enrollment period. At most, respondent failed to help out during the preparations for graduation
and this, to us, was not a significant reason for terminating or dismissing her from her job.
With regard to her alleged failure to enroll during the first semester, although we agree with the President and
Rector, Fr. Mendez, that respondent should have first ascertained whether she was still eligible to study at the PWU
before applying for a study leave,17 such lapse was more of an error in judgment rather than an act of serious
misconduct. If respondent intended to use her study leave for other unauthorized purposes, as petitioner would like
us to believe, she would not have enrolled at the Golden Gate Colleges during the second semester. Yet she did, as
borne out by the certification18 prepared by the Registrar of Golden Gate Colleges.
Furthermore, we find that respondent did not violate the prohibition on engaging in employment outside the school as
specified in her study leave grant and as provided in the Faculty Manual. Section 40 (a) of the Manual 19 states:
a. Once proven beyond reasonable doubt during the period of the approved leave of absence that the
faculty member shall engage himself in employment outside the institution, the administration shall regard
the faculty member on leave resigned. (Emphasis supplied)
We find the provision of the Faculty Manual ambiguous as the term "employment" connotes a number of meanings.
Employment in its general sense connotes any work or service rendered in exchange for money. The loose
connotation of employment may therefore cover jobs without an employer-employee relationship. However,
inasmuch as in this case, petitioner School drafted the said policy, the term "employment" should be strictly
construed against it.20 Moreover, it is a settled rule that in controversies between a laborer and his master, doubts
reasonably arising from the evidence, or in the interpretation of agreements and writings should be resolved in the
former’s favor.21 The act of respondent in selling insurance and cookware was not the "employment" prohibited by
the Faculty Manual. The prohibition against outside employment was enacted to prevent the teacher from using the
study leave period for unsanctioned purposes since the School pays the teacher while pursuing further studies. That
rationale was not violated by respondent for the reason that her part-time activity of selling insurance and cookware
could not have prevented her in any way from studying and, more importantly, she was not being paid by the School
while on leave. How did the school expect her and her family to survive without any income for one whole year?
Petitioner also failed to comply with the procedural requirements for a valid dismissal. As earlier noted, the law
requires the employer to give the worker to be dismissed two written notices before terminating his employment.
Considering that these notices are mandatory, the absence of one renders any management decision to terminate
null and void. Petitioner failed to give respondent the first notice which should have informed the latter of the former’s
intention to dismiss her. Petitioner argues that it complied with this requirement as there were several exchanges of
communication between the School and respondent regarding the cause of her termination. However, we find that
these letters did not apprise respondent that her dismissal was being sought by petitioner School as said letters only
required respondent to submit proof of enrollment. The letter of Principal Angelina Q. Quiatchon dated April 17,
199622 was worded as follows:
In accordance with the terms of your study leave from June 5, 1995 to March 31, 1996, you must submit
credentials/proofs of your study to justify the approved leave.
To this date, April 17, this office has not received your credentials. Please do so within the next three days
from receipt hereof so that this office can act accordingly.
Similarly, the May 10, 1996 letter23 of the Academic Affairs Director, Dr. Rhodora G. Odejar, was worded thus:
The Academic Affairs Office has received your certification of graduate studies completed in the second
semester of Schoolyear 1995-1996. However, there is no report as to how you utilized your leave in the
first semester. You are therefore instructed to submit your report on the matter within three days from
receipt hereof.
The next letter from the petitioner, dated June 3, 1996, already informed respondent that she was considered
resigned effective schoolyear 1996-1997.
These letters did not comply with the requirements of the law that the first written notice must apprise the employee
that his termination is being considered due to a certain act or omission. These letters merely required petitioner to
submit proof of her studies and respondent could not have reasonably inferred from them that her dismissal was
being considered by the petitioner. The fact that there was a hearing conducted by the grievance committee pursuant
to the collective bargaining agreement did not work in petitioner’s favor because this was done afterpetitioner had
informed respondent that she was already considered resigned from her teaching job. Besides, the rights of an
employee to be informed of his proposed dismissal are personal to him 24 and, therefore, the notice to the union was
not notice to the employee.
With regard to the respondent’s claim for the six-month study leave and vacation pay, we affirm the decision25 of the
Voluntary Arbitrator that respondent is not entitled to such benefits:
While it is true that the collective bargaining agreement between respondent and complainant’s union
provides for six months’ pay for qualified teachers who will go on sabbatical or study leave, the same was
expressly waived by complainant when she signed conforme to the letter dated June 2, 1995 approving
her study leave which states among others, to wit: ‘2. The requested study leave involves no remuneration
on the part of the school.’ And considering that her leave of absence for the whole school year 1995-1996
was presumed to be a leave of absence without pay, then she did not earn her vacation leave incentive for
the next coming summer. We find it just, fair and reasonable to grant vacation pay on April and May of
every calendar as additional incentive only to those teachers who rendered continuous service to the
Collegio the preceding school year.
We similarly affirm the Voluntary Arbitrator’s decision that respondent is not entitled to moral and exemplary
damages and attorney’s fees because there is no evidence showing that bad faith or malice attended the dismissal
of respondent. Moral damages are recoverable only where the dismissal is attended by bad faith or fraud, or
constitutes an act oppressive to labor, or is done in a manner contrary to morals, good customs or public policy. A
dismissal may be contrary to law but, by itself alone, it does not necessarily establish bad faith.26
WHEREFORE, the petition is DENIED.
SO ORDERED.
G.R. No. 171630 August 8, 2010
CENTURY CANNING CORPORATION, RICARDO T. PO, JR. and AMANCIO C. RONQUILLO, Petitioners,
vs.
VICENTE RANDY R. RAMIL, Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set aside the
Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 86939, dated December 1, 2005 and
February 17, 2006, respectively.
The antecedents are as follows:
Petitioner Century Canning Corporation, a company engaged in canned food manufacturing, employed respondent
Vicente Randy Ramil in August 1993 as technical specialist. Prior to his dismissal on May 20, 1999, his job included,
among others, the preparation of the purchase requisition (PR) forms and capital expenditure (CAPEX) forms, as
well as the coordination with the purchasing department regarding technical inquiries on needed products and
services of petitioner's different departments.
On March 3, 1999, respondent prepared a CAPEX form for external fax modems and terminal server, per order of
Technical Operations Manager Jaime Garcia, Jr. and endorsed it to Marivic Villanueva, Secretary of Executive Vice-
President Ricardo T. Po, for the latter's signature. The CAPEX form, however, did not have the complete details3and
some required signatures.4 The following day, March 4, 1999, with the form apparently signed by Po, respondent
transmitted it to Purchasing Officer Lorena Paz in Taguig Main Office. Paz processed the paper and found that some
details in the CAPEX form were left blank. She also doubted the genuineness of the signature of Po, as appearing in
the form. Paz then transmitted the CAPEX form to Purchasing Manager Virgie Garcia and informed her of the
questionable signature of Po. Consequently, the request for the equipment was put on hold due to Po's forged
signature. However, due to the urgency of purchasing badly needed equipment, respondent was ordered to make
another CAPEX form, which was immediately transmitted to the Purchasing Department.
Suspecting him to have committed forgery, respondent was asked to explain in writing the events surrounding the
incident. He vehemently denied any participation in the alleged forgery. Respondent was, thereafter, suspended on
April 21, 1999. Subsequently, he received a Notice of Termination from Armando C. Ronquillo, on May 20, 1999, for
loss of trust and confidence.
Due to the foregoing, respondent, on May 24, 1999, filed a Complaint for illegal dismissal, non-payment of overtime
pay, separation pay, moral and exemplary damages and attorney's fees against petitioner and its officers before the
Labor Arbiter (LA), and was docketed as NLRC-NCR Case No. 00-05-05894-99.5
LA Potenciano S. Canizares rendered a Decision6 dated December 6, 1999 dismissing the complaint for lack of
merit. Aggrieved by the LA's finding, respondent appealed to the National Labor Relations Commission (NLRC).
Upon recommendation of LA Cristeta D. Tamayo, who reviewed the case, the NLRC First Division, in its
Decision7dated August 26, 2002, set aside the ruling of LA Canizares. The NLRC declared respondent's dismissal to
be illegal and directed petitioner to reinstate respondent with full backwages and seniority rights and privileges. It
found that petitioner failed to show clear and convincing evidence that respondent was responsible for the forgery of
the signature of Po in the CAPEX form.
Petitioner filed a motion for reconsideration. To respondent's surprise and dismay, the NLRC reversed itself and
rendered a new Decision8 dated October 20, 2003, upholding LA Canizares' dismissal of his complaint. Respondent
filed a motion for reconsideration, which was denied by the NLRC.
Frustrated by this turn of events, respondent filed a petition for certiorari with the CA. The CA, in its Decision dated
December 1, 2005, rendered judgment in favor of respondent and reinstated the earlier decision of the NLRC, dated
August 26, 2002. It ordered petitioner to reinstate respondent, without loss of seniority rights and privileges, and to
pay respondent full backwages from the time his employment was terminated on May 20, 1999 up to the time of the
finality of its decision. The CA, likewise, remanded the case to the LA for the computation of backwages of the
respondent.
Petitioner filed a motion for reconsideration, which the CA denied in a Resolution dated February 17, 2006. Hence,
the instant petition assigning the following errors:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE UNANIMOUS FINDINGS
OF THE LABOR ARBITER AND THE NATIONAL LABOR RELATIONS COMMISSION SUSTAINING THE
LEGALITY OF PRIVATE RESPONDENT'S TERMINATION FROM HIS EMPLOYMENT.
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT PETITIONER
CORPORATION FAILED TO SATISFY THE BURDEN OF PROVING THAT THE DISMISSAL OF PRIVATE
RESPONDENT WAS FOR A VALID OR AUTHORIZED CAUSE.
III
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT FOR LOSS OF TRUST AND
CONFIDENCE TO BE A VALID GROUND FOR AN EMPLOYEE'S DISMISSAL, IT MUST BE SUBSTANTIAL AND
NOT ARBITRARY, AND MUST BE FOUNDED ON CLEARLY ESTABLISHED FACTS, OVERLOOKING THE RULE
THAT THE MERE EXISTENCE OF A BASIS FOR BELIEVING THAT SUCH EMPLOYEE HAS BREACHED THE
TRUST AND CONFIDENCE OF HIS EMPLOYER SUFFICES FOR HIS DISMISSAL.
IV
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT ASIDE FROM HIS
INVOLVEMENT IN THE FORGERY OF THE CAPITAL EXPENDITURE (CAPEX) FORMS, PRIVATE
RESPONDENT'S PAST VIOLATIONS OR ADMITTED INFRACTIONS OF COMPANY RULES AND REGULATIONS
ARE MORE THAN SUFFICIENT GROUNDS TO JUSTIFY THE TERMINATION OF HIS EMPLOYMENT WITH
PETITIONER CORPORATION.
Petitioner's main allegation is that there are factual and legal grounds constituting substantial proof that respondent
was clearly involved in the forgery of the CAPEX form, i.e., respondent is the forger of the signature of Po, as he is
the custodian and the one who prepared the CAPEX form; the forged signature was already existing when he
submitted the same for processing; he has the motive to forge the signature; respondent has the propensity to
deviate from the Standard Operating Procedure as shown by the fact that the CAPEX form, with the forged signature
of Po, is not complete in details and lacks the required signatures; also, in February 1999, respondent ordered 8
units of External Fax Modem without the required CAPEX form and a PR form.
Petitioner insists that the mere existence of a basis for believing that respondent employee has breached the trust
and confidence of his employer suffices for his dismissal. Finally, petitioner maintains that aside from respondent's
involvement in the forgery of the CAPEX form, his past violations of company rules and regulations are more than
sufficient grounds to justify his termination from employment.
In his Comment, respondent alleged that petitioner failed to present clear and convincing evidence to prove his
participation in the charge of forgery nor any damage to the petitioner.
Anent the first issue raised, petitioner faults the CA in disregarding the unanimous findings of the LA and the NLRC
sustaining the legality of respondent's termination from his employment. The rule is that high respect is accorded to
the findings of fact of quasi-judicial agencies, more so in the case at bar where both the LA and the NLRC share the
same findings. The rule is not, however, without exceptions one of which is when the findings of fact of the labor
officials on which the conclusion was based are not supported by substantial evidence. The same holds true when it
is perceived that far too much is concluded, inferred or deduced from bare facts adduced in evidence.9
In the case at bar, the NLRC's findings of fact upon which its conclusion was based are not supported by substantial
evidence, that is, the amount of relevant evidence, which a reasonable mind might accept as adequate to justify a
conclusion.10
As correctly found by the CA:
x x x The record of the case is bereft of evidence that would clearly establish Ramil's involvement in the forgery.
They did not even submit any affidavit of witness11 or present any during the hearing to substantiate their claim
against Ramil.12
Respondent alleged in his position paper that after preparing the CAPEX form on March 3, 1999, he endorsed it to
Marivic Villanueva for the signature of the Executive Vice-President Ricardo T. Po. The next day, March 4, 1999,
respondent received the CAPEX form containing the signature of Po. Petitioner never controverted these allegations
in the proceedings before the NLRC and the CA despite its opportunity to do so. Petitioner's belated allegations in its
reply filed before this Court that Marivic Villanueva denied having seen the CAPEX form cannot be given credit.
Points of law, theories, issues and arguments not brought to the attention of the lower court, administrative agency or
quasi-judicial body need not be considered by a reviewing court, as they cannot be raised for the first time at that late
stage.13 When a party deliberately adopts a certain theory and the case is decided upon that theory in the court
below, he will not be permitted to change the same on appeal, because to permit him to do so would be unfair to the
adverse party.14
Thus, if respondent retrieved the form on March 4, 1999 with the signature of Po, it can be correctly inferred that he
is not the forger. Had the CAPEX form been returned to respondent without Po's signature, Villanueva or any officer
of the petitioner's company could have readily noticed the lack of signature, and could have easily attested that the
form was unsigned when it was released to respondent.
Further, as correctly found by the NLRC in its original decision dated August 26, 2002, if respondent was the one
who forged the signature of Po in the CAPEX form, there was no need for him to endorse the same to Villanueva and
transmit it the next day. He could have easily forged the signature of Po on the same day that he prepared the
CAPEX form and submitted it on the very same day to petitioner's main office without passing through any officer of
petitioner.
Accordingly, for want of substantial basis, in fact or in law, factual findings of an administrative agency, such as the
NLRC, cannot be given the stamp of finality and conclusiveness normally accorded to it, as even decisions of
administrative agencies which are declared "final" by law are not exempt from judicial review when so
warranted.15Contrary to petitioner’s assertion, therefore, this Court sees no error on the part of the CA when it made
a new determination of the case and, upon this, reversed the ruling of the NLRC.
As to the second issue, the law mandates that the burden of proving the validity of the termination of employment
rests with the employer. Failure to discharge this evidentiary burden would necessarily mean that the dismissal was
not justified and, therefore, illegal. Unsubstantiated suspicions, accusations, and conclusions of employers do not
provide for legal justification for dismissing employees. In case of doubt, such cases should be resolved in favor of
labor, pursuant to the social justice policy of labor laws and the Constitution.16
The termination letter17 addressed to respondent, dated May 20, 1999, provides that:
We also conducted inquiries from persons concerned to get more information in (sic) this forgery. Some of your
statements do not jibe with theirs. x x x
However, this information which petitioner allegedly obtained from the "persons concerned" was not backed-up by
any affidavit or proof. Petitioner did not even bother to name these resource persons.
Petitioner based respondent's dismissal on its unsubstantiated suspicions and conclusion that since respondent was
the custodian and the one who prepared the CAPEX forms, he had the motive to commit the forgery. However, as
correctly found by the NLRC in its original Decision, respondent would not be benefited by the purchase of the
subject equipment. The equipment would be for the use of petitioner company.
With respect to the third issue, while We have previously held that employers are allowed a wider latitude of
discretion in terminating the services of employees who perform functions which by their nature require the
employers' full trust and confidence and the mere existence of basis for believing that the employee has breached
the trust of the employer is sufficient,18 this does not mean that the said basis may be arbitrary and unfounded.
The right of an employer to dismiss an employee on the ground that it has lost its trust and confidence in him must
not be exercised arbitrarily and without just cause.19 Loss of trust and confidence, to be a valid cause for dismissal,
must be based on a willful breach of trust20 and founded on clearly established facts. The basis for the dismissal
must be clearly and convincingly established, but proof beyond reasonable doubt is not necessary. 21 It must rest on
substantial grounds and not on the employer’s arbitrariness, whim, caprice or suspicion; otherwise, the employee
would eternally remain at the mercy of the employer.22
The case of Philippine Airlines, Inc. v. Tongson,23 cited by the petitioner, is not applicable to the present case. In that
case, PAL dismissed Tongson from service on the ground of corruption, extortion and bribery in the processing of
PAL's passengers' travel documents. We upheld the validity of Tongson's dismissal because PAL's overwhelming
documentary evidence reflects an unbroken chain which naturally leads to one fair and reasonable conclusion, that
at the very least, respondent was involved in extorting money from PAL's passengers. We further said that even if
there is no direct evidence to prove that the employees actually committed the offense, substantial proof based on
documentary evidence is sufficient to warrant their dismissal from employment.
In the case at bar, there is neither direct evidence nor substantial documentary evidence pointing to respondent as
the one liable for the forgery of the signature of Po.1avvphi1
The cited case of Deles Jr. v. National Labor Relations Commission24 is also inapplicable. Therein dismissed
employee, Deles Jr., himself admitted during the company investigation that he tampered with the company's
sensitive equipment (the JTF Gravitometer No. 5). Thus, there existed sufficient basis for the finding that therein
employee breached the trust and confidence of his employer.
As for the final issue raised, petitioner's reliance on respondent's previous tardiness in reporting for work as a ground
for his dismissal is likewise not meritorious. The correct rule has always been that such previous offense may be
used as valid justification for dismissal from work only if the infractions are related to the subsequent offense upon
which the basis of termination is decreed.25 His previous offenses were entirely separate and distinct from his latest
alleged infraction of forgery. Hence, the same could no longer be utilized as an added justification for his dismissal.
Besides, respondent had already been sanctioned for his prior infractions. To consider these offenses as justification
for his dismissal would be penalizing respondent twice for the same offense. 26
Respondent's illegal dismissal carries the legal consequences defined under Article 279 of the Labor Code, that is,
an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights
and other privileges, and to the payment of his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent, computed from the time his compensation was withheld from him up to the time of his
actual reinstatement.27
However, the Court finds that it would be best to award separation pay instead of reinstatement, in view of the
strained relations between petitioner and respondent. Respondent was dismissed due to loss of trust and confidence
and it would be impractical to reinstate an employee whom the employer does not trust, and whose task is to handle
and prepare delicate documents.
Under the doctrine of strained relations, the payment of separation pay has been considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On the one hand, such payment
liberates the employee from what could be a highly oppressive work environment. On the other hand, the payment
releases the employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer
trust.28
In view of the foregoing, respondent is entitled to the payment of full backwages, inclusive of allowances, and other
benefits or their monetary equivalent, computed from the date of his dismissal on May 20, 1999 up to the finality of
this decision, and separation pay in lieu of reinstatement equivalent to one month salary for every year of service,
computed from the time of his engagement by petitioner on August 1993 up to the finality of the decision.29
The awards of separation pay and backwages are not mutually exclusive and both may be given to the respondent.
In Nissan North Edsa Balintawak, Quezon City v. Serrano, Jr.,30 the Court held that:
The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the employee
becomes entitled to reinstatement to his former position without loss of seniority rights and, secondly, the payment of
backwages corresponding to the period from his illegal dismissal up to actual reinstatement. The statutory intent on
this matter is clearly discernible. Reinstatement restores the employee who was unjustly dismissed to the position
from which he was removed, that is, to his status quo ante dismissal, while the grant of backwages allows the same
employee to recover from the employer that which he had lost by way of wages as a result of his dismissal. These
twin remedies —reinstatement and payment of backwages — make the dismissed employee whole who can then
look forward to continued employment. Thus, do these two remedies give meaning and substance to the
constitutional right of labor to security of tenure. The two forms of relief are distinct and separate, one from the other.
Though the grant of reinstatement commonly carries with it an award of backwages, the inappropriateness or non-
availability of one does not carry with it the inappropriateness or non-availability of the other. x x x As the term
suggests, separation pay is the amount that an employee receives at the time of his severance from the service and
x x x is designed to provide the employee with "the wherewithal during the period that he is looking for another
employment." In the instant case, the grant of separation pay was a substitute for immediate and continued re-
employment with the private respondent Bank. The grant of separation pay did not redress the injury that is intended
to be relieved by the second remedy of backwages, that is, the loss of earnings that would have accrued to the
dismissed employee during the period between dismissal and reinstatement. Put a little differently, payment of
backwages is a form of relief that restores the income that was lost by reason of unlawful dismissal; separation pay,
in contrast, is oriented towards the immediate future, the transitional period the dismissed employee must undergo
before locating a replacement job. x x x The grant of separation pay was a proper substitute only for reinstatement; it
could not be an adequate substitute both for reinstatement and for backwages. (Emphasis supplied.) 31
The case is, therefore, remanded to the Labor Arbiter for the purpose of computing the proper monetary award due
to the respondent.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
86939, dated December 1, 2005 and February 17, 2006, respectively, are AFFIRMED with MODIFICATION that the
order of reinstatement is deleted, and in lieu thereof, Petitioner Century Canning Corporation is DIRECTED to pay
respondent separation pay.
The case is REMANDED to the Labor Arbiter for the purpose of computing respondent's full backwages, inclusive of
allowances, and other benefits or their monetary equivalent, computed from the date of his dismissal on May 20,
1999 up to the finality of the decision, and separation pay in lieu of reinstatement equivalent to one month salary for
every year of service, computed from the time of his engagement by petitioner on August 1993 up to the finality of
this decision.
SO ORDERED.
G.R. No. 147597 August 6, 2008
CLARISSA U. MATA, doing business under the firm name BESSANG PASS SECURITY AGENCY, petitioner,
vs.
ALEXANDER M. AGRAVANTE, EDDIE E. SANTILLAN, PATRICIO A. ARMODIA, ALEJANDRO A. ALMADEN
and HERMENEGILDO G. SALDO, respondents.
DECISION
NACHURA, J.:
Before us is a petition for review on certiorari assailing the decision1 of the Court of Appeals (CA) which dismissed
petitioner's complaint for damages filed against the respondents.
The antecedent facts are as follows:
Respondents Eddie E. Santillan, Patricio A. Armodia, Alejandro A. Almaden and Hermenegildo G. Saldo were former
security guards of the Bessang Pass Security Agency, owned by herein petitioner Clarissa Mata.
On October 27, 1993, the respondents, assisted by their counsel, Atty. Alexander Agravante, filed a complaint with
the National Labor Relations Commission (NLRC) in Cebu City for non-payment of salaries/wages and other
benefits.2Subsequently, they filed an affidavit-complaint with the Philippine National Police (PNP) in Cramp Crame,
Quezon City requesting an investigation of the Bessang Pass Security Agency and cancellation of its license to
operate as security agency for violation of labor laws. Copies of this affidavit-complaint were likewise sent to the
following offices: (1) Office of the President, (2) Office of the Secretary of Public Works and Highways, (3) Office of
the PNP Director General, (4) PNP Chief Superintendent Warlito Capitan, (5) Office of the DILG Secretary, (6)
Ombudsman Conrado Vasquez and (7) Office of the Vice-President.
On January 6, 1994, petitioner instituted an action for damages against the respondents averring that respondents
filed unfounded, baseless complaints before the NLRC for alleged violation of the labor laws and with the PNP for
cancellation of its license to operate. She further alleged that by furnishing the government offices copies of these
complaints, especially the Department of Public Works and Highways which was its biggest client, the agency's
reputation was besmirched, resulting in the loss of contracts/projects and income in the amount of at
least P5,000,000.00. Petitioner then declared that respondents' deliberate and concerted campaign of hate and
vilification against the Bessang Pass Security Agency violated the provisions of Articles 19, 20, and 21 of the Civil
Code, and thus, prayed that the respondents be held jointly and severally liable to pay her the sum of P1,000,000.00
as moral damages, attorney's fees in the amount of P200,000.00 and other reliefs.
On August 4, 1999, the trial court rendered judgment, the dispositive portion of which reads, as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against
defendants ordering the latter to pay plaintiff the sum of ONE MILLION (P1,000,000.00) PESOS as moral
damages.3
On the basis of the evidence adduced by the petitioner ex parte, the trial court found preponderant evidence enough
to justify petitioner's cause of action. It gave credence to the petitioner's contentions that the respondents had no
other motive in sending the letter to the seven (7) government offices except to unduly prejudice her good name and
reputation. The trial court, however, did not award the sum of P5,000,000.00 as petitioner's estimated loss of income
for being speculative.
On appeal, the CA reversed and set aside the trial court's decision. It dismissed the complaint for lack of merit.
Hence, this petition anchored on the following grounds:
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS
REVERSIBLE ERROR, AMOUNTING TO GRAVE ABUSE OF DISCRETION WHEN IT REVERSED AND
SET ASIDE THE DECISION OF THE REGIONAL TRIAL COURT, BRANCH 89 IN QUEZON CITY AND
FURTHER CONCLUDED THAT RESPONDENTS' ACT OF FURNISHING COPIES OF THEIR LETTER-
COMPLAINT NOT ONLY TO SEVEN (7) NATIONAL AGENCIES BUT ALSO TO PETITIONER'S
BIGGEST CLIENT, WAS NOT TAINTED WITH BAD FAITH AND WITH THE SOLE MOTIVE TO MALIGN
THE GOOD NAME AND REPUTATION OF PETITIONER.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR
IN THE APPRECIATION OF FACTS AND APPLICATION OF LAWS, WHICH IF NOT RECTIFIED,
WOULD CAUSE IRREPARABLE INJURY AND DAMAGE TO HEREIN PETITIONER.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS
REVERSIBLE ERROR, AMOUNTING TO GRAVE ABUSE OF DISCRETION, WHEN IT REVERSED AND
SET ASIDE THE DECISION OF THE REGIONAL TRIAL COURT, BRANCH 89 IN QUEZON CITY,
NOTWITHSTANDING RESPONDENTS HAVING BEEN DECLARED IN DEFAULT.4
Petitioner contends that the respondents were so driven by unrestrained hatred and revenge that they not only
succeeded in disseminating the letter-complaint to the 7 government offices but to the DPWH, her biggest client, with
the intention to destroy her reputation and, more importantly, her business. She posits that this would mean a loss of
employment for numerous employees throughout the country who solely depend on the security agency for their
existence, and that respondents obviously failed to see this fact. She claims that the respondents have abused their
rights, to her prejudice, and that of the security agency which has tried very hard to protect its name and hard-earned
reputation. Petitioner then concludes that the respondents have violated Articles 19 and 21 of the Civil Code and
should be held liable for damages.5
We are not impressed. We are more in accord with the findings and conclusions of the respondent court that
petitioner is not entitled to any award of damages. We agree with the respondent court's explanation, viz.:
In filing the letter-complaint (Exhibit "D") with the Philippine National Police and furnishing copies thereof to
seven (7) other executive offices of the national government, the defendants-appellants may not be said to
be motivated simply by the desire to "unduly prejudice the good name and reputation" of plaintiff-appellee.
Such act was consistent with and a rational consequence of seeking justice through legal means for the
alleged abuses defendants-appellants suffered in the course of their employment with plaintiff-appellee,
which started with the case for illegal dismissal and non-payment of backwages and benefits earlier filed
with the NLRC Regional Arbitration Branch in Cebu City. In exhausting the legal avenues to air their
legitimate grievances, the paramount and overriding concern of the defendants-appellants - who had
already suffered from retaliatory acts of their employer when they manifested their desire to take formal
action on the violations of labor laws committed by employer - is to secure government intervention or
action to correct or punish their employer, plaintiff-appellee, in accordance with the provisions of existing
 laws or rules and regulations which may be applicable to their situation. And in this process, the
intervention of the Philippine National Police was sought in view of its mandated role of administrative
supervision over security agencies like plaintiff-appellee.
Section 8 of Republic Act No. 5487, otherwise known as the "Private Security Agency Law," empowered
the Chief of the former Philippine Constabulary (PC) at any time "to suspend or cancel the licenses of
private watchman or security guard agency found violating any of the provisions of this Act or of the rules
and regulations promulgated by the Chief of Constabulary pursuant thereto." With the enactment of
Republic Act No. 6975 ("Department of the Interior and Local Government Act of 1990"), the PC-INP was
abolished and in its place, a new police force was established, the Philippine National Police (PNP).
Among the administrative support units of the PNP under the new law is the Civil Security Unit which shall
provide administrative services and general supervision over the organization, business operation and
activities of all organized private detectives, watchmen, security guard agencies and company guard
houses. It was thus but logical for defendants-appellants, as advised by their counsel, to also communicate
their grievances against their employer security guard agency with the PNP. The act of furnishing copies to
seven (7) other executive offices, including that of the Office of the President, was merely to inform said
offices of the fact of filing of such complaint, as is usually done by individual complainants seeking official
government action to address their problems or grievances. Their pending case with the NLRC would not
preclude them from seeking assistance from the PNP as said agency is the national body that exercises
general supervision over all security guard agencies in the country, the defendants-appellants were of the
honest belief that the violation of labor laws committed by their employer will elicit proper action from said
body, providing them with a relief (cancellation of license) distinct from those reliefs sought by them from
the NLRC (payment of backwages and benefits). Certainly, defendants-appellants had good reason to
believe that bringing the matter to PNP is justified as no private security agency found to be violating labor
laws should remain in good standing with or [be] tolerated by the PNP. Despite the pendency of the NLRC
case, such request for investigation of plaintiff-appellee could not in any way be tainted with malice and
bad faith where the same was made by the very individuals who suffered from the illegal labor practices of
plaintiff-appellee. Moreover, no liability could arise from defendants-appellants' act of filing of the labor
case with the NLRC which plaintiff-appellee claimed to have resulted in the agency's not being able to
secure contracts because of such pending labor case, defendants-appellants merely exercised a right
granted to them by our labor laws.6
It has been held that Article 19,7 known to contain what is commonly referred to as the principle of abuse of rights, is
not a panacea for all human hurts and social grievances. The object of this article is to set certain standards which
must be observed not only in the exercise of one's rights but also in the performance of one's duties. These
standards are the following: act with justice, give everyone his due, and observe honesty and good faith. Its
antithesis is any act evincing bad faith or intent to injure.8 Article 21 refers to acts contra bonos mores and has the
following elements: (1) an act which is legal; (2) but which is contrary to morals, good custom, public order or public
policy; and (3) is done with intent to injure. The common element under Articles 19 and 21 is that the act complained
of must be intentional,9 and attended with malice or bad faith. There is no hard and fast rule which can be applied to
determine whether or not the principle of abuse of rights may be invoked. The question of whether or not this
principle has been violated, resulting in damages under Articles 20 and 21, 10or other applicable provision of law,
depends on the circumstances of each case.11 In the case before us, as correctly pointed out by the CA, the
circumstances do not warrant an award of damages. Thus, the award of P1,000,000.00 as moral damages is quite
preposterous. We agree with the appellate court that in the action of the respondents, there was no malicious intent
to injure petitioner's good name and reputation. The respondents merely wanted to call the attention of responsible
government agencies in order to secure appropriate action upon an erring private security agency and obtain redress
for their grievances. So, we reiterate the basic postulate that in the absence of proof that there was malice or bad
faith on the part of the respondents, no damages can be awarded.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
G.R. No. 183952 September 9, 2013
CZARINA T. MALVAR, Petitioner,
vs.
KRAFT FOOD PHILS., INC. and/or BIENVENIDO BAUTISTA, KRAFT FOODS INTERNATIONAL, Respondents.
DECISION
BERSAMIN, J.:
Although the practice of law is not a business, an attorney is entitled to be properly compensated for the professional
services rendered for the client, who is bound by her express agreement to duly compensate the attorney. The client
may not deny her attorney such just compensation.
The Case
The case initially concerned the execution of a final decision of the Court of Appeals (CA) in a labor litigation, but has
mutated into a dispute over attorney's fees between the winning employee and her attorney after she entered into a
compromise agreement with her employer under circumstances that the attorney has bewailed as designed to
prevent the recovery of just professional fees.
Antecedents
On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as its Corporate Planning
Manager. From then on, she gradually rose from the ranks, becoming in 1996 the Vice President for Finance in the
Southeast Asia Region of Kraft Foods International (KFI),KFPI’s mother company. On November 29, 1999,
respondent Bienvenido S. Bautista, as Chairman of the Board of KFPI and concurrently the Vice President and Area
Director for Southeast Asia of KFI, sent Malvar a memo directing her to explain why no administrative sanctions
should be imposed on her for possible breach of trust and confidence and for willful violation of company rules and
regulations. Following the submission of her written explanation, an investigating body was formed. In due time, she
was placed under preventive suspension with pay. Ultimately, on March 16, 2000, she was served a notice of
termination.
Obviously aggrieved, Malvar filed a complaint for illegal suspension and illegal dismissal against KFPI and Bautista
in the National Labor Relations Commission (NLRC). In a decision dated April 30, 2001, 1 the Labor Arbiter found and
declared her suspension and dismissal illegal, and ordered her reinstatement, and the payment of her full
backwages, inclusive of allowances and other benefits, plus attorney’s fees.
On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but additionally ruled that Malvar was
entitled to "any and all stock options and bonuses she was entitled to or would have been entitled to had she not
been illegally dismissed from her employment," as well as to moral and exemplary damages. 2
KFPI and Bautista sought the reconsideration of the NLRC’s decision, but the NLRC denied their motion to that
effect.3
Undaunted, KFPI and Bautista assailed the adverse outcome before the CA on certiorari (CA-G.R. SP No. 69660),
contending that the NLRC thereby committed grave abuse of discretion. However, the petition for certiorari was
dismissed by the CA on December 22, 2004, but with the CA reversing the order of reinstatement and instead
directing the payment of separation pay to Malvar, and also reducing the amounts awarded as moral and exemplary
damages.4
After the judgment in her favor became final and executory on March14, 2006, Malvar moved for the issuance of a
writ of execution.5 The Executive Labor Arbiter then referred the case to the Research and Computation Unit (RCU)
of the NLRC for the computation of the monetary awards under the judgment. The RCU’s computation ultimately
arrived at the total sum of ₱41,627,593.75.6
10,790,788.86

On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an order, 7 finding that the RCU’s computation Backwages (from 3/7/00-4/30/01, award in LA Sytian’s Decision 4,651,773.75
lacked legal basis for including the salary increases that the decision promulgated in CA-G.R. SP No. 69660 did not
include. Hence, Labor Arbiter Reyno reduced Malvar’s total monetary award to ₱27,786,378.11, viz:
Allowances & Other Benefits:

WHEREFORE, premises considered, in so far as the computation of complainant’s other benefits and allowances Management Incentive Plan 7,355,166.58
are concerned, the same are in order. However, insofar as the computation of her backwages and other monetary
benefits (separation pay, unpaid salary for January 1 to 26, 2005,holiday pay, sick leave pay, vacation leave pay,
13th month pay), the same are hereby recomputed as follows: Cash Dividend on Philip Morris Shares 2,711,646.00

Car Maintenance 381,702.92

1. Separation Pay
Gas Allowance 198,000.00
8/1/88-1/26/05 = 16 yrs
Entitlement to a Company Driver 438,650.00
₱344,575.83 x 16 = 5,513,213.28
Rice Subsidy 58,650.00
2. Unpaid Salary
Moral Damages 500,000.00
1/1-26/05 = 87 mos.
Exemplary Damages 200,000.00
₱344,575.83 x 87 = 299,780.97
Attorney’s Fees 500,000.00
3. Holiday Pay
Entitlement to Philip Sch G Subject to
4/1/00-1/26/05 = 55 holidays
"Share Option Grant" Market Price
₱4,134,910/12 mos/20.83 days x 55 days 909,825.77

4. Unpaid 13th month pay for Dec 2000 344,575.83 27,786,378.11

5. Sick Leave Pay

SO ORDERED.
Year 1999 to 2004 = 6 yrs
Both parties appealed the computation to the NLRC, which, on April19, 2007, rendered its decision setting aside
₱344,575.88/20.83 x 15 days x 6 = 1,488,805.79 Labor Arbiter Reyno’s November 9, 2006 order, and adopting the computation by the RCU.8

Year 2005 In its resolution dated May 31, 2007,9 the NLRC denied the respondents’ motion for reconsideration.

₱344,575.83/20.83 x 15/12 x 1 20,677.86 1,509,483.65 Malvar filed a second motion for the issuance of a writ of execution to enforce the decision of the NLRC rendered on
April 19, 2007. After the writ of execution was issued, a partial enforcement as effected by garnishing the
6. Vacation Leave Pay respondents’ funds deposited with Citibank worth 37,391,696.06. 10

Year 1999 to 2004 = 6 years
₱344,575.88/20.83 x 22 days x 6 = 2,183,581.83
Year 2005
₱344,575.83/20.83 x 22/12 x 1 30,327.55
On July 27, 2007, the respondents went to the CA on certiorari (with prayer for the issuance of a temporary
restraining order (TRO) or writ of preliminary injunction), assailing the NLRC’s setting aside of the computation by
Labor Arbiter Reyno (CA-G.R. SP No. 99865). The petition mainly argued that the NLRC had gravely abused its
discretion in ruling that: (a) the inclusion of the salary increases and other monetary benefits in the award to Malvar
was final and executory; and (b) the finality of the ruling in CA-G.R. SP No. 69660 precluded the respondents from
challenging the inclusion of the salary increases and other monetary benefits. The CA issued a TRO, enjoining the
NLRC and Malvar from implementing the NLRC’s decision.11
2,213,909.36
On April 17, 2008, the CA rendered its decision in CA-G.R. SP No. 99865,12 disposing thusly: separation pay, retirement pay, holiday pay, allowances, 13th and 14th month pay, claims for stock, stock options or
other forms of equity compensation whether vested or otherwise whether arising from her employment contract,
company grant, present and future contractual commitments, company policies or practices, or otherwise, in
WHEREFORE, premises considered, the herein Petition is GRANTED and the 19 April 2007 Decision of the NLRC
connection with Ms. Malvar’s employment with KFPI.15
and the 31May 2007 Resolution in NLRC NCR 30-07-02316-00 are hereby REVERSED and SET ASIDE.

xxxx
The matter of computation of monetary awards for private respondent is hereby REMANDED to the Labor Arbiter
and he is DIRECTED to recompute the monetary award due to private respondent based on her salary at the time of
her termination, without including projected salary increases. In computing the said benefits, the Labor Arbiter is Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case,16 praying that the appeal be immediately
further directed to DISREGARD monetary awards arising from: (a) the management incentive plan and (b) the share dismissed/withdrawn in view of the compromise agreement, and that the case be considered closed and terminated.
option grant, including cash dividends arising therefrom without prejudice to the filing of the appropriate remedy by
the private respondent in the proper forum. Private respondent’s allowances for car maintenance and gasoline are
Intervention
likewise DELETED unless private respondent proves, by appropriate receipts, her entitlement thereto.

Before the Court could act on Malvar’s Motion to Dismiss/Withdraw Case, the Court received on February 15, 2011 a
With respect to the Motion to Exclude the Undisputed Amount of ₱14,252,192.12 from the coverage of the Writ of
so-called Motion for Intervention to Protect Attorney’s Rights 17 from The Law Firm of Dasal, Llasos and Associates,
Preliminary Injunction and to order its immediate release, the same is hereby GRANTED for reasons stated therefor,
through its Of Counsel Retired Supreme Court Associate Justice Josue N. Bellosillo18 (Intervenor), whereby the
which amount shall be deducted from the amount to be given to private respondent after proper computation.
Intervenor sought, among others, that both Malvar and KFPI be held and ordered to pay jointly and severally the
Intervenor’s contingent fees.
As regards the Motions for Reconsideration of the Resolution denying the Motion for Voluntary Inhibition and the
Omnibus Motion dated 30 October 2007, both motions are hereby DENIED for lack of merit.
The Motion for Intervention relevantly averred:

SO ORDERED.13
14
Malvar sought reconsideration, but the CA denied her motion on July30, 2008.
Aggrieved, Malvar appealed to the Court, assailing the CA’s decision.
On December 9, 2010, while her appeal was pending in this Court, Malvar and the respondents entered into a
compromise agreement, the pertinent dispositive portion of which is quoted as follows:
xxxx
Lawyers, oftentimes, are caricatured as alligators or some other specie of voracious carnivore; perceived also as
leeches sucking dry the blood of their adversaries, and even their own clients they are sworn to serve and protect! As
we lay down the facts in this case, this popular, rather unpopular, perception will be shown wrong. This case is a
reversal of this perception.
xxxx

NOW, THEREFORE, for and in consideration of the covenants and understanding between the parties herein, the
parties hereto have entered into this Agreement on the following terms and conditions:
1. Simultaneously upon execution of this Agreement in the presence of Ms. Malvar’s attorney, KFPI shall pay Ms.
Malvar the amount of Philippine Pesos Forty Million (Php 40,000,000.00), which is in addition to the Philippine Pesos
Fourteen Million Two Hundred Fifty-Two Thousand One Hundred Ninety-Two and Twelve Centavos
(Php14,252,192.12) already paid to and received by Ms. Malvar from KFPI in August2008 (both amounts constituting
the "Compromise Payment").
Here, it is the lawyer who is eaten up alive by the warring but conspiring litigants who finally settled their differences
without the knowledge, much less, participation, of Petitioner’s counsel that labored hard and did everything to
champion her cause.
xxxx
This Motion for Intervention will illustrate an aberration from the norm where the lawyer ends up seeking protection
from his client’s and Respondents’ indecent and cunning maneuverings. x x x.

The Compromise Payment includes full and complete payment and settlement of Ms. Malvar’s salaries and wages
xxxx
up to the last day of her employment, allowances, 13th and 14th month pay, cash conversion of her accrued
vacation, sick and emergency leaves, separation pay, retirement pay and such other benefits, entitlements, claims
for stock, stock options or other forms of equity compensation whether vested or otherwise and claims of any and all On 18 March 2008 Petitioner engaged the professional services of Intervenor x x x on a contingency basis whereby
kinds against KFPI and KFI and Altria Group, Inc., their predecessors-in-interest, their stockholders, officers, the former agreed in writing to pay the latter contingency fees amounting to almost ₱19,600,000.00 (10% of her total
directors, agents or successors-in-interest, affiliates and subsidiaries, up to the last day of the aforesaid cessation of claim of almost ₱196,000,000.00 in connection with her labor case against Respondents. x x x.
her employment.
xxxx
2. In consideration of the Compromise Payment, Ms. Malvar hereby freely and voluntarily releases and forever
discharges KFPI and KFI and Altria Group, Inc., their predecessors or successors-in-interest, stockholders, officers,
According to their agreement (Annex "A"), Petitioner bound herself to pay Intervenor contingency fees as follows (a)
including Mr. Bautista who was impleaded in the Labor Case as a party respondent, directors, agents or successors-
in-interest, affiliates and subsidiaries from any and all manner of action, cause of action, sum of money, damages, 10% of ₱14,252, 192.12 upon its collection; (b) 10% of the remaining balance of ₱41,627,593.75; and (c)10% of the
claims and demands whatsoever in law or in equity which Ms. Malvar or her heirs, successors and assigns had, or value of the stock options Petitioner claims to be entitled to, or roughly ₱154,000,000.00 as of April 2008.
now have against KFPI and/or KFI and/or Altria Group, Inc., including but not limited to, unpaid wages, salaries,
 xxxx
Intervenor’s efforts resulted in the award and partial release of Petitioner’s claim amounting to ₱14,252,192.12 out of
which Petitioner paid Intervenor 10% or ₱1,425,219.21 as contingency fees pursuant to their engagement agreement
(Annex "A"). Copy of the check payment of Petitioner payable to Intervenor’s Of Counsel is attached as Annex "C".
xxxx
On 12 September 2008 Intervenor filed an exhaustive Petition for Review with the Supreme Court containing 70
pages, including its Annexes "A" to "R", or a total of 419 pages against Respondents to collect on the balance of
Petitioner’s claims amounting to at least ₱27,000,000.00 and ₱154,000,000.00 the latter representing the estimated
value of Petitioner’s stock options as of April 2008.
xxxx
On 15 January 2009 Respondents filed their Comment to the Petition for Review.
xxxx
On 13 April 2009 Intervenor, in behalf of Petitioner, filed its Reply to the Comment.
xxxx
All the pleadings in this Petition have already been submitted on time with nothing more to be done except to await
the Resolution of this Honorable Court which, should the petition be decided in her favor, Petitioner would stand to
gain ₱182,000,000.00, more or less, which victory would be largely through the efforts of Intervenor.19 (Bold
emphasis supplied).
xxxx
It appears that in July 2009, to the Intervenor’s surprise, Malvar unceremoniously and without any justifiable reason
terminated its legal service and required it to withdraw from the case. 20 Hence, on October 5,2009, the Intervenor
reluctantly filed a Manifestation (With Motion to Withdraw as Counsel for Petitioner),21 in which it spelled out: (a) the
terms of and conditions of the Intervenor’s engagement as counsel; (b) the type of legal services already rendered by
the Intervenor for Malvar; (c) the absence of any legitimate reason for the termination of their attorney-client
relationship; (d) the reluctance of the Intervenor to withdraw as Malvar’s counsel; and (e) the desire of the Intervenor
to assert and claim its contingent fee notwithstanding its withdrawal as counsel. The Intervenor prayed that the Court
furnish it with copies of resolutions, decisions and other legal papers issued or to be issued after its withdrawal as
counsel of Malvar in the interest of protecting its interest as her attorney.
The Intervenor indicated that Malvar’s precipitate action had baffled, shocked and even embarrassed the Intervenor,
because it had done everything legally possible to serve and protect her interest. It added that it could not recall any
instance of conflict or misunderstanding with her, for, on the contrary, she had even commended it for its dedication
and devotion to her case through her following letter to Justice Bellosillo, to wit:
July 16, 2008
Justice Josue Belocillo (sic)
Dear Justice,
It is almost morning of July 17 as I write this letter to you. Let me first thank you for your continued and unrelenting
lead, help and support in the case. You have been our "rock" as far as this case is concerned. Jun and I are forever
grateful to you for all your help. I just thought I’d express to you what is in the innermost of my heart as we proceed in
the case. It has been around four months now since we met mid-March early this year.
The most important and immediate aspect of the case at this time for me is the collection of the undisputed amount
of Pesos 14million which the Court has clearly directed and ordered the NLRC to execute. The only impending
constraint for NLRC to execute and collect this amount from the already garnished amount of Pesos 41 million at
Citibank is the MR of Kraft on the Order of the Court (CA) to execute collection. We need to get a denial of this
motion for NLRC to execute immediately. We already obtained commitment from NLRC that all it needed to execute
collection is the denial of the MR. Jun and I applaud your initiative and efforts to mediate with Romulo on potential
settlement. However, as I expressed to you in several instances, I have serious reservations on the willingness of
Romulo to settle within reasonable amounts specifically as it relates to the stock options. Let us continue to pursue
this route vigorously while not setting aside our efforts to influence the CA to DENY their Motion on the Undisputed
amount of Pesos 14million.
At this point, I cannot overemphasize to you our need for funds. We have made financial commitments that require
us to raise some amount. But we can barely meet our day to day business and personal requirements given our
current situation right now.
Thank you po for your understanding and support.22
According to the Intervenor, it was certain that the compromise agreement was authored by the respondents to
evade a possible loss of ₱182,000,000.00 or more as a result of the labor litigation, but considering the Intervenor’s
interest in the case as well as its resolve in pursuing Malvar’s interest, they saw the Intervenor as a major stumbling
block to the compromise agreement that it was then brewing with her. Obviously, the only way to remove the
Intervenor was to have her terminate its services as her legal counsel. This prompted the Intervenor to bring the
matter to the attention of the Court to enable it to recover in full its compensation based on its written agreement with
her, averring thus:
xxxx
28. Upon execution of the Compromise Agreement and pursuant thereto, Petitioner immediately received
(supposedly) from Respondents₱40,000,000.00. But despite the settlement between the parties, Petitioner did not
pay Intervenor its just compensation as set forth in their engagement agreement; instead, she immediately moved to
Dismiss/Withdraw the Present Petition.
29. To parties’ minds, with the dismissal by Petitioner of Intervenor as her counsel, both Petitioner and Respondents
probably thought they would be able to settle the case without any cost to them, with Petitioner saving on
Intervenor’s contingent fees while Respondents able to take advantage of the absence of Intervenor in determining
the settlement price.
30. The parties cannot be any more mistaken. Pursuant to the Second Paragraph of Section 26, Rule 138, of the
Revised Rules of Court quoted in paragraph 3 hereof, Intervenor is still entitled to recover from Petitioner the full
compensation it deserves as stipulated in its contract.
31. All the elements for the full recovery of Intervenor’s compensation are present. First, the contract between the
Intervenor and Petitioner is reduced into writing. Second, Intervenor is dismissed without justifiable cause and at the
stage of proceedings where there is nothing more to be done but to await the Decision or Resolution of the Present
Petition.23
xxxx
In support of the Motion for Intervention, the Intervenor cites the rulings in Aro v. Nañawa 24 and Law Firm of
Raymundo A. Armovit v. Court of Appeals,25 particularly the following passage:
x x x. While We here reaffirm the rule that "the client has an undoubted right to compromise a suit without the
intervention of his lawyer," We hold that when such compromise is entered into in fraud of the lawyer, with intent to
deprive him of the fees justly due him, the compromise must be subject to the said fees and that when it is evident
that the said fraud is committed in confabulation with the adverse party who had knowledge of the lawyer’s
contingent interest or such interest appears of record and who would benefit under such compromise, the better
practice is to settle the matter of the attorney’s fees in the same proceeding, after hearing all the affected parties and
without prejudice to the finality of the compromise agreement in so far as it does not adversely affect the right of the
lawyer.26 x x x.
The Intervenor prays for the following reliefs:
a) Granting the Motion for Intervention to Protect Attorney’s Rights in favor of the Intervenor;
b) Directing both Petitioner and Respondents jointly and severally to pay Intervenor its contingent fees;
c) Granting a lien upon all judgments for the payment of money and executions issued in pursuance of
such judgments; and
d) Holding in Abeyance in the meantime the Resolution of the Motion to Dismiss/Withdraw Case filed by
Petitioner and granting the Motion only after Intervenor has been fully paid its just compensation; and
e) Other reliefs just and equitable.27
Opposing the Motion for Intervention,28 Malvar stresses that there was no truth to the Intervenor’s claim to defraud it
of its professional fees; that the Intervenor lacked the legal capacity to intervene because it had ceased to exist after
Atty. Marwil N. Llasos resigned from the Intervenor and Atty. Richard B. Dasal became barred from private practice
upon his appointment as head of the Legal Department of the Small Business Guarantee and Finance Corporation, a
government subsidiary; and that Atty. Llasos and Atty. Dasal had personally handled her case.
Malvar adds that even assuming, arguendo, that the Intervenor still existed as a law firm, it was still not entitled to
intervene for the following reasons, namely: firstly, it failed to attend to her multiple pleas and inquiries regarding the
case, as when communications to the Intervenor through text messages were left unanswered; secondly,
maintaining that this was a justifiable cause to dismiss its services, the Intervenor only heeded her repeated
demands to withdraw from the case when Atty. Dasal was confronted about his appointment to the government
subsidiary; thirdly, it was misleading and grossly erroneous for the Intervenor to claim that it had rendered to her full
and satisfactory services when the truth was that its participation was strictly limited to the preparation, finalization
and submission of the petition for review with the Supreme Court; and finally, while the Intervenor withdrew its
services on October 5, 2009, the compromise agreement was executed with the respondents on December 9,2010
and notarized on December 14, 2010, after more than a year and two months, dispelling any badge of bad faith on
their end.
On June 21, 2011, the respondents filed their comment to the Intervenor’s Motion for Intervention.
On November 18, 2011, the Intervenor submitted its position on the respondent’s comment dated June 21,
2011,29and thereafter the respondents sent in their reply.30
Issues
The issues for our consideration and determination are two fold, namely: (a) whether or not Malvar’s motion to
dismiss the petition on the ground of the execution of the compromise agreement was proper; and (b) whether or not
the Motion for Intervention to protect attorney’s rights can prosper, and, if so, how much could it recover as attorney’s
fees.
Ruling of the Court
We shall decide the issues accordingly.
1.
Client’s right to settle litigation
by compromise agreement, and
to terminate counsel; limitations
A compromise agreement is a contract, whereby the parties undertake reciprocal obligations to avoid litigation, or put
an end to one already commenced.31 The client may enter into a compromise agreement with the adverse party to
terminate the litigation before a judgment is rendered therein.32 If the compromise agreement is found to be in order
and not contrary to law, morals, good customs and public policy, its judicial approval is in order. 33 A compromise
agreement, once approved by final order of the court, has the force of res judicata between the parties and will not
be disturbed except for vices of consent or forgery.34
A client has an undoubted right to settle her litigation without the intervention of the attorney, for the former is
generally conceded to have exclusive control over the subject matter of the litigation and may at anytime, if acting in
good faith, settle and adjust the cause of action out of court before judgment, even without the attorney’s
intervention.35 It is important for the client to show, however, that the compromise agreement does not adversely
affect third persons who are not parties to the agreement.36
By the same token, a client has the absolute right to terminate the attorney-client relationship at any time with or
without cause.37 But this right of the client is not unlimited because good faith is required in terminating the
relationship. The limitation is based on Article 19 of the Civil Code, which mandates that "every person must, in the
exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith." The right is also subject to the right of the attorney to be compensated. This is clear from
Section 26, Rule 138 of the Rules of Court, which provides:
Section 26. Change of attorneys. - An attorney may retire at anytime from any action or special proceeding, by the
written consent of his client filed in court. He may also retire at any time from an action or special proceeding, without
the consent of his client, should the court, on notice to the client and attorney, and on hearing, determine that he
ought to be allowed to retire. In case of substitution, the name of the attorney newly employed shall be entered on
the docket of the court in place of the former one, and written notice of the change shall be given to the adverse
party.
A client may at any time dismiss his attorney or substitute another in his place, but if the contract between client and
attorney has been reduced to writing and the dismissal of the attorney was without justifiable cause, he shall be
entitled to recover from the client the full compensation stipulated in the contract. However, the attorney may, in the
discretion of the court, intervene in the case to protect his rights. For the payment of his compensation the attorney
shall have a lien upon all judgments for the payment of money, and executions issued in pursuance of such
judgment, rendered in the case wherein his services had been retained by the client. (Bold emphasis supplied)
In fine, it is basic that an attorney is entitled to have and to receive a just and reasonable compensation for services
performed at the special instance and request of his client. The attorney who has acted in good faith and honesty in
representing and serving the interests of the client should be reasonably compensated for his service. 38
2.
Compromise agreement is to be approved
despite favorable action on the
Intervenor’s Motion for Intervention
On considerations of equity and fairness, the Court disapproves of the tendencies of clients compromising their
cases behind the backs of their attorneys for the purpose of unreasonably reducing or completely setting to naught
the stipulated contingent fees.39 Thus, the Court grants the Intervenor’s Motion for Intervention to Protect Attorney’s
Rights as a measure of protecting the Intervenor’s right to its stipulated professional fees that would be denied under
the compromise agreement. The Court does so in the interest of protecting the rights of the practicing Bar rendering
professional services on contingent fee basis.
Nonetheless, the claim for attorney’s fees does not void or nullify the compromise agreement between Malvar and
the respondents. There being no obstacles to its approval, the Court approves the compromise agreement. The
Court adds, however, that the Intervenor is not left without a remedy, for the payment of its adequate and reasonable
compensation could not be annulled by the settlement of the litigation without its participation and conformity. It
remains entitled to the compensation, and its right is safeguarded by the Court because its members are officers of
the Court who are as entitled to judicial protection against injustice or imposition of fraud committed by the client as
much as the client is against their abuses as her counsel. In other words, the duty of the Court is not only to ensure
that the attorney acts in a proper and lawful manner, but also to see to it that the attorney is paid his just fees. Even if
the compensation of the attorney is dependent only on winning the litigation, the subsequent withdrawal of the case
upon the client’s initiative would not deprive the attorney of the legitimate compensation for professional services
rendered.40
The basis of the intervention is the written agreement on contingent fees contained in the engagement executed on
March 19, 2008 between Malvar and the Intervenor,41 the pertinent portion of which stipulated that the Intervenor
would "collect ten percent (10%) of the amount of Ph₱14,252,192.12 upon its collection and another ten percent
(10%) of the remaining balance of Ph₱41,627,593.75 upon collection thereof, and also ten percent (10%) of
whatever is the value of the stock option you are entitled to under the Decision." There is no question that such
arrangement was a contingent fee agreement that was valid in this jurisdiction, provided the fees therein fixed were
reasonable.42
We hold that the contingent fee of 10% of ₱41,627,593.75 and 10% of the value of the stock option was reasonable.
The ₱41,627,593.75 was already awarded to Malvar by the NLRC but the award became the subject of the appeal in
this Court because the CA reversed the NLRC. Be that as it may, her subsequent change of mind on the amount
sought from the respondents as reflected in the compromise agreement should not negate or bar the Intervenor’s
recovery of the agreed attorney’s fees.
Considering that in the event of a dispute between the attorney and the client as to the amount of fees, and the
intervention of the courts is sought, the determination requires that there be evidence to prove the amount of fees
and the extent and value of the services rendered, taking into account the facts determinative thereof, 43 the history of
the Intervenor’s legal representation of Malvar can provide a helpful predicate for resolving the dispute between her
and the Intervenor.
The records reveal that on March 18, 2008, Malvar engaged the professional services of the Intervenor to represent
her in the case of illegal dismissal. At that time, the case was pending in the CA at the respondents’ instance after
the NLRC had set aside the RCU’s computation of Malvar’s backwages and monetary benefits, and had upheld the
computation arrived at by the NLRC Computation Unit. On April 17, 2008, the CA set aside the assailed resolution of
the NLRC, and remanded the case to the Labor Arbiter for the computation of her monetary awards. It was at this
juncture that the Intervenor commenced its legal service, which included the following incidents, namely:
a) Upon the assumption of its professional duties as Malvar’s counsel, a Motion for Reconsideration of the
Decision of the Court of Appeals dated April 17, 2008 consisting of thirty-eight pages was filed before the
Court of Appeals on May 6, 2008.
b) On June 2, 2009, Intervenors filed a Comment to Respondents’ Motion for Partial Reconsideration, said
Comment consisted 8 pages.
c) In the execution proceedings before Labor Arbiter Jaime Reyno, Intervenor prepared and filed on
Malvar’s behalf an "Ex-Parte Motion to Release to Complainant the Undisputed amount of
₱14,252,192.12" in NLRC NCR Case No. 30-07-02716-00.
d) On July 29, 2000, Intervenor prepared and filed before theLabor Arbiter a Comment to Respondents’
Opposition to the "Ex-Parte Motion to Release" and a "Motion Reiterating Immediate Implementation of the
Writ of Execution"
e) On August 6, 2008, Intervenor prepared and filed before the Labor Arbiter Malvar’s Motion Reiterating
Motion to Release the Amount of ₱14,252,192.12.44
The decision promulgated on April 17, 200845 and the resolution promulgated on July 30, 200846 by the CA prompted
Malvar to appeal on August 15, 2008 to this Court with the assistance of the Intervenor. All the subsequent
pleadings, including the reply of April 13, 2009,47 were prepared and filed in Malvar’s behalf by the Intervenor.
Malvar should accept that the practice of law was not limited to the conduct of cases or litigations in court but
embraced also the preparation of pleadings and other papers incidental to the cases or litigations as well as the
management of such actions and proceedings on behalf of the clients. 48 Consequently, fairness and justice demand
that the Intervenor be accorded full recognition as her counsel who discharged its responsibility for Malvar’s cause to
its successful end.
But, as earlier pointed out, although a client may dismiss her lawyer at any time, the dismissal must be for a
justifiable cause if a written contract between the lawyer and the client exists. 49
Considering the undisputed existence of the written agreement on contingent fees, the question begging to be
answered is: Was the Intervenor dismissed for a justifiable cause?
We do not think so.
In the absence of the lawyer’s fault, consent or waiver, a client cannot deprive the lawyer of his just fees already
earned in the guise of a justifiable reason. Here, Malvar not only downplayed the worth of the Intervenor’s legal
service to her but also attempted to camouflage her intent to defraud her lawyer by offering excuses that were not
only inconsistent with her actions but, most importantly, fell short of being justifiable.
The letter Malvar addressed to Retired Justice Bellosillo, who represented the Intervenor, debunked her allegations
of unsatisfactory legal service because she thereby lavishly lauded the Intervenor for its dedication and devotion to
the prosecution of her case and to the protection of her interests. Also significant was that the attorney-client
relationship between her and the Intervenor was not severed upon Atty. Dasal’s appointment to public office and
Atty. Llasos’ resignation from the law firm. In other words, the Intervenor remained as her counsel of record, for, as
we held in Rilloraza, Africa, De Ocampo and Africa v. Eastern Telecommunication Philippines, Inc., 50 a client who
employs a law firm engages the entire law firm; hence, the resignation, retirement or separation from the law firm of
the handling lawyer does not terminate the relationship, because the law firm is bound to provide a replacement.
The stipulations of the written agreement between Malvar and the Intervenors, not being contrary to law, morals,
public policy, public order or good customs, were valid and binding on her. They expressly gave rise to the right of
the Intervenor to demand compensation. In a word, she could not simply walk away from her contractual obligations
towards the Intervenor, for Article 1159 of the Civil Code provides that obligations arising from contracts have the
force of law between the parties and should be complied with in good faith.
To be sure, the Intervenor’s withdrawal from the case neither cancelled nor terminated the written agreement on the
contingent attorney’s fees. Nor did the withdrawal constitute a waiver of the agreement. On the contrary, the
agreement continued between them because the Intervenor’s Manifestation (with Motion to Withdraw as Counsel for
Petitioner)explicitly called upon the Court to safeguard its rights under the written agreement, to wit:
WHEREFORE, premises considered, undersigned counsel respectfully pray that instant Motion to Withdraw as
Counsel for Petitioner be granted and their attorney’s lien pursuant to the written agreement be reflected in the
judgment or decision that may be rendered hereafter conformably with par. 2, Sec. 26, Rule 138 of the Rules of
Court.
Undersigned counsel further requests that they be furnished copy of the decision, resolutions and other legal
processes of this Honorable Court to enable them to protect their interests. 51
Were the respondents also liable?
The respondents would be liable if they were shown to have connived with Malvar in the execution of the
compromise agreement, with the intention of depriving the Intervenor of its attorney’s fees. Thereby, they would be
solidarily liable with her for the attorney’s fees as stipulated in the written agreement under the theory that they
unfairly and unjustly interfered with the Intervenor’s professional relationship with Malvar.
The respondents insist that they were not bound by the written agreement, and should not be held liable under
it.1âwphi1
We disagree with the respondents’ insistence. The respondents were complicit in Malvar’s move to deprive the
Intervenor of its duly earned contingent fees.
First of all, the unusual timing of Malvar’s letter terminating the Intervenor’s legal representation of her, of her Motion
to Dismiss/Withdraw Case, and of the execution of compromise agreement manifested her desire to evade her legal
obligation to pay to the Intervenor its attorney’s fees for the legal services rendered. The objective of her withdrawal
of the case was to release the respondents from all her claims and causes of action in consideration of the
settlement in the stated amount of ₱40,000.000.00, a sum that was measly compared to what she was legally
entitled to, which, to begin with, already included the ₱41,627,593.75 and the value of the stock option already
awarded to her. In other words, she thereby waived more than what she was lawfully expected to receive from the
respondents.
Secondly, the respondents suddenly turned around from their strong stance of berating her demand as offensive to
all precepts of justice and fair play and as a form of unjust enrichment for her to a surprisingly generous surrender to
her demand, allowing to her through their compromise agreement the additional amount of ₱40,000,000.00 on top of
the₱14,252,192.12 already received by her in August 2008. The softening unavoidably gives the impression that
they were now categorically conceding that Malvar deserved much more. Under those circumstances, it is plausible
to conclude that her termination of the Intervenor’s services was instigated by their prodding in order to remove the
Intervenor from the picture for being a solid obstruction to the settlement for a much lower liability, and thereby save
for themselves and for her some more amount.
Thirdly, the compromise agreement was silent on the Intervenor’s contingent fee, indicating that the objective of the
compromise agreement was to secure a huge discount from its liability towards Malvar.
Finally, contrary to the stipulation in the compromise agreement, only Malvar, minus the respondents, filed the
Motion to Dismiss/Withdraw Case.
At this juncture, the Court notes that the compromise agreement would have Malvar waive even the substantial stock
options already awarded by the NLRC’s decision,52 which ordered the respondents to pay to her, among others, the
value of the stock options and all other bonuses she was entitled to or would have been entitled to had she not been
illegally dismissed from her employment. This ruling was affirmed by the CA.53 But the waiver could not negate the
Intervenor’s right to 10% of the value of the stock options she was legally entitled to under the decisions of the NLRC
and the CA, for that right was expressly stated in the written agreement between her and the Intervenor. Thus, the
Intervenor should be declared entitled to recover full compensation in accordance with the written agreement
because it did not assent to the waiver of the stock options, and did not waive its right to that part of its
compensation.
These circumstances show that Malvar and the respondents needed an escape from greater liability towards the
Intervenor, and from the possible obstacle to their plan to settle to pay. It cannot be simply assumed that only Malvar
would be liable towards the Intervenor at that point, considering that the Intervenor, had it joined the negotiations as
her lawyer, would have tenaciously fought all the way for her to receive literally everything that she was entitled to,
especially the benefits from the stock option. Her rush to settle because of her financial concerns could have led her
to accept the respondents’ offer, which offer could be further reduced by the Intervenor’s expected demand for
compensation. Thereby, she and the respondents became joint tort-feasors who acted adversely against the
interests of the Intervenor. Joint tort-feasors are those who command, instigate, promote, encourage, advise,
countenance, cooperate in, aid or abet the commission of a tort, or who approve of it after it is done, if done for their
benefit.54
They are also referred to as those who act together in committing wrong or whose acts, if independent of each other,
unite in causing a single injury.55 Under Article 2194 of the Civil Code, joint tort-feasors are solidarily liable for the
resulting damage. As regards the extent of their respective liabilities, the Court said in Far Eastern Shipping
Company v. Court of Appeals:56
x x x. Where several causes producing an injury are concurrent and each is an efficient cause without which the
injury would not have happened, the injury may be attributed to all or any of the causes and recovery may be had
against any or all of the responsible persons although under the circumstances of the case, it may appear that one of
them was more culpable, and that the duty owed by them to the injured person was not same. No actor’s negligence
ceases to be a proximate cause merely because it does not exceed the negligence of other acts. Each wrongdoer is
responsible for the entire result and is liable as though his acts were the sole cause of the injury.
There is no contribution between joint tort-feasors whose liability is solidary since both of them are liable for the total
damage. Where the concurrent or successive negligent acts or omissions of two or more persons, although acting
independently, are in combination the direct and proximate cause of a single injury to a third person, it is impossible
to determine in what proportion each contributed to the injury and either of them is responsible for the whole injury. x
xx
Joint tort-feasors are each liable as principals, to the same extent and in the same manner as if they had performed
the wrongful act themselves. It is likewise not an excuse for any of the joint tort-feasors that individual participation in
the tort was insignificant as compared to that of the other. 57 To stress, joint tort-feasors are not liable pro rata. The
damages cannot be apportioned among them, except by themselves. They cannot insist upon an apportionment, for
the purpose of each paying an aliquot part. They are jointly and severally liable for the whole amount.58 Thus, as joint
tort-feasors, Malvar and the respondents should be held solidarily liable to the Intervenor. There is no way of
appreciating these circumstances except in this light.
That the value of the stock options that Malvar waived under the compromise agreement has not been fixed as yet is
no hindrance to the implementation of this decision in favor of the Intervenor. The valuation could be reliably made at
a subsequent time from the finality of this adjudication. It is enough for the Court to hold the respondents and Malvar
solidarily liable for the 10% of that value of the stock options.
As a final word, it is necessary to state that no court can shirk from enforcing the contractual stipulations in the
manner they have agreed upon and written. As a rule, the courts, whether trial or appellate, have no power to make
or modify contracts between the parties. Nor can the courts save the parties from disadvantageous provisions. 59The
same precepts hold sway when it comes to enforcing fee arrangements entered into in writing between clients and
attorneys. In the exercise of their supervisory authority over attorneys as officers of the Court, the courts are bound
to respect and protect the attorney’s lien as a necessary means to preserve the decorum and respectability of the
Law Profession.60 Hence, the Court must thwart any and every effort of clients already served by their attorneys’
worthy services to deprive them of their hard-earned compensation. Truly, the duty of the courts is not only to see to
it that attorneys act in a proper and lawful manner, but also to see to it that attorneys are paid their just and lawful
fees.61
WHEREFORE, the Court APPROVES the compromise agreement; GRANTS the Motion for Intervention to Protect
Attorney's Rights; and ORDERS Czarina T. Malvar and respondents Kraft Food Philippines Inc. and Kraft Foods
International to jointly and severally pay to Intervenor Law Firm, represented by Retired Associate Justice Josue N.
Bellosillo, its stipulated contingent fees of 10% of ₱41,627,593.75, and the further sum equivalent to 10% of the
value of the stock option. No pronouncement on costs of suit.
SO ORDERED.
G.R. No. 205453 February 5, 2014
UNITED TOURIST PROMOTIONS (UTP) and ARIEL D. JERSEY, Petitioners,
vs.
HARLAND B. KEMPLIN, Respondents.
DECISION
REYES, J.:
United Tourist Promotions (UTP), a sole proprietorship business entity engaged in the printing and distribution of
promotional brochures and maps for tourists, and its registered owner, Ariel D. Jersey (Jersey), are now before us
with a Petition for Review on Certiorari1 filed under Rule 45 of the Rules of Court to assail the Decision2 rendered by
the Court of Appeals (CA) on June 29, 2012 and the Resolution3 thereafter issued on January 16, 2013 in CA-G.R.
SP No. 118971. The assailed decision and resolution affirmed in toto the rulings of the Sixth Division of the National
Labor Relations Commission (NLRC) and Labor Arbiter Leandro M. Jose (LA Jose) finding that Harland B. Kemplin
(Kemplin) was illegally dismissed as President of UTP.
Antecedents
In 1995, Jersey, with the help of two American expatriates, Kemplin and the late Mike Dunne, formed UTP.
In 2002, UTP employed Kemplin to be its President for a period of five years, to commence on March 1, 2002 and to
end on March 1, 2007, "renewable for the same period, subject to new terms and conditions".4
Kemplin continued to render his services to UTP even after his fixed term contract of employment expired. Records
show that on May 12, 2009, Kemplin, signing as President of UTP, entered into advertisement agreements with
Pizza Hut and M. Lhuillier.5
On July 30, 2009, UTP’s legal counsel sent Kemplin a letter, which, in part, reads:
6
We would like to inform you that your Employment Contract had been expired since March 1, 2007 and never been
renewed. So[,] it is clear [that] you are no longer [an] employee as President of [UTP] considering the expiration of
your employment contract. However, because of your past services to our client’s company despite [the fact that]
your service is no longer needed by his company[,] as token[,] he tolerated you to come in the office [and] as such[,]
you were given monthly commissions with allowances.
But because of your inhuman treatment x x x [of] the rank and file employees[,] which caused great damage and
prejudices to the company as evidenced [by] those cases filed against you[,] specifically[:] (1) x x x for Grave Oral
[T]hreat pending for Preliminary Investigation, Pasay City Prosecutor’s Office x x x[;] (2) x x x for Summary
Deportation[,] BID, Pasay City Prosecutor’s Office; and (3) x x x for Grave Coercion and Grave Threats, we had no
other recourse but to give you this notice to cease and desist from entering the premises of the main office[,] as well
as the branch offices of [UTP] from receipt hereof for the protection and safety of the company[,] as well as to the
employees and to avoid further great damages that you may cause to the company x x x. 7
On August 10, 2009, Kemplin filed before Regional Arbitration Branch No. 111 of the NLRC a Complaint 8 against
UTP and its officers, namely, Jersey, Lorena Lindo9 and Larry Jersey,10 for: (a) illegal dismissal; (b) non-payment of
salaries, 13th month and separation pay, and retirement benefits; (c) payment of actual, moral and exemplary
damages and monthly commission of ₱200,0000.00; and (d) recovery of the company car, which was forcibly taken
from him, personal laptop, office paraphernalia and personal books.
In Kemplin’s Position Paper,11 which he filed before LA Jose, he claimed that even after the expiration of his
employment contract on March 1, 2007, he rendered his services as President and General Manager of UTP. In
December of 2008, he began examining the company’s finances, with the end in mind of collecting from delinquent
accounts of UTP’s distributors. After having noted some accounting discrepancies, he sent e-mail messages to the
other officers but he did not receive direct replies to his queries. Subsequently, on July 30, 2009, he received a
notice from UTP’s counsel ordering him to cease and desist from entering the premises of UTP offices.
UTP, on its part, argued that the termination letter sent to Kemplin on July 30, 2009 was based on (a) the expiration
of the fixed term employment contract they had entered into, and (b) an employer’s prerogative to terminate an
employee, who commits criminal and illegal acts prejudicial to business. UTP alleged that Kemplin bad-mouthed,
treated his co-workers as third class citizens, and called them "brown monkeys". Kemplin’s presence in the premises
of UTP was merely tolerated and he was given allowances due to humanitarian considerations. 12
The LA’s Decision
On June 25, 2010, LA Jose rendered a Decision,13 the dispositive portion of which reads:
WHEREFORE, premises considered, the following findings are made:
1. [Kemplin] is found to be a regular employee;
2. [Kemplin] is adjudged to have been illegally dismissed even as [UTP and Jersey] are held liable
therefor;
3. Consequently, [UTP and Jersey] are ordered to reinstate [Kemplin] to his former position without loss of
seniority rights and other privileges, with backwages initially computed at this time at [P]219,200.00;
4. The reinstatement aspect of this decision is immediately executory even as [UTP and Jersey] are
enjoined to submit a report of compliance therewith within ten (10) days from receipt hereof;
5. [UTP and Jersey] are further ordered to pay [Kemplin] his salary for July 2009 of [P]20,000.00 and 13th
month pay for the year 2009 in the sum of [P]20,000.00;
 6. [UTP and Jersey] are assessed 10% attorney’s fee of [P]25,920.00 in favor of [Kemplin].
All other claims are dismissed for lack of merit.
14
SO ORDERED.
LA Jose’s ratiocinations are:
[Kemplin] was able to show that he was still officially connected with [UTP] as he signed in his capacity as President
of [UTP] an (sic) advertisement agreement[s] with Pizza Hut and M. Lhuillier Phils. as late as May 12, 2009. This only
goes to show that [UTP and Jersey’s] theory of toleration has no basis in fact.
It would appear now, per record, that [Kemplin] was allowed to continue performing and suffered to work much
beyond the expiration of his contract. Such being the case, [Kemplin’s] fixed term employment contract was
converted to a regular one under Art. 280 of the Labor Code, as amended (Viernes vs. NLRC, et al., G.R. No.
108405, April 4, 2003).
[Kemplin’s] tenure having now been converted to regular employment, he now enjoys security of tenure under Art.
279 of the Labor Code, as amended. Simply put, [Kemplin] may only be dismissed for cause and after affording him
the procedural requirement of notice and hearing. Otherwise, his dismissal will be illegal.
Be that as it may, [UTP and Jersey] proceeded to argue that [Kemplin] was not illegally terminated, for his
termination was according to Art. 282 of the Labor Code, as amended, i.e., loss of trust and confidence allegedly for
various and serious offenses x x x.
However, upon closer scrutiny, in trying to justify [Kemplin’s] dismissal on the ground of loss of trust and confidence,
[UTP and Jersey] failed to observe the procedural requirements of notice and hearing, or more particularly, the two-
notice rule. It would appear that [UTP and Jersey’s] x x x cease and desist letter compressed the two notices in one.
Besides, the various and serious offenses alluded thereto were not legally established before [Kemplin’s] separation.
Ostensibly, [Kemplin] was not confronted with these offenses and given the opportunity to explain himself.
x x x [R]espondents miserably failed to discharge their onus probandi. Hence, illegal dismissal lies.
xxxx
The claim for non-payment of salary for July 2009 appears to be meritorious for failure of [UTP and Jersey] to prove
payment thereof when they have the burden of proof to do so.
The same ruling applies to the claim for 13th month pay.
However, the claims for commissions, company car, laptop, office paraphernalia and personal books may not be
given due course for failure of [Kemplin] to provide the specifics of his claims and/or sufficient basis thereof when the
burden of proof is reposed in him.15
The Decision of the NLRC
On January 21, 2011, the NLRC affirmed LA Jose’s Decision. However, Lorena Lindo and Larry Jersey were
16
expressly excluded from assuming liability for lack of proof of their involvement in Kemplin’s dismissal. The NLRC
declared:
[A]fter the expiration of [Kemplin’s] fixed term employment, his employment from March 2, 2007 until his separation
therefrom on July 30, 2009 is classified as regular pursuant to the provisions of Article 280 of the Labor Code, to wit:
ART. 280. Regular and casual employment. – The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any
employee who has rendered at least one year of service, whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in which he is employed and his employment shall
continue while such activity exists.
The aforesaid Article 280 of the Labor Code, as amended, classifies employees into three (3) categories, namely: (1)
regular employees or those whose work is necessary or desirable to the usual business of the employer; (2) project
employees or those whose employment has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed [are] seasonal in nature and the employment is for the duration of the season; and (3)
casual employees or those who are neither regular nor project employees. Regular employees are further classified
into: (1) regular employees by nature of work; and (2) regular employees by years of service. The former refers to
those employees who perform a particular activity which is necessary or desirable in the usual business or trade of
the employer, regardless of their length of service; while the latter refers to those employees who have been
performing the job, regardless of the nature thereof, for at least a year. (Rowell Industrial Corporation vs. Court of
Appeals, G.R. No. 167714, March 7, 2007)
Considering that he continued working as President for UTP for about one (1) year and five (5) months and since
[his] employment is not covered by another fixed term employment contract, [Kemplin’s] employment after the
expiration of his fixed term employment is already regular. Therefore, he is guaranteed security of tenure and can
only be removed from service for cause and after compliance with due process. This is notwithstanding [UTP and
Jersey’s] insistence that they merely tolerated [Kemplin’s] "consultancy" for humanitarian reasons.
In termination cases, the employer bears the burden of proving that the dismissal of the employee is for a just or an
authorized cause. Failure to dispose of the burden would imply that the dismissal is not lawful, and that the employee
is entitled to reinstatement, back wages and accruing benefits. Moreover, dismissed employees are not required to
prove their innocence of the employer’s accusations against them. (San Miguel Corporation vs. National Labor
Relations Commission and William L. Friend, Jr., G.R. No. 153983, May 26, 2009).
In this case, [UTP and Jersey] failed to prove the existence of just cause for his termination. Their allegation of loss
of trust and confidence was raised only in their position paper and was never posed before [Kemplin] in order that he
may be able to answer to the charge. In fact, he was merely told to cease and desist from entering the premises. He
was never afforded due process as he was not notified of the charges against him and given the opportunity to be
heard. Thus, there was never any proven just cause for [Kemplin’s] termination, which makes it, therefore, illegal. x x
x.17 (Underscoring supplied)
The CA’s Decision
On June 29, 2012, the CA rendered the herein assailed Decision18 affirming the disquisitions of the LA and NLRC.
The CA stated that:
[Kemplin’s] presence for humanitarian reasons is purely self-serving and belied by the evidence on record. In fact,
[UTP and Jersey’s] alleged document denominated as Revocation of Power of Attorney (executed on November 24,
2008 or MORE THAN one year from the expiration of [Kemplin’s] employment contract) will only confirm that
[Kemplin] continued rendering work x x x beyond March 1, 2007. x x x.
xxxx
Moreover, if indeed [Kemplin’s] relationship with UTP after the expiration of the former’s employment contract was
based on [UTP and Jersey’s] mere tolerance, why then did [they] have to "dismiss" [Kemplin] based on alleged loss
of trust and confidence? Clearly, [UTP’s and Jersey’s] allegation in their Position Paper (before LA Jose) that
[Kemplin] was "formally given notice of his termination as in [sic] indicated on the Notice of Termination Letter dated
July 20, 2009," is already an indication, if not an admission, that [Kemplin] was, indeed, still in the employ of UTP
albeit without a new or renewed contract of employment.
xxxx
The validity of an employer’s dismissal from service hinges on the satisfaction of the two substantive requirements
for a lawful termination. x x x [T]he procedural aspect. And x x x the substantive aspect.
Records are bereft of any evidence that [Kemplin] was notified of the alleged causes for his possible dismissal.
Neither was there any notice sent to him to afford him an opportunity to air his side and defenses. The alleged Notice
of Termination Letter sent by [UTP and Jersey] miserably failed to comply with the twin-notice requirement under the
law. x x x
xxxx
We likewise sustain the finding of the [NLRC] that [UTP and Jersey] failed to prove the existence of just cause for
[Kemplin’s] termination. [UTP and Jersey’s] allegation of loss of trust and confidence was raised only in their Position
Paper and was never posed before [Kemplin] in order that he may be able to answer to the charge. It is a basic
principle that in illegal dismissal cases, the burden of proof rests upon the employer to show that the dismissal of the
employee is for a just cause and failure to do so would necessarily mean that the dismissal is not justified.19(Citations
omitted)
On January 16, 2013, the CA issued the herein assailed Resolution20 denying UTP and Jersey’s Motion for
Reconsideration.21
Hence, the instant petition anchored on the following issues:
Whether or not the CA erred when it:
(a) ruled that the termination of [Kemplin] was invalid or unjust;
(b) invalidated the termination of [Kemplin] for [UTP and Jersey’s] failure to afford him due process of law;
(c) stated that the issue [of] "loss of trust and confidence" cannot be raised for the first time on appeal; and
(d) failed to apply the doctrine of strained relations in lieu of reinstatement. 22
UTP and Jersey’s Allegations
In support of the instant petition, UTP and Jersey reiterate their averments in the proceedings below. They likewise
emphasize that Kemplin is a fugitive from justice since warrants of arrest for grave oral defamation and grave
coercion23 had been issued against him by the Metropolitan Trial Court (MTC) of Pasay City, and for qualified theft by
the Regional Trial Court (RTC) of Angeles City. Kemplin’s co-workers likewise complained about his alleged
improprieties, lack of proper decorum, immorality and grave misconduct. Kemplin also blocked UTP’s website and
diverted all links towards his own site. Consequently, UTP lost both its customers and revenues. UTP, then, as an
employer, has the right to exercise its management prerogative of terminating Kemplin, who has been committing
acts inimical to business.24
Further, citing Wenphil Corporation v. National Labor Relations Commission, 25 UTP and Jersey argue that even if it
were to be assumed that procedural due process was not observed in terminating Kemplin, still, the dismissal due to
just cause should not be invalidated. Instead, a fine should just be imposed as indemnity. 26
UTP and Jersey also challenge the CA’s holding that the court need not resolve the issue of loss of trust and
confidence since it was only belatedly raised in the Position Paper filed before the LA. It is argued that the issue was
timely raised before the proper forum and Kemplin had all the opportunity to contradict the charges against him, but
he chose not to do so.27
UTP and Jersey likewise posit that a strained relationship between them and Kemplin had arisen due to the several
criminal and civil cases they had filed and which are now pending against the latter. Hence, even if the CA were
correct in holding that there was illegal dismissal, Kemplin’s reinstatement is not advisable, practical and viable. A
separation pay should just be paid instead.28
Kemplin’s Comment
In Kemplin’s Comment,29 he sought the dismissal of the instant petition.
He insists that both procedural and substantive due process were absent when he was dismissed from service.
Kemplin alleges that Jersey merely want to wrest the business away after the former initiated new checking and
collection procedures relative to UTP’s finances. Kemplin also laments that Jersey caused him to answer for
baseless criminal offenses, for which no bail can be posted. Specifically, the indictment for qualified theft before the
RTC of Angeles City involves a car registered in UTP’s name, but which was actually purchased using Kemplin’s
money.30
Kemplin further emphasizes that "the doctrine of strained relations should not be applied
indiscriminately,"31especially where "the differences of the employer with the employee are neither personal nor
physical[,] much less serious in nature[.]"32
This Court’s Ruling
The instant petition is partially meritorious.
The first two issues raised are factual in nature, hence, beyond the ambit of a petition filed under Rule 45 of the
Rules of Court.
It is settled that Rule 45 limits us merely to the review of questions of law raised against the assailed CA
decision.33The Court is generally bound by the CA’s factual findings, except only in some instances, among which is,
when the said findings are contrary to those of the trial court or administrative body exercising quasi-judicial functions
from which the action originated.34
In the case before us now, the LA, NLRC and CA uniformly ruled that Kemplin was dismissed sans substantive and
procedural due process. While we need not belabor the first two factual issues presented herein, it bears stressing
that we find the rulings of the appellate court and the labor tribunals as amply supported by substantial evidence.
Specifically, we note the advertisement agreements 35 with Pizza Hut and M. Lhuillier entered into by Kemplin, who Kemplin should have been promptly apprised of the issue of loss of trust and confidence in him before and not after
signed the documents as President of UTP on May 12, 2009, or more than two years after the supposed expiration he was already dismissed.
of his employment contract. They validate Kemplin’s claim that he, indeed, continued to render his services as
President of UTP well beyond March 2, 2007.
UTP and Jersey challenge the CA’s disquisition that it need not resolve the issue of loss of trust and confidence
considering that the same was only raised in the Position Paper which they filed before LA Jose.
Moreover, in the letter36 dated July 30, 2009, Kemplin was ordered to cease and desist from entering the premises of
UTP.
UTP and Jersey’s stance is untenable.
37
In Unilever Philippines, Inc. v. Maria Ruby M. Rivera, the Court laid down in detail the steps on how to comply with
In Lawrence v. National Labor Relations Commission,42 the Court is emphatic that:
procedural due process in terminating an employee, viz:

Considering that Lawrence has already been fired, the belated act of LEP in attempting to show a just cause in lieu
(1) The first written notice to be served on the employees should contain the specific causes or grounds for
of a nebulous one cannot be given a semblance of legality. The legal requirements of notice and hearing cannot be
termination against them, and a directive that the employees are given the opportunity to submit their
supplanted by the notice and hearing in labor proceedings. The due process requirement in the dismissal process is
written explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules means
different from the due process requirement in labor proceedings and both requirements must be separately observed
every kind of assistance that management must accord to the employees to enable them to prepare
x x x. Thus, LEP’s method of "Fire the employee and let him explain later" is obviously not in accord with the
adequately for their defense. This should be construed as a period of at least five (5) calendar days from
mandates of law. x x x.43
receipt of the notice to give the employees an opportunity to study the accusation against them, consult a
union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and Clearly then, UTP was not exempted from notifying Kemplin of the charges against him.1âwphi1 The fact that
defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as Kemplin was apprised of his supposed offenses, through the Position Paper filed by UTP and Jersey before LA Jose,
basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the did not cure the defects attending his dismissal from employment.
notice should specifically mention which company rules, if any, are violated and/or which among the
grounds under Art. 282 is being charged against the employees.
While we agree with the LA, NLRC and CA’s findings that Kemplin was illegally dismissed, grounds exist compelling
us to modify the order of reinstatement and payment of 13th month benefit.
(2) After serving the first notice, the employers should schedule and conduct a hearing or conference
wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the charge
against them; (2) present evidence in support of their defenses; and (3) rebut the evidence presented UTP and Jersey lament that the CA failed to apply the doctrine of strained relations to justify the award of separation
against them by the management. During the hearing or conference, the employees are given the chance pay in lieu of reinstatement.
to defend themselves personally, with the assistance of a representative or counsel of their choice.
Moreover, this conference or hearing could be used by the parties as an opportunity to come to an APO Chemical Manufacturing Corporation v. Bides44 is instructive anent the instances when separation pay and not
amicable settlement. reinstatement shall be ordered. Thus:

(3) After determining that termination of employment is justified, the employers shall serve the employees
a written notice of termination indicating that: (1) all circumstances involving the charge against the
employees have been considered; and (2) grounds have been established to justify the severance of their
employment. (Underlining ours)38
Prescinding from the above, UTP’s letter sent to Kemplin on July 30, 2009 is a lame attempt to comply with the twin
notice requirement provided for in Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code. 39
The charges against Kemplin were not clearly specified. While the letter stated that Kemplin’s employment contract
had expired, it likewise made general references to alleged criminal suits filed against him.40 One who reads the
letter is inevitably bound to ask if Kemplin is being terminated due to the expiration of his contract, or by reason of
the pendency of suits filed against him. Anent the pendency of criminal suits, the statement is substantially bare.
Besides, an employee’s guilt or innocence in a criminal case is not determinative of the existence of a just or
authorized cause for his dismissal.41 The pendency of a criminal suit against an employee, does not, by itself,
sufficiently establish a ground for an employer to terminate the former.
The Court is well aware that reinstatement is the rule and, for the exception of "strained relations" to apply, it should
be proved that it is likely that, if reinstated, an atmosphere of antipathy and antagonism would be generated as to
adversely affect the efficiency and productivity of the employee concerned.
Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. On one hand, such payment liberates the
employee from what could be a highly oppressive work environment. On the other hand, it releases the employer
from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust. Moreover, the
doctrine of strained relations has been made applicable to cases where the employee decides not to be reinstated
and demands for separation pay.45 (Citations omitted)
Considering that Kemplin’s dismissal occurred in 2009, there is much room to doubt the viability, desirability and
practicability of his reinstatement as UTP’s President. Besides, as a consequence of the unsavory accusations
hurled by the contending parties against each other, Kemplin’s reinstatement is not likely to create an efficient and
productive work environment, hence, prejudicial to business and all the persons concerned.

It also bears stressing that the letter failed to categorically indicate which of the policies of UTP did Kemplin violate to We likewise find the award of 13th month benefit to Kemplin as improper.
warrant his dismissal from service. Further, Kemplin was never given the chance to refute the charges against him
as no hearing and investigation were conducted.
In Torres v. Rural Bank of San Juan, Inc.,46 we stated that:

Corollarily, in the absence of a hearing and investigation, the existence of just cause to terminate Kemplin could not
have been sufficiently established.
Being a managerial employee, the petitioner is not entitled to 13th month pay. Pursuant to Memorandum Order No.
28, as implemented by the Revised Guidelines on the Implementation of the 13th Month Pay Law dated November
16, 1987, managerial employees are exempt from receiving such benefit without prejudice to the granting of other
bonuses, in lieu of the 13th month pay, to managerial employees upon the employer's discretion. 47 (Citation omitted)
Hence, Kemplin, who had rendered his services as UTP's President, a managerial position, is clearly not entitled to
be paid the 13th month benefit.
WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision on June 29, 2012 and the Resolution
thereafter issued on January 16, 2013 rendered by the Court of Appeals in CA-G.R. SP No. 118971 finding that
Harland B. Kemplin was illegally dismissed are AFFIRMED with MODIFICATIONS. The award to Harland B. Kemplin
of a 13th month benefit is hereby DELETED. In lieu of his reinstatement, he is AWARDED SEPARATION PAY to be
computed at the rate of one ( 1) month pay for every year of service, with a fraction of at least six ( 6) months
considered as one whole year to be reckoned from the time of his employment on March 1, 2002 until the finality of
this Decision.48 United Tourist Promotions and Ariel D. Jersey are further ORDERED TO PAY Harland B. Kemplin
legal interest of six percent (6%)per annum of the total monetary awards computed from the finality of this Decision
until full satisfaction thereof.49
The Labor Arbiter is hereby DIRECTED to re-compute the awards according to the above.
SO ORDERED.
G.R. No. 191455 March 12, 2014
DREAMLAND HOTEL RESORT and WESTLEY J. PRENTICE, Petitioners,
vs.
STEPHEN B. JOHNSON, Respondent.
DECISION
REYES, J.:
Before the Court is a Petition for Review on Certiorari1 assailing the December 14, 20092 and February 11,
20103Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 111693 which dismissed outright the petition for
certiorari on technical grounds.
Dreamland Hotel Resort (Dreamland) and its President, Westley J. Prentice (Prentice) (petitioners) alleged the
following facts in the instant petition:
9. Dreamland is a corporation duly registered with the Securities and Exchange Commission on January 15, 2003 to
exist for a period of fifty [50] years with registration number SEC A 1998-6436. Prentice is its current President and
Chief Executive Officer. It is engaged in the hotel, restaurant and allied businesses. Dreamland is presently
undertaking operations of its business at National Highway, Sto. Tomas, Matain Subic, Zambales, 2209.
10. Respondent Stephen B. Johnson is an Australian citizen who came to the Philippines as a businessman/investor
without the authority to be employed as the employee/officer of any business as he was not able to secure his Alien
Employment Permit ["AEP" for brevity], which fact was duly supported by the Certification dated March 14, 2008 of
the Department of Labor and Employment ["DOLE" for brevity] Regional Director, Regional Office No. III, San
Fernando City, Pampanga,
x x x.
11. As a fellow Australian citizen, Johnson was able to convince Prentice to accept his offer to invest in Dreamland
and at the same time provide his services as Operations Manager of Dreamland with a promise that he will secure
an AEP and Tax Identification Number ["TIN" for brevity] prior to his assumption of work.
12. Sometime on June 21, 2007, Prentice and Johnson entered into an Employment Agreement, which stipulates
among others, that the [sic] Johnson shall serve as Operations Manager of Dreamland from August 1, 2007 and shall
serve as such for a period of three (3) years.
13. Before entering into the said agreement[,] Prentice required the submission of the AEP and TIN from Johnson.
Johnson promised that the same shall be supplied within one (1) month from the signing of the contract because the
application for the TIN and AEP were still under process. Thus[,] it was agreed that the efficacy of the said
agreement shall begin after one (1) month or on August 1, 2007. x x x.
14. On or about October 8, 2007, Prentice asked on several occasions the production of the AEP and TIN from
Johnson. Johnson gave excuses and promised that he is already in possession of the requirements. Believing the
word of Johnson, Dreamland commenced a dry run of its operations.
15. Johnson worked as a hotel and resort Operations Manager only at that time. He worked for only about three (3)
weeks until he suddenly abandoned his work and subsequently resigned as Operations Manager starting November
3, 2007. He never reported back to work despite several attempts of Prentice to clarify his issues. x x x. 4
On the other hand, respondent Stephen B. Johnson (Johnson) averred that:
4. There is also no truth to the allegation that it was [Johnson] who "offered" and "convinced" petitioner Prentice to
"invest" in and provide his services to petitioner Dreamland Hotel Resort x x x. The truth of the matter is that it was
petitioners who actively advertised for a resort manager for Dreamland Hotel. x x x
5. It was in response to these advertisements that private respondent Johnson contacted petitioners to inquire on the
terms for employment offered. It was Prentice who offered employment and convinced Johnson to give out a loan,
purportedly so the resort can be completed and operational by August 2007. Believing the representations of
petitioner Prentice, private respondent Johnson accepted the employment as Resort Manager and loaned money to
petitioners [consisting of] his retirement pay in the amount of One Hundred Thousand US Dollars (USD 100,000.00)
to finish construction of the resort. x x x.
6. From the start of August 2007, as stipulated in the Employment Agreement, respondent Johnson already reported
for work. It was then that he found out to his dismay that the resort was far from finished. However, he was instructed
to supervise construction and speak with potential guests. He also undertook the overall preparation of the
guestrooms and staff for the opening of the hotel, even performing menial tasks (i.e. inspected for cracked tiles,
ensured proper grout installation, proper lighting and air-conditioning unit installation, measured windows for curtain
width and showers for shower curtain rods, unloaded and installed mattresses, beddings, furniture and appliances
and even ironed and hung guest room curtains).
xxxx
8. As [Johnson] remained unpaid since August 2007 and he has loaned all his money to petitioners, he asked for his
salary after the resort was opened in October 2007 but the same was not given to him by petitioners. [Johnson]
became very alarmed with the situation as it appears that there was no intention to pay him his salary, which he now
depended on for his living as he has been left penniless. He was also denied the benefits promised him as part of his
compensation such as service vehicles, meals and insurance.
9. [Johnson] was also not given the authority due to him as resort manager. Prentice countermanded his orders to
the staff at every opportunity. Worse, he would even be berated and embarrassed in front of the staff. Prentice would
go into drunken tiffs, even with customers and [Johnson] was powerless to prohibit Prentice. It soon became clear to
him that he was only used for the money he loaned and there was no real intention to have him as resort manager of
Dreamland Hotel.
10. Thus, on November 3, 2007, after another embarrassment was handed out by petitioner Prentice in front of the
staff, which highlighted his lack of real authority in the hotel and the disdain for him by petitioners, respondent
Johnson was forced to submit his resignation, x x x. In deference to the Employment Agreement signed, [Johnson]
stated that he was willing to continue work for the three month period stipulated therein.
11. However, in an SMS or text message sent by Prentice to [Johnson] on the same day at around 8:20 pm, he was
informed that "… I consider [yo]ur resignation as immediate". Despite demand, petitioners refused to pay [Johnson]
the salaries and benefits due him.5
On January 31, 2008, Johnson filed a Complaint for illegal dismissal and non-payment of salaries, among others,
against the petitioners.
On May 23, 2008, the Labor Arbiter (LA) rendered a Decision6 dismissing Johnson’s complaint for lack of merit with
the finding that he voluntarily resigned from his employment and was not illegally dismissed. We quote:
There [is] substantial evidence on record that [Johnson] indeed resigned voluntarily from his position by his mere act
of tendering his resignation and immediately abandoned his work as Operations Manager from the time that he filed
said resignation letter on November 3, 2007 and never returned to his work up to the filing of this case. Evidence on
record also show that [Johnson] only served as Operations Manager for a period of three (3) weeks after which he
tendered his voluntary resignation and left his job. This fact was not denied or questioned by him. His claim that there
was breach of employment contract committed by the respondents and that he was not refunded his alleged
investment with the respondent Dreamland Hotel and Resort were not properly supported with substantial evidence
and besides these issues are not within the ambit of jurisdiction of this Commission.
There being competent, concrete and substantial evidence to confirm the voluntary resignation of [Johnson] from his
employment, there was no illegal dismissal committed against him and for him to be entitled to reinstatement to his
former position and backwages.
xxxx
WHEREFORE, premises considered, let this case be as it is hereby ordered DISMISSED for lack of merit.
All the money claims of the complainant are likewise ordered dismissed for lack of legal basis.
SO ORDERED.7
Dissatisfied, Johnson appealed to the National Labor Relations Commission (NLRC). The NLRC rendered its
Decision8 on April 30, 2009, the dispositive portion of which reads:
WHEREFORE, the decision appeared from is hereby REVERSED. Respondent Wes[t]ley Prentice and/or
Dreamland Resort & Hotel, Inc[.] are hereby ordered to pay [Johnson] the following:
1. Backwages computed at [P]60,000.00 monthly from November
3, 2007 up to the finality of this decision;
2. Separation pay equivalent to one month’s salary, or [P]60,000.00;
3. Unpaid salaries from August 1, 2007 to November 1, 2007 amounting to a total of [P]172,800.00.
SO ORDERED.9
The NLRC also noted the following:
Insofar as the charge of abandonment against [Johnson] is concerned, it is significant that the contention that
[Johnson] received a total of [P]172,000.00 from the [petitioners] since July 2007 is not supported by the evidence x
x x submitted by the [petitioners]. Except for a promissory note x x x for [P]2,200.00, the pieces of evidence in
question do not bear [Johnson’s] signature, and do not therefore constitute proof of actual receipt by him of the
amounts stated therein. Thus, based on the evidence and on the admission by [Johnson] that he received the
amount of [P]5,000.00 from the [petitioners], it appears that [Johnson] received a total of only [P]7,200.00 from the
[petitioners]. Since based on the Employment Agreement, his employment commenced on August 1, 2007, it follows
that as of November 3, 2007, when he tendered his resignation, the [petitioners] had failed to pay him a total of
[P]172,800.00 representing his unpaid salaries for three months ([P]60,000.00 x 3 mos. = [P]180,000.00 – [P]7,200 =
[P]172,800.00). Even the most reasonable employee would consider quitting his job after working for three months
and receiving only an insignificant fraction of his salaries. There was, therefore, not an abandonment of employment
nor a resignation in the real sense, but a constructive dismissal, which is defined as an involuntary resignation
resorted to when continued employment is rendered impossible, unreasonable or unlikely x x x. Consequently,
[Johnson] is entitled to reinstatement with full backwages. However, due to the strained relation between the parties,
which renders his reinstatement inadvisable, separation pay may be awarded in lieu of reinstatement.10
Consequently, the petitioners elevated the NLRC decision to the CA by way of Petition for Certiorari with Prayer for
the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction under Rule 47.
In the assailed Resolution11 dated December 14, 2009, the CA dismissed the petition for lack of proof of authority
and affidavit of service of filing as required by Section 13 of the 1997 Rules of Procedure. The subsequent motion for
reconsideration filed by the petitioners was likewise denied by the CA in a Resolution12 dated February 11, 2010.
Undaunted, the petitioners filed before this Court the present Petition for Review on Certiorari, raising the following
issues, viz:
A.
THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS FIRST
RESOLUTION (DECEMBER 14, 2009) WHICH OUTRIGHTLY DISMISSED PETITIONERS’ PETITION
FOR CERTIORARI.
B.
THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS SECOND
RESOLUTION (FEBRUARY 11, 2010) WHICH DENIED FOR LACK OF MERIT PETITIONERS’ MOTION
FOR RECONSIDERATION.
C.
THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN NOT GIVING DUE CONSIDERATION
TO THE MERITS OF THE PETITIONERS’ PETITION AND IN NOT GRANTING THEIR PRAYER FOR
TEMPORARY RESTRAINING ORDER[.]13
The petition is partially granted.
At its inception, the Court takes note of the Resolutions dated December 14, 2009 and February 11, 2010 of the CA
dismissing the Petition for Certiorari due to the following infirmities:
1. The affiant has no proof of authority to file the petition in behalf of petitioner Dreamland.
2. The petition has no appended affidavit of service to show proof of service of filing as required by Sec. 13
of the 1997 Rules of Civil Procedure.14
To justify their stance that the CA should have considered the merits of the case, instead of dismissing merely on
procedural grounds, the petitioners cited numerous cases wherein the Court has decided to waive the strict
application of the Rules in the interest of substantial justice. 15 While "[u]tter disregard of [the rules of procedure]
cannot justly be rationalized by harking on the policy of liberal construction," 16 the Court recognizes badges of
inequity present in the case at bar, which would be seemingly branded with approval should the Court turn a blind
eye and dismiss this petition on procedural grounds alone.
"While it is desirable that the Rules of Court be faithfully observed, courts should not be so strict about procedural
lapses that do not really impair the proper administration of justice. If the rules are intended to ensure the proper and
orderly conduct of litigation, it is because of the higher objective they seek which are the attainment of justice and the
protection of substantive rights of the parties. Thus, the relaxation of procedural rules, or saving a particular case
from the operation of technicalities when substantial justice requires it, as in the instant case, should no longer be
subject to cavil."17
Time and again, this Court has emphasized that procedural rules should be treated with utmost respect and due
regard, since they are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in
the resolution of rival claims and in the administration of justice. "From time to time, however, we have recognized
exceptions to the Rules but only for the most compelling reasons where stubborn obedience to the Rules would
defeat rather than serve the ends of justice."18 "It is true that procedural rules may be waived or dispensed with in the
interest of substantial justice."19
Brushing aside technicalities, in the utmost interest of substantial justice and taking into consideration the varying
and conflicting factual deliberations by the LA and the NLRC, the Court shall now delve into the merits of the case.
The petitioners contend that the employment of Johnson as operations manager commenced only on October 8,
2007 and not on August 1, 2007. However, the employment contract categorically stated that the "term of
employment shall commence on [August 1, 2007]." Furthermore, the factual allegations of Johnson that he actually
worked from August 1, 2007 were neither sufficiently rebutted nor denied by the petitioners. As Johnson has
specifically set forth in his reply before the LA:
Although the resort did not open until approximately 8th October 2007, [Johnson’s] employment began, as per
Employment Agreement, on 1st August 2007. During the interim period[, Johnson] was frequently instructed by
[Prentice] to supervise the construction staff and speak with potential future guests who visited the site out of
curiosity. Other duties carried out by [Johnson] prior to [the] opening included the overall preparation of the guest
rooms for eventual occupation ensuring cracked tiles were replaced, ensuring grout was properly installed between
tiles, ensuring all lighting and air conditioning [were] functioning, measuring windows for curtain width, measuring
showers for shower curtain rods and installing shower curtains. Other duties included the unloading, carrying and
installation of mattresses, bedding[s], TV’s, refrigerators and other furnishings and ironing curtains x x x. 20
Notably, it was only in their Motion for Reconsideration21 of the NLRC decision where the petitioners belatedly
disagreed that Johnson performed the abovementioned tasks and argued that had Johnson done the tasks he
enumerated, those were tasks foreign and alien to his position as operations manager and [were done] without their
knowledge and consent.22
Nevertheless, Prentice did not deny that he ordered Johnson to speak with potential guests of the hotel. In fact, the
petitioners admitted and submitted documents23 which showed that Johnson has already taken his residence in the
hotel as early as July 2007—a part of Johnson’s remuneration as the hotel operations manager. In presenting such
documents, the petitioners would want to impress upon the Court that their act of accommodating Johnson was
merely due to his being a fellow Australian national.
As it could not be determined with absolute certainty whether or not Johnson rendered the services he mentioned
during the material time, doubt must be construed in his favor for the reason that "the consistent rule is that if doubt
exists between the evidence presented by the employer and that by the employee, the scales of justice must be tilted
in favor of the latter."24 What is clear upon the records is that Johnson had already taken his place in the hotel since
July 2007.
For the petitioners’ failure to disprove that Johnson started working on August 1, 2007, as stated on the employment
contract, payment of his salaries on said date, even prior to the opening of the hotel is warranted.
The petitioners also maintain that they have paid the amount of ₱7,200.00 to Johnson for his three weeks of service
from October 8, 2007 until November 3, 2007, the date of Johnson’s resignation,25 which Johnson did not controvert.
Even so, the amount the petitioners paid to Johnson as his three-week salary is significantly deficient as Johnson’s
monthly salary as stipulated in their contract is ₱60,000.0026. Thus, the amount which Johnson should have been
paid is ₱45,000.00 and not ₱7,200.00. In light of this deficiency, there is more reason to believe that the petitioners
withheld the salary of Johnson without a valid reason. If they indeed believed that Johnson deserves to be paid only
for three-week worth of service as operations manager, then they should still have paid him the amount due for three
weeks of work rendered.
Another argument posited by the petitioners is that the employment contract executed by the parties is inefficacious
because the employment contract is subject to the presentation of Johnson of his Alien Employment Permit (AEP)
and Tax Identification Number (TIN).
Again, this statement is wanting of merit.
Johnson has adduced proof that as a permanent resident, he is exempted from the requirement of securing an AEP
as expressed under Department Order No. 75-06, Series of 2006 of the Department of Labor and Employment
(DOLE), which we quote:
Rule I- Coverage and Exemption
xxxx
2. Exemption. The following categories of foreign nationals are exempt from securing an employment permit:
xxxx
2.7 Resident foreign nationals
Furthermore, Johnson submitted a Certification27 from DOLE Regional Office III, stating that he is exempted from
securing an AEP as a holder of Permanent Resident Visa. Consequently, the condition imposed upon Johnson’s
employment, if there is any, is in truth without effect to its validity.
Anent the requirement of securing a TIN to make the contract of employment efficacious, records show that Johnson
secured his TIN only on December 200728 after his resignation as operations manager. Nevertheless, this does not
negate the fact that the contract of employment had already become effective even prior to such date.
In addition to the foregoing, there is no stipulation in the employment contract itself that the same shall only be
effective upon the submission of AEP and TIN. The petitioners did not present any proof to support this agreement
prior to the execution of the employment contract. In the case of Ortañez v. CA 29, the Court held:
Spoken words could be notoriously unreliable unlike a written contract which speaks of a uniform language. Thus,
under the general rule in Section 9 of Rule 130 of the Rules of Court, when the terms of an agreement were reduced
to writing, as in this case, it is deemed to contain all the terms agreed upon and no evidence of such terms can be
admitted other than the contents thereof. x x x.30 (Citations omitted)
As regards the NLRC findings that Johnson was constructively dismissed and did not abandon his work, the Court is
in consonance with this conclusion with the following basis:
Even the most reasonable employee would consider quitting his job after working for three months and receiving only
an insignificant fraction of his salaries. There was, therefore, not an abandonment of employment nor a resignation in
the real sense, but a constructive dismissal, which is defined as an involuntary resignation resorted to when
continued employment is rendered impossible, unreasonable or unlikely x x x. 31
The petitioners aver that considering that Johnson tendered his resignation and abandoned his work, it is his burden
to prove that his resignation was not voluntary on his part.32
With this, the Court brings to mind its earlier ruling in the case of SHS Perforated Materials, Inc. v. Diaz33 where it
held that:
"There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued
employment. It exists where there is cessation of work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay." 34
It is impossible, unreasonable or unlikely that any employee, such as Johnson would continue working for an
employer who does not pay him his salaries. Applying the Court’s pronouncement in Duldulao v. CA 35, the Court
construes that the act of the petitioners in not paying Johnson his salaries for three months has become unbearable
on the latter’s part that he had no choice but to cede his employment with them. The Court quotes the pertinent
sections of Johnson’s resignation letter which reflects the real reason why he was resigning as operations manager
of the hotel:
I hereby tender my resignation to you, Mr[.] Wes Prentice, Dreamland Resort, Subic, Zambales, Philippines.
Since joining Dreamland Resort & Hotel over three months ago I have put my heart and soul into the business. I
have donated many hours of my personal time. I have frequently worked seven days a week and twelve to thirteen
hours a day. I am now literally penniless, due totally to the fact that I have lent you and your resort/hotel well over
$200,000AU (approx 8million pesos) and your non-payment of wages to me from 1st August 2007 as per
Employment Agreement. x x x.36 (Emphasis and underscoring ours)
The above preceding statement only goes to show that while it was Johnson who tendered his resignation, it was
due to the petitioners’ acts that he was constrained to resign. The petitioners cannot expect Johnson to tolerate
working for them without any compensation.
Since Johnson was constructively dismissed, he was illegally dismissed. As to the reliefs granted to an employee
who is illegally dismissed, Golden Ace Builders v. Talde37 referring to Macasero v. Southern Industrial Gases
Philippines38 is instructive:
Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs
provided are separate and distinct. In instances where reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation pay is granted. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and
backwages.
The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of seniority rights,
and payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month
salary for every year of service should be awarded as an alternative. The payment of separation pay is in addition to
payment of backwages.39 (Emphasis and underscoring supplied)
The case of Golden Ace further provides:
"The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no longer practical
or in the best interest of the parties. Separation pay in lieu of reinstatement may likewise be awarded if the employee
decides not to be reinstated." x x x
Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. On one hand, such payment liberates the
employee from what could be a highly oppressive work environment.1âwphi1 On the other hand, it releases the
employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust.40
In the present case, the NLRC found that due to the strained relations between the parties, separation pay is to be
awarded to Johnson in lieu of his reinstatement.
The NLRC held that Johnson is entitled to backwages from November 3, 2007 up to the finality of the decision;
separation pay equivalent to one month salary; and unpaid salaries from August 1, 2007 to November 1, 2007
amounting to a total of ₱172,800.00.41
While the Court agrees with the NLRC that the award of separation pay and unpaid salaries is warranted, the Court
does not lose sight of the fact that the employment contract states that Johnson's employment is for a term of three
years.
Accordingly, the award of backwages should be computed from November 3, 2007 to August 1, 2010 - which is three
years from August 1, 2007. Furthermore, separation pay is computed from the commencement of employment up to
the time of termination, including the imputed service for which the employee is entitled to backwages. 42 As one-
month salary is awarded as separation pay for every year of service, including imputed service, Johnson should be
paid separation pay equivalent to his three-month salary for the three-year contract.
WHEREFORE, the Resolutions dated December 14, 2009 and February 11, 2010 of the Court of Appeals in CA-
G.R. SP No. 111693 are hereby SET ASIDE. The Decision of the NLRC dated April 30, 2009 in NLRC LAC No. 07-
002711-08 is REINSTATED and AFFIRMED with MODIFICATIONS in the computation of backwages and separation
pay. Dreamland Hotel Resort and Westley Prentice are ORDERED to PAY Stephen Johnson backwages of
₱60,000.00 per month which should be computed from November 3, 2007 to August 1, 2010 less the P.7,200.00
already paid to him. Likewise, separation pay of ₱180.000.00, representing Stephen Johnson's three-year contract
should be awarded.
SO ORDERED.
G.R. No. 172013 October 2, 2009
PATRICIA HALAGUEÑA, MA. ANGELITA L. PULIDO, MA. TERESITA P. SANTIAGO, MARIANNE V. KATINDIG,
BERNADETTE A. CABALQUINTO, LORNA B. TUGAS, MARY CHRISTINE A. VILLARETE, CYNTHIA A.
STEHMEIER, ROSE ANNA G. VICTA, NOEMI R. CRESENCIO, and other flight attendants of PHILIPPINE
AIRLINES, Petitioners,
vs.
PHILIPPINE AIRLINES INCORPORATED, Respondent.
DECISION
PERALTA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set
aside the Decision1 and the Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 86813.
Petitioners were employed as female flight attendants of respondent Philippine Airlines (PAL) on different dates prior
to November 22, 1996. They are members of the Flight Attendants and Stewards Association of the Philippines
(FASAP), a labor organization certified as the sole and exclusive certified as the sole and exclusive bargaining
representative of the flight attendants, flight stewards and pursers of respondent.
On July 11, 2001, respondent and FASAP entered into a Collective Bargaining Agreement 3 incorporating the terms
and conditions of their agreement for the years 2000 to 2005, hereinafter referred to as PAL-FASAP CBA.
Section 144, Part A of the PAL-FASAP CBA, provides that:
A. For the Cabin Attendants hired before 22 November 1996:
xxxx
3. Compulsory Retirement
Subject to the grooming standards provisions of this Agreement, compulsory retirement shall be fifty-five (55) for
females and sixty (60) for males. x x x.
In a letter dated July 22, 2003,4 petitioners and several female cabin crews manifested that the aforementioned CBA
provision on compulsory retirement is discriminatory, and demanded for an equal treatment with their male
counterparts. This demand was reiterated in a letter5 by petitioners' counsel addressed to respondent demanding the
removal of gender discrimination provisions in the coming re-negotiations of the PAL-FASAP CBA.
On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005 CBA proposals6 and
manifested their willingness to commence the collective bargaining negotiations between the management and the
association, at the soonest possible time.
On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with Prayer for the Issuance of
Temporary Restraining Order and Writ of Preliminary Injunction7 with the Regional Trial Court (RTC) of Makati City,
Branch 147, docketed as Civil Case No. 04-886, against respondent for the invalidity of Section 144, Part A of the
PAL-FASAP CBA. The RTC set a hearing on petitioners' application for a TRO and, thereafter, required the parties to
submit their respective memoranda.
On August 9, 2004, the RTC issued an Order8 upholding its jurisdiction over the present case. The RTC reasoned
that:
In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA which is allegedly discriminatory as it
discriminates against female flight attendants, in violation of the Constitution, the Labor Code, and the CEDAW. The
allegations in the Petition do not make out a labor dispute arising from employer-employee relationship as none is
shown to exist. This case is not directed specifically against respondent arising from any act of the latter, nor does it
involve a claim against the respondent. Rather, this case seeks a declaration of the nullity of the questioned
provision of the CBA, which is within the Court's competence, with the allegations in the Petition constituting the
bases for such relief sought.
The RTC issued a TRO on August 10, 2004,9 enjoining the respondent for implementing Section 144, Part A of the
PAL-FASAP CBA.
The respondent filed an omnibus motion10 seeking reconsideration of the order overruling its objection to the
jurisdiction of the RTC the lifting of the TRO. It further prayed that the (1) petitioners' application for the issuance of a
writ of preliminary injunction be denied; and (2) the petition be dismissed or the proceedings in this case be
suspended.
On September 27, 2004, the RTC issued an Order11 directing the issuance of a writ of preliminary injunction
enjoining the respondent or any of its agents and representatives from further implementing Sec. 144, Part A of the
PAL-FASAP CBA pending the resolution of the case.
Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and Prohibition with Prayer for a Temporary
Restraining Order and Writ of Preliminary Injunction12 with the Court of Appeals (CA) praying that the order of the
RTC, which denied its objection to its jurisdiction, be annuled and set aside for having been issued without and/or
with grave abuse of discretion amounting to lack of jurisdiction.
The CA rendered a Decision, dated August 31, 2005, granting the respondent's petition, and ruled that:
WHEREFORE, the respondent court is by us declared to have NO JURISDICTION OVER THE CASE BELOW and,
consequently, all the proceedings, orders and processes it has so far issued therein are ANNULED and SET ASIDE.
Respondent court is ordered to DISMISS its Civil Case No. 04-886.
SO ORDERED.
Petitioner filed a motion for reconsideration,13 which was denied by the CA in its Resolution dated March 7, 2006.
Hence, the instant petition assigning the following error:
THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A LABOR DISPUTE OR
GRIEVANCE IS CONTRARY TO LAW AND JURISPRUDENCE.
The main issue in this case is whether the RTC has jurisdiction over the petitioners' action challenging the legality or
constitutionality of the provisions on the compulsory retirement age contained in the CBA between respondent PAL
and FASAP.
Petitioners submit that the RTC has jurisdiction in all civil actions in which the subject of the litigation is incapable of
pecuniary estimation and in all cases not within the exclusive jurisdiction of any court, tribunal, person or body
exercising judicial or quasi-judicial functions. The RTC has the power to adjudicate all controversies except those
expressly witheld from the plenary powers of the court. Accordingly, it has the power to decide issues of
constitutionality or legality of the provisions of Section 144, Part A of the PAL-FASAP CBA. As the issue involved is
constitutional in character, the labor arbiter or the National Labor Relations Commission (NLRC) has no jurisdiction
over the case and, thus, the petitioners pray that judgment be rendered on the merits declaring Section 144, Part A
of the PAL-FASAP CBA null and void.
Respondent, on the other hand, alleges that the labor tribunals have jurisdiction over the present case, as the
controversy partakes of a labor dispute. The dispute concerns the terms and conditions of petitioners' employment in
PAL, specifically their retirement age. The RTC has no jurisdiction over the subject matter of petitioners' petition for
declaratory relief because the Voluntary Arbitrator or panel of Voluntary Arbitrators have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or implementation of the CBA.
Regular courts have no power to set and fix the terms and conditions of employment. Finally, respondent alleged that
petitioners' prayer before this Court to resolve their petition for declaratory relief on the merits is procedurally
improper and baseless.
The petition is meritorious.
Jurisdiction of the court is determined on the basis of the material allegations of the complaint and the character of
the relief prayed for irrespective of whether plaintiff is entitled to such relief. 14
In the case at bar, the allegations in the petition for declaratory relief plainly show that petitioners' cause of action is
the annulment of Section 144, Part A of the PAL-FASAP CBA. The pertinent portion of the petition recites:
CAUSE OF ACTION
24. Petitioners have the constitutional right to fundamental equality with men under Section 14, Article II,
1987 of the Constitution and, within the specific context of this case, with the male cabin attendants of
Philippine Airlines.
26. Petitioners have the statutory right to equal work and employment opportunities with men under Article
3, Presidential Decree No. 442, The Labor Code and, within the specific context of this case, with the male
cabin attendants of Philippine Airlines.
27. It is unlawful, even criminal, for an employer to discriminate against women employees with respect to
terms and conditions of employment solely on account of their sex under Article 135 of the Labor Code as
amended by Republic Act No. 6725 or the Act Strengthening Prohibition on Discrimination Against
Women.
28. This discrimination against Petitioners is likewise against the Convention on the Elimination of All
Forms of Discrimination Against Women (hereafter, "CEDAW"), a multilateral convention that the
Philippines ratified in 1981. The Government and its agents, including our courts, not only must condemn
all forms of discrimination against women, but must also implement measures towards its elimination.
29. This case is a matter of public interest not only because of Philippine Airlines' violation of the
Constitution and existing laws, but also because it highlights the fact that twenty-three years after the
Philippine Senate ratified the CEDAW, discrimination against women continues.
31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory retirement from service is
invidiously discriminatory against and manifestly prejudicial to Petitioners because, they are compelled to
retire at a lower age (fifty-five (55) relative to their male counterparts (sixty (60).
33. There is no reasonable, much less lawful, basis for Philippine Airlines to distinguish, differentiate or
classify cabin attendants on the basis of sex and thereby arbitrarily set a lower compulsory retirement age
of 55 for Petitioners for the sole reason that they are women.
37. For being patently unconstitutional and unlawful, Section 114, Part A of the PAL-FASAP 2000-2005
CBA must be declared invalid and stricken down to the extent that it discriminates against petitioner.
38. Accordingly, consistent with the constitutional and statutory guarantee of equality between men and
women, Petitioners should be adjudged and declared entitled, like their male counterparts, to work until
they are sixty (60) years old.
PRAYER
WHEREFORE, it is most respectfully prayed that the Honorable Court:
c. after trial on the merits:
(I) declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA INVALID, NULL and VOID to the extent that it
discriminates against Petitioners; x x x x
From the petitioners' allegations and relief prayed for in its petition, it is clear that the issue raised is whether Section
144, Part A of the PAL-FASAP CBA is unlawful and unconstitutional. Here, the petitioners' primary relief in Civil Case
No. 04-886 is the annulment of Section 144, Part A of the PAL-FASAP CBA, which allegedly discriminates against
them for being female flight attendants. The subject of litigation is incapable of pecuniary estimation, exclusively
cognizable by the RTC, pursuant to Section 19 (1) of Batas Pambansa Blg. 129, as amended. 15 Being an ordinary
civil action, the same is beyond the jurisdiction of labor tribunals.
The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires the application of the
Constitution, labor statutes, law on contracts and the Convention on the Elimination of All Forms of Discrimination
Against Women,16 and the power to apply and interpret the constitution and CEDAW is within the jurisdiction of trial
courts, a court of general jurisdiction. In Georg Grotjahn GMBH & Co. v. Isnani,17 this Court held that not every
dispute between an employer and employee involves matters that only labor arbiters and the NLRC can resolve in
the exercise of their adjudicatory or quasi-judicial powers. 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 controversy or money claim by an employee against the employer or vice-versa is within the exclusive
jurisdiction of the labor arbiter. Actions between employees and employer where the employer-employee relationship
is merely incidental and the cause of action precedes from a different source of obligation is within the exclusive
jurisdiction of the regular court.18 Here, the employer-employee relationship between the parties is merely incidental
and the cause of action ultimately arose from different sources of obligation, i.e., the Constitution and CEDAW.
Thus, where the principal relief sought is to be resolved not by reference to the Labor Code or other labor relations
statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the dispute belongs to
the regular courts of justice and not to the labor arbiter and the NLRC. In such situations, resolution of the dispute
requires expertise, not in labor management relations nor in wage structures and other terms and conditions of
employment, but rather in the application of the general civil law. Clearly, such claims fall outside the area of
competence or expertise ordinarily ascribed to labor arbiters and the NLRC and the rationale for granting jurisdiction
over such claims to these agencies disappears.19
If We divest the regular courts of jurisdiction over the case, then which tribunal or forum shall determine the
constitutionality or legality of the assailed CBA provision?
This Court holds that the grievance machinery and voluntary arbitrators do not have the power to determine and
settle the issues at hand. They have no jurisdiction and competence to decide constitutional issues relative to the
questioned compulsory retirement age. Their exercise of jurisdiction is futile, as it is like vesting power to someone
who cannot wield it.
In Gonzales v. Climax Mining Ltd.,20 this Court affirmed the jurisdiction of courts over questions on constitutionality of
contracts, as the same involves the exercise of judicial power. The Court said:
Whether the case involves void or voidable contracts is still a judicial question. It may, in some instances, involve
questions of fact especially with regard to the determination of the circumstances of the execution of the contracts.
But the resolution of the validity or voidness of the contracts remains a legal or judicial question as it requires the
exercise of judicial function. It requires the ascertainment of what laws are applicable to the dispute, the
interpretation and application of those laws, and the rendering of a judgment based thereon. Clearly, the dispute is
not a mining conflict. It is essentially judicial. The complaint was not merely for the determination of rights under the
mining contracts since the very validity of those contracts is put in issue.
In Saura v. Saura, Jr.,21 this Court emphasized the primacy of the regular court's judicial power enshrined in the
Constitution that is true that the trend is towards vesting administrative bodies like the SEC with the power to
adjudicate matters coming under their particular specialization, to insure a more knowledgeable solution of the
problems submitted to them. This would also relieve the regular courts of a substantial number of cases that would
otherwise swell their already clogged dockets. But as expedient as this policy may be, it should not deprive the
courts of justice of their power to decide ordinary cases in accordance with the general laws that do not
require any particular expertise or training to interpret and apply. Otherwise, the creeping take-over by the
administrative agencies of the judicial power vested in the courts would render the judiciary virtually
impotent in the discharge of the duties assigned to it by the Constitution.
To be sure, in Rivera v. Espiritu,22 after Philippine Airlines (PAL) and PAL Employees Association (PALEA) entered
into an agreement, which includes the provision to suspend the PAL-PALEA CBA for 10 years, several employees
questioned its validity via a petition for certiorari directly to the Supreme Court. They said that the suspension was
unconstitutional and contrary to public policy. Petitioners submit that the suspension was inordinately long, way
beyond the maximum statutory life of 5 years for a CBA provided for in Article 253-A of the Labor Code. By agreeing
to a 10-year suspension, PALEA, in effect, abdicated the workers' constitutional right to bargain for another CBA at
the mandated time.
In that case, this Court denied the petition for certiorari, ruling that there is available to petitioners a plain, speedy,
and adequate remedy in the ordinary course of law. The Court said that while the petition was denominated as one
for certiorari and prohibition, its object was actually the nullification of the PAL-PALEA agreement. As such,
petitioners' proper remedy is an ordinary civil action for annulment of contract, an action which properly falls under
the jurisdiction of the regional trial courts.
The change in the terms and conditions of employment, should Section 144 of the CBA be held invalid, is but a
necessary and unavoidable consequence of the principal relief sought, i.e., nullification of the alleged discriminatory
provision in the CBA. Thus, it does not necessarily follow that a resolution of controversy that would bring about a
change in the terms and conditions of employment is a labor dispute, cognizable by labor tribunals. It is unfair to
preclude petitioners from invoking the trial court's jurisdiction merely because it may eventually result into a change
of the terms and conditions of employment. Along that line, the trial court is not asked to set and fix the terms and
conditions of employment, but is called upon to determine whether CBA is consistent with the laws.
Although the CBA provides for a procedure for the adjustment of grievances, such referral to the grievance
machinery and thereafter to voluntary arbitration would be inappropriate to the petitioners, because the union and the
management have unanimously agreed to the terms of the CBA and their interest is unified.
In Pantranco North Express, Inc., v. NLRC,23 this Court held that:
x x x Hence, only disputes involving the union and the company shall be referred to the grievance machinery or
voluntary arbitrators.
In the instant case, both the union and the company are united or have come to an agreement regarding the
dismissal of private respondents. No grievance between them exists which could be brought to a grievance
machinery. The problem or dispute in the present case is between the union and the company on the one hand and
some union and non-union members who were dismissed, on the other hand. The dispute has to be settled before
an impartial body. The grievance machinery with members designated by the union and the company cannot be
expected to be impartial against the dismissed employees. Due process demands that the dismissed workers’
grievances be ventilated before an impartial body. x x x .
Applying the same rationale to the case at bar, it cannot be said that the "dispute" is between the union and
petitioner company because both have previously agreed upon the provision on "compulsory retirement" as
embodied in the CBA. Also, it was only private respondent on his own who questioned the compulsory retirement. x x
x.
In the same vein, the dispute in the case at bar is not between FASAP and respondent PAL, who have both
previously agreed upon the provision on the compulsory retirement of female flight attendants as embodied in the
CBA. The dispute is between respondent PAL and several female flight attendants who questioned the provision on
compulsory retirement of female flight attendants. Thus, applying the principle in the aforementioned case cited,
referral to the grievance machinery and voluntary arbitration would not serve the interest of the petitioners.
Besides, a referral of the case to the grievance machinery and to the voluntary arbitrator under the CBA would be
futile because respondent already implemented Section 114, Part A of PAL-FASAP CBA when several of its female
flight attendants reached the compulsory retirement age of 55.
Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted its association's bargaining proposal
for the remaining period of 2004-2005 of the PAL-FASAP CBA, which includes the renegotiation of the subject
Section 144. However, FASAP's attempt to change the questioned provision was shallow and superficial, to say the
least, because it exerted no further efforts to pursue its proposal. When petitioners in their individual capacities
questioned the legality of the compulsory retirement in the CBA before the trial court, there was no showing that
FASAP, as their representative, endeavored to adjust, settle or negotiate with PAL for the removal of the difference
in compulsory age retirement between its female and male flight attendants, particularly those employed before
November 22, 1996. Without FASAP's active participation on behalf of its female flight attendants, the utilization of
the grievance machinery or voluntary arbitration would be pointless.
The trial court in this case is not asked to interpret Section 144, Part A of the PAL-FASAP CBA. Interpretation, as
defined in Black's Law Dictionary, is the art of or process of discovering and ascertaining the meaning of a statute,
will, contract, or other written document.24 The provision regarding the compulsory retirement of flight attendants is
not ambiguous and does not require interpretation. Neither is there any question regarding the implementation of the
subject CBA provision, because the manner of implementing the same is clear in itself. The only controversy lies in
its intrinsic validity.
Although it is a rule that a contract freely entered between the parties should be respected, since a contract is the
law between the parties, said rule is not absolute.
In Pakistan International Airlines Corporation v. Ople,25 this Court held that:
The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306, of our
Civil Code is that the contracting parties may establish such stipulations as they may deem convenient, "provided
they are not contrary to law, morals, good customs, public order or public policy." Thus, counter-balancing the
principle of autonomy of contracting parties is the equally general rule that provisions of applicable law, especially
provisions relating to matters affected with public policy, are deemed written into the contract. Put a little differently,
the governing principle is that parties may not contract away applicable provisions of law especially peremptory
provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is
clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other.
Moreover, the relations between capital and labor are not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good.x x x 26 The supremacy of the law over contracts is
explained by the fact that labor contracts are not ordinary contracts; these are imbued with public interest and
therefore are subject to the police power of the state.27 It should not be taken to mean that retirement provisions
agreed upon in the CBA are absolutely beyond the ambit of judicial review and nullification. A CBA, as a labor
contract, is not merely contractual in nature but impressed with public interest. If the retirement provisions in the CBA
run contrary to law, public morals, or public policy, such provisions may very well be voided. 28
Finally, the issue in the petition for certiorari brought before the CA by the respondent was the alleged exercise of
grave abuse of discretion of the RTC in taking cognizance of the case for declaratory relief. When the CA annuled
and set aside the RTC's order, petitioners sought relief before this Court through the instant petition for review under
Rule 45. A perusal of the petition before Us, petitioners pray for the declaration of the alleged discriminatory
provision in the CBA against its female flight attendants.
This Court is not persuaded. The rule is settled that pure questions of fact may not be the proper subject of an
appeal by certiorari under Rule 45 of the Revised Rules of Court. This mode of appeal is generally limited only to
questions of law which must be distinctly set forth in the petition. The Supreme Court is not a trier of facts. 29
The question as to whether said Section 114, Part A of the PAL-FASAP CBA is discriminatory or not is a question of
fact. This would require the presentation and reception of evidence by the parties in order for the trial court to
ascertain the facts of the case and whether said provision violates the Constitution, statutes and treaties. A full-blown
trial is necessary, which jurisdiction to hear the same is properly lodged with the the RTC. Therefore, a remand of
this case to the RTC for the proper determination of the merits of the petition for declaratory relief is just and
proper.1avvphi1
WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of the Court of Appeals, dated
August 31, 2005 and March 7, 2006, respectively, in CA-G.R. SP. No. 86813 are REVERSED and SET ASIDE. The
Regional Trial Court of Makati City, Branch 147 is DIRECTED to continue the proceedings in Civil Case No. 04-886
with deliberate dispatch.
SO ORDERED.
G.R. No. 138051 June 10, 2004
JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of Appeals
in CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed
the findings of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiter’s dismissal of
the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement")
with the Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide
SONZA’s services exclusively to ABS-CBN as talent for radio and television. The Agreement listed the services
SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays. 3
ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and ₱317,000 for
the second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the
month.
On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your
goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his
programs and career. We consider these acts of the station violative of the Agreement and the
station as in breach thereof. In this connection, we hereby serve notice of rescission of said
Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to seek recovery of the other
benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment,
National Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay,
service incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees
Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at PCIBank, Quezon
Avenue Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN
deposited SONZA’s talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to file
their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent
company until April 15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer
jurisdiction over the instant case in this Office. And as to whether or not such claim would entitle
complainant to recover upon the causes of action asserted is a matter to be resolved only after and as a
result of a hearing. Thus, the respondent’s plea of lack of employer-employee relationship may be pleaded
only as a matter of defense. It behooves upon it the duty to prove that there really is no employer-
employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on
24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge Respondent’s
Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s witnesses Soccoro Vidanes
and Rolando V. Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction. 6 The
pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a
talent," it stands to reason that a "talent" as above-described cannot be considered as an employee by
reason of the peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and
talent as a TV host and a radio broadcaster. Unlike an ordinary employee, he was free to perform
the services he undertook to render in accordance with his own style. The benefits conferred to
complainant under the May 1994 Agreement are certainly very much higher than those generally given to
employees. For one, complainant Sonza’s monthly talent fees amount to a staggering ₱317,000.
Moreover, his engagement as a talent was covered by a specific contract. Likewise, he was not bound to
render eight (8) hours of work per day as he worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an
employee is inconsequential. Whatever benefits complainant enjoyed arose from specific agreement
by the parties and not by reason of employer-employee relationship. As correctly put by the
respondent, "All these benefits are merely talent fees and other contractual benefits and should not be
deemed as ‘salaries, wages and/or other remuneration’ accorded to an employee, notwithstanding the
nomenclature appended to these benefits. Apropos to this is the rule that the term or nomenclature given
to a stipulated benefit is not controlling, but the intent of the parties to the Agreement conferring such
benefit."
The fact that complainant was made subject to respondent’s Rules and Regulations, likewise, does
not detract from the absence of employer-employee relationship. As held by the Supreme Court, "The
line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs. NLRC, et al.,
G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter’s
decision. SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision
and resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed between SONZA
and ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent
of complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of
the principal itself. This fact is made particularly true in this case, as admittedly MJMDC ‘is a management
company devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs.
Carmela C. Tiangco.’ (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and
not between ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which
specifically referred to MJMDC as the ‘AGENT’. As a matter of fact, when complainant herein unilaterally
rescinded said May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf of Mr.
Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties
to the said agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is
the latest Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said
Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN such that there
exist[s] employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it
indubitable, that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly
admitted by the latter and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular
courts, the same being in the nature of an action for alleged breach of contractual obligation on the part of
respondent-appellee. As squarely apparent from complainant-appellant’s Position Paper, his claims for
compensation for services, ‘13th month pay’, signing bonus and travel allowance against respondent-
appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while
his claims for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position
Paper of complainant-appellant bears perusal:
‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound
itself to pay complainant a signing bonus consisting of shares of stocks…with FIVE HUNDRED
THOUSAND PESOS (₱500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower
than the amount he was receiving prior to effectivity of (the) Agreement’.
 Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel
benefit amounting to at least One Hundred Fifty Thousand Pesos (₱150,000.00) per year.’
Thus, it is precisely because of complainant-appellant’s own recognition of the fact that his contractual
relations with ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of
merely resigning from ABS-CBN, complainant-appellant served upon the latter a ‘notice of rescission’ of
Agreement with the station, per his letter dated April 1, 1996, which asserted that instead of referring to
unpaid employee benefits, ‘he is waiving and renouncing recovery of the remaining amount stipulated in
paragraph 7 of the Agreement but reserves the right to such recovery of the other benefits under said
Agreement.’ (Annex 3 of the respondent ABS-CBN’s Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock
Purchase Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-
appellant’s claims being anchored on the alleged breach of contract on the part of respondent-appellee,
the same can be resolved by reference to civil law and not to labor law. Consequently, they are within the
realm of civil law and, thus, lie with the regular courts. As held in the case of Dai-Chi Electronics
Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an action for breach of contractual
obligation is intrinsically a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN
is a factual question that is within the jurisdiction of the NLRC to resolve. 10 A special civil action for certiorari extends
only to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the
correctness of the evaluation of the evidence which served as basis of the NLRC’s conclusion. 12 The Court of
Appeals added that it could not re-examine the parties’ evidence and substitute the factual findings of the NLRC with
its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION AND REFUSING
TO FIND THAT AN EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-
CBN, DESPITE THE WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.14
The Court’s Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling
which upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly
the elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its "talents." There is no case law stating that a radio
and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and
radio personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN.
On the other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent
contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings
of the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial
evidence.15 Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.16 A party cannot prove the absence of substantial evidence by simply pointing out that there is
contrary evidence on record, direct or circumstantial. The Court does not substitute its own judgment for that of the
tribunal in determining where the weight of evidence lies or what evidence is credible. 17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case
law has consistently held that the elements of an employer-employee relationship are: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to
control the employee on the means and methods by which the work is accomplished. 18 The last element, the so-
called "control test", is the most important element.19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of SONZA’s peculiar
skills, talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting
and hiring complainant over other broadcasters of possibly similar experience and qualification as complainant belies
respondent’s claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them
from ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and
celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an
independent contractual relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-
CBN would not have entered into the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that
this mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN
granted him benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job
contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA
were ABS-CBN’s employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare,
x x x and 13th month pay"20 which the law automatically incorporates into every employer-employee
contract.21Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee
relationship.22
SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and out of the
ordinary that they indicate more an independent contractual relationship rather than an employer-employee
relationship. ABS-CBN agreed to pay SONZA such huge talent fees precisely because of SONZA’s unique skills,
talent and celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough
bargaining power to demand and receive such huge talent fees for his services. The power to bargain talent fees
way above the salary scales of ordinary employees is a circumstance indicative, but not conclusive, of an
independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is
the AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show
that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment to
prevent losses as provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT and Jay Sonza
shall faithfully and completely perform each condition of this Agreement." 24 Even if it suffered severe business
losses, ABS-CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZA’s talent fees
during the life of the Agreement. This circumstance indicates an independent contractual relationship between
SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees.
Plainly, ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZA’s talent fees during the
remaining life of the Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of SONZA. 25
SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission that he is not an
employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an employee, he
would merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president of MJMDC,
rescinded the Agreement. SONZA’s letter clearly bears this out.26 However, the manner by which SONZA terminated
his relationship with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does
not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First
Circuit, recently held in Alberty-Vélez v. Corporación De Puerto Rico Para La Difusión Pública ("WIPR")27 that a
television program host is an independent contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a
skilled position requiring talent and training not available on-the-job. x x x In this regard, Alberty
possesses a master’s degree in public communications and journalism; is trained in dance, singing, and
modeling; taught with the drama department at the University of Puerto Rico; and acted in several theater
and television productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty provided the
"tools and instrumentalities" necessary for her to perform. Specifically, she provided, or obtained
sponsors to provide, the costumes, jewelry, and other image-related supplies and services necessary for
her appearance. Alberty disputes that this factor favors independent contractor status because WIPR
provided the "equipment necessary to tape the show." Alberty’s argument is misplaced. The equipment
necessary for Alberty to conduct her job as host of "Desde Mi Pueblo" related to her appearance on the
show. Others provided equipment for filming and producing the show, but these were not the primary tools
that Alberty used to perform her particular function. If we accepted this argument, independent contractors
could never work on collaborative projects because other individuals often provide the equipment required
for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Alberty’s
contracts with WIPR specifically provided that WIPR hired her "professional services as Hostess for the
Program Desde Mi Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition to work
related to these tapings. x x x28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent
contractor. The control test is the most important test our courts apply in distinguishing an employee from an
independent contractor.29 This test is based on the extent of control the hirer exercises over a worker. The greater
the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The converse
holds true as well – the less control the hirer exercises, the more likely the worker is considered an independent
contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the "Mel & Jay"
programs. ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills
and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s
control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not
dictate the contents of SONZA’s script. However, the Agreement prohibited SONZA from criticizing in his shows
ABS-CBN or its interests.32 The clear implication is that SONZA had a free hand on what to say or discuss in his
shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s
work.33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule "for more effective programming."34 ABS-CBN’s sole concern was the quality of
the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods
of performance of SONZA’s work.
SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the means and
methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZA’s show,
ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with
the means and methods of SONZA’s performance of his work, or even with the quality or product of his work, ABS-
CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but
ABS-CBN must still pay his talent fees in full.35
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to continue paying in
full SONZA’s talent fees, did not amount to control over the means and methods of the performance of SONZA’s
work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his work
- how he delivered his lines and appeared on television - did not meet ABS-CBN’s approval. This proves that ABS-
CBN’s control was limited only to the result of SONZA’s work, whether to broadcast the final product or not. In either
case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals ruled that vaudeville performers
were independent contractors although the management reserved the right to delete objectionable features in their
shows. Since the management did not have control over the manner of performance of the skills of the artists, it
could only control the result of the work by deleting objectionable features.37
SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No
doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However,
the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What
SONZA principally needed were his talent or skills and the costumes necessary for his appearance. 38Even though
ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an independent
contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole concern was for SONZA to exclusively for a particular radio or television station. In short, the huge talent fees partially compensates for
display his talent during the airing of the programs.39 exclusivity, as in the present case.

A radio broadcast specialist who works under minimal supervision is an independent contractor.40 SONZA’s work as MJMDC as Agent of SONZA
television and radio program host required special skills and talent, which SONZA admittedly possesses. The
records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and
SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his services to ABS-
talent in his shows.
CBN. The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists
that MJMDC is a "labor-only" contractor and ABS-CBN is his employer.
Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected him to its rules
and standards of performance. SONZA claims that this indicates ABS-CBN’s control "not only [over] his manner of
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is
work but also the quality of his work."
ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer.
Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering responsible to the employees of the "labor-only contractor" as if the principal itself directly hired or employed the
talents"41 of ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of employees.48 These circumstances are not present in this case.
performance prescribed for employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement
refers to the "Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC
adopted by the COMPANY (ABS-CBN) as its Code of Ethics."42 The KBP code applies to broadcasters, not to
merely acted as SONZA’s agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA.
employees of radio and television stations. Broadcasters are not necessarily employees of radio and television
The records do not show that MJMDC acted as ABS-CBN’s agent. MJMDC, which stands for Mel and Jay
stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents
Management and Development Corporation, is a corporation organized and owned by SONZA and TIANGCO. The
and not to employees of ABS-CBN.
President and General Manager of MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned,
controlled, headed and managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of both ABS-CBN and
former.43 In this case, SONZA failed to show that these rules controlled his performance. We find that these general SONZA.
rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television
and radio programs that comply with standards of the industry. We have ruled that:
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA
and his broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting.
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the MJMDC does not have any other function apart from acting as agent of SONZA or TIANGCO to promote their
services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of careers in the broadcast and television industry.49
this case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Policy Instruction No. 40
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement
of the mutually desired result without dictating the means or methods to be employed in attaining it, and
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally
those that control or fix the methodology and bind or restrict the party hired to the use of such means. The
settled the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast
first, which aim only to promote the result, create no employer-employee relationship unlike the second,
industry are the station and program employees.
which address both the result and the means used to achieve it. 44

Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain
legal presumption that Policy Instruction No. 40 determines SONZA’s status. A mere executive issuance cannot
supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from
exclude independent contractors from the class of service providers to the broadcast industry. The classification of
performing his services according to his own initiative.45
workers in the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court,
especially when the classification has no basis either in law or in fact.
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-
CBN exercised over him.
Affidavits of ABS-CBN’s Witnesses

This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN.
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving
Even an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast
his counsel the
industry, exclusivity is not necessarily the same as control.

opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. 46 This practice is
prevailing practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading
not designed to control the means and methods of work of the talent, but simply to protect the investment of the
and irrelevant.
broadcast station. The broadcast station normally spends substantial amounts of money, time and effort "in building
up its talents as well as the programs they appear in and thus expects that said talents remain exclusive with the
station for a commensurate period of time."47 Normally, a much higher fee is paid to talents who agree to work
While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after
the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the complaint
excluding those that may have been amicably settled, and shall be accompanied by all supporting
documents including the affidavits of their respective witnesses which shall take the place of the latter’s
direct testimony. x x x
Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the parties of their
position papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a
formal trial or hearing. At this stage, he may, at his discretion and for the purpose of making such
determination, ask clarificatory questions to further elicit facts or information, including but not limited to the
subpoena of relevant documentary evidence, if any from any party or witness. 50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a
formal trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of
right.52 If the Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the documents alone are insufficient.
The proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings before a Labor
Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents
like SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of
labor to security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-
employee relationship under labor laws. Not every performance of services for a fee creates an employer-employee
relationship. To hold that every person who renders services to another for a fee is an employee - to give meaning to
the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors.
The right to life and livelihood guarantees this freedom to contract as independent contractors. The right of labor to
security of tenure cannot operate to deprive an individual, possessed with special skills, expertise and talent, of his
right to contract as an independent contractor. An individual like an artist or talent has a right to render his services
without any one controlling the means and methods by which he performs his art or craft. This Court will not interpret
the right of labor to security of tenure to compel artists and talents to render their services only as employees. If radio
and television program hosts can render their services only as employees, the station owners and managers can
dictate to the radio and television hosts what they say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic Act
No. 8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are
subject to the 10% value-added tax ("VAT") on services they render. Exempted from the VAT are those under an
employer-employee relationship.57 This different tax treatment accorded to talents and broadcasters bolters our
conclusion that they are independent contractors, provided all the basic elements of a contractual relationship are
present as in this case.
Nature of SONZA’s Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave,
signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the
findings of the Labor Arbiter and the Court of Appeals that SONZA’s claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present case does not call for an
application of the Labor Code provisions but an interpretation and implementation of the May 1994 Agreement. In
effect, SONZA’s cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the regular
courts.58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-
G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 145443. March 18, 2005
RAQUEL P. CONSULTA, Petitioner,
vs.
COURT OF APPEALS, PAMANA PHILIPPINES, INC., RAZUL Z. REQUESTO, and ALETA
TOLENTINO,Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 assailing the Decision of 28 April 2000 and Resolution of 9 October 2000 promulgated
by the Court of Appeals ("appellate court")2 in CA-G.R. SP No. 50462. The appellate court reversed the Resolution of
the National Labor Relations Commission ("NLRC") which in turn affirmed the Labor Arbiter’s Decision.
The Antecedent Facts
Pamana Philippines, Inc. ("Pamana") is engaged in health care business. Raquel P. Consulta ("Consulta") was a
Managing Associate of Pamana. Consulta’s appointment dated 1 December 1987 states:
We are pleased to formally confirm your appointment and confer upon you the authority as MANAGING ASSOCIATE
(MA) effective on December 1, 1987 up to January 2, 1988. Your area of operation shall be within Metro Manila.
In this capacity, your principal responsibility is to organize, develop, manage, and maintain a sales division and a full
complement of agencies and Health Consultants (HealthCons) and to submit such number of enrollments and
revenue attainments as may be required of your position in accordance with pertinent Company policies and
guidelines. In pursuit of this objective, you are hereby tasked with the responsibilities of recruiting, training and
directing your Supervising Associates (SAs) and the Health Consultants under their respective agencies, for the
purpose of promoting our corporate Love Mission.
In the performance of such duties, you are expected to uphold and promote the Company’s interests and good
image and to abide by its principles and established norms of conduct necessary and appropriate in the discharge of
your functions. The authority as MA likewise vests upon you command responsibility for the actions of your SAs and
HealthCons; the Company therefore reserves the right to debit your account for any accountabilities/financial
obligations arising therefrom.
ACCORDINGLY, respondent is hereby ordered to pay complainant her unpaid commission to be computed as
against actual transactions between respondent PAMANA and the contracting Department of U.S. Naval Supply
Depot upon presentation of pertinent document.
Respondent is further ordered to pay ten (10%) percent attorney’s fees.

By your acceptance of this appointment, it is understood that you must represent the Company on an exclusive
SO ORDERED.6
basis, and must not engage directly or indirectly in activities, nor become affiliated in official or unofficial capacity with
companies or organizations which compete or have the same business as Pamana. It is further understood that his
[sic] self-inhibition shall be effective for a period of one year from date of official termination with the Company arising Pamana, Requesto and Tolentino ("Pamana et al.") appealed the Decision of the Labor Arbiter.
from any cause whatsoever.
In a Resolution7 promulgated on 22 July 1994, the NLRC dismissed the appeal and affirmed the Decision of the
In consideration of your undertaking the assignment and the accompanying duties and responsibilities, you shall be Labor Arbiter. In its Order promulgated on 3 October 1994, the NLRC denied the motion for reconsideration of
entitled to compensation computed as follows: Pamana et al.

On Initial Membership Fee Entrance Fee 5% Pamana et al. filed a petition for certiorari before this Court. In compliance with this Court’s resolution dated 6
February 1995, the Office of the Solicitor General submitted a Manifestation in Lieu of Comment praying to grant the
petition on the ground that Consulta was not an employee of Pamana. On 23 November 1998, this Court referred the
Medical Fee 6%
case to the appellate court pursuant to St. Martin Funeral Home v. NLRC.8

On Subsequent Membership Fee 6%

The Decision of the Appellate Court

You are likewise entitled to participate in sales contests and such other incentives that may be implemented by the
In its Decision promulgated on 28 April 2000, the appellate court reversed the NLRC Decision. The appellate court
Company.
ruled that Consulta was a commission agent, not an employee of Pamana. The appellate court also ruled that
Consulta should have litigated her claim for unpaid commission in an ordinary civil action.
This appointment is on a non-employer-employee relationship basis, and shall be in accordance with the Company
Guidelines on Appointment, Reclassification and Transfer of Sales Associates.3
Hence, Consulta’s recourse to this Court.

Sometime in 1987, Consulta negotiated with the Federation of Filipino Civilian Employees Association ("FFCEA")
The Issues
working at the United States Subic Naval Base for a Health Care Plan for the FFCEA members. Pamana issued
Consulta a Certification4 dated 23 November 1987, as follows:
The issues are:
This certifies that the Emerald Group under Ms. Raquel P. Consulta, as Managing Consultant, is duly authorized to
negotiate for and in behalf of PAMANA with the Federation of Filipino Civilian Employees Association covering all 1. Whether Consulta was an employee of Pamana.
U.S. facilities in the Philippines, the coverage of FFCEA members under the Pamana Golden Care Health Plans.
2. Whether the Labor Arbiter had jurisdiction over Consulta’s claim for unpaid commission.
Upon such negotiation and eventual execution of the contract agreements, entitlements of all benefits due the
Emerald Group in it’s [sic] entirely including it’s [sic] Supervising Consultants and Health Consultants, by of
commissions, over-rides and other package of benefits is hereby affirmed, obligated and confirmed as long as the The Ruling of the Court
contracts negotiated and executed are in full force and effect, including any and all renewals made. And provided
further that the herein authorized consultants remain in active status with the Pamana Golden Care sales group. 5 We affirm the Decision of the appellate court. Consulta was an independent agent and not an employee of Pamana.

On 4 March 1988, Pamana and the U.S. Naval Supply Depot signed the FFCEA account. Consulta, claiming that
Pamana did not pay her commission for the FFCEA account, filed a complaint for unpaid wages or commission
against Pamana, its President Razul Z. Requesto ("Requesto"), and its Executive Vice-President Aleta Tolentino
("Tolentino").
The Rulings of the Labor Arbiter and the NLRC
The Four-Fold Test
In Viaña v. Al-Lagadan,9 the Court first laid down the four-fold test to determine the existence of an employer-
employee relationship. The four elements of an employer-employee relationship, which have since been adopted in
subsequent jurisprudence,10 are (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the
power to control. The power to control is the most important of the four elements.

In a Decision promulgated on 23 June 1993, Labor Arbiter Alex Arcadio Lopez ruled, as follows: In Insular Life Assurance Co., Ltd. v. NLRC,11 the Court explained the scope of the power to control, thus:
x x x It should, however, be obvious that not every form of control that the hiring party reserves to himself over the
conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an
employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn
somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish
altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and
eschews any intervention whatsoever in his performance of the engagement.
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and
the means used to achieve it.
In the present case, the power to control is missing. Pamana tasked Consulta to organize, develop, manage, and
maintain a sales division, submit a number of enrollments and revenue attainments in accordance with company
policies and guidelines, and to recruit, train and direct her Supervising Associates and Health
Consultants.12However, the manner in which Consulta was to pursue these activities was not subject to the control of
Pamana. Consulta failed to show that she had to report for work at definite hours. The amount of time she devoted to
soliciting clients was left entirely to her discretion. The means and methods of recruiting and training her sales
associates, as well as the development, management and maintenance of her sales division, were left to her sound
judgment.
Consulta claims that the documents she submitted show that Pamana had control on the conduct of her work and
the means and methods to accomplish the work. However, the documents only prove the absence of the power to
control. The Minutes of the meeting on 31 May 1988 of the Managing Associates with Fely Whitfield, Vice-President
for Sales of Pamana, reflect the following:
At this point Mrs. Whitfield gave some pointers on recruitment and selling techniques and reminded the group
that the success of an agency is still people. The more recruits you have the better is your chance to achieve your
quota.
She also announced June be made a recruitment month, and told the MAs to remind their associates that if you
cannot sell to a prospect then recruit him or her.
She also discussed extensively the survey method of selling and recruitment and that the sales associates should be
more aggressive in their day to day sales activity. She reminded the MAs to fill up their recruitment
requirements to be able to participate in the monthly and quarterly contest.
xxx
4. Recruitment Campaign
In connection with the Recruitment Campaign for June, Mr. R. Canon13 requested for Management support. He
suggested that a recruitment Advertisement be placed in a leading Metropolitan daily Newspaper. The cost of
which was unanimously suggested by MAs that Management should share at least 50%.
5. MAs agreed to pay in advance their share for the salary of the MAs Secretary.14 (Emphasis supplied)
The Minutes of the 7 June 1988 meeting reflect the following:
III. PRODUCTION & RECRUITMENT INCENTIVES
To help the MAs in their recruitment drive Mrs. Whitfield suggested some incentives to be undertaken by the MAs
like (1) cash incentives for associates that bring in a recruit, (2) cash incentives based on production brought in by
these new recruits.
She said that MAs, as businessm[e]n should invest time, effort & money to their work, because it will redown [sic] to
their own good anyway, that the success of their agency should not depend solely on what management could give
as incentives but also on incentives of MAs within their agencies. It should be a concerted effort.
After a thorough discussion on the pros & cons of the suggestions it was agreed that a ₱10.00 per recruit be given to
the associate that will recruit and an additional cash prize based on production of these new recruits. 15
Clearly, the Managing Associates only received suggestions from Pamana on how to go about their recruitment and
sales activities. They could adopt the suggestions but the suggestions were not binding on them. They could adopt
other methods that they deemed more effective.
Further, the Managing Associates had to ask the Management of Pamana to shoulder half of the advertisement cost
for their recruitment campaign. They shelled out their own resources to bolster their recruitment. They shared in the
payment of the salaries of their secretaries. They gave cash incentives to their sales associates from their own
pocket. These circumstances show that the Managing Associates were independent contractors, not employees, of
Pamana.
Finally, Pamana paid Consulta not for labor she performed but only for the results of her labor. 16 Without results,
Consulta’s labor was her own burden and loss. Her right to compensation, or to commission, depended on the
tangible results of her work17 - whether she brought in paying recruits. Consulta’s appointment paper provides:
In consideration of your undertaking the assignment and the accompanying duties and responsibilities, you shall be
entitled to compensation computed as follows:
On Initial Membership Fee Entrance Fee 5%
Medical Fee 6%
On Subsequent Membership Fee 6%
You are likewise entitled to participation in sales contests and such other incentives that may be implemented by the
Company.18
The Guidelines on Appointment of Associates show that a Managing Associate received the following commissions
and bonuses:
3. Compensation Package of Regular MAs
Regular MAs shall be entitled to the following compensation and benefits:
3.1 Compensation
a) Personal Production
Individual/Family Institutional Acct.
commission 30% 30%
bonus 40% -
b) Group Production
overriding commission 6% 6%
bonus 5% -
3.2 Benefits
Participation in all sales contests corresponding to the MA position plus any such other benefits as may be provided
for the MA on regular status.19
Aside from commissions, bonuses and other benefits that depended solely on actual sales, Pamana did not pay
Consulta any compensation for managing her sales division, or for recruiting and training her sales consultants. As a
Managing Associate, she was only entitled to commissions, bonuses and other benefits, which depended solely on
her sales and on the sales of her group.
The Exclusivity Provision
Consulta’s appointment had an exclusivity provision. The appointment provided that Consulta must represent
Pamana on an exclusive basis. She must not engage directly or indirectly in activities of other companies that
compete with the business of Pamana. However, the fact that the appointment required Consulta to solicit business
exclusively for Pamana did not mean that Pamana exercised control over the means and methods of Consulta’s
work as the term control is understood in labor jurisprudence. 20 Neither did it make Consulta an employee of
Pamana. Pamana did not prohibit Consulta from engaging in any other business, or from being connected with any
other company, for as long as the business or company did not compete with Pamana’s business.
The prohibition applied for one year after the termination of the contract with Pamana. In one of their meetings, one
of the Managing Associates reported that he was transferring his sales force and account from another company to
Pamana.21 The exclusivity provision was a reasonable restriction designed to prevent similar acts prejudicial to
Pamana’s business interest. Article 1306 of the Civil Code provides that "[t]he contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy."
Jurisdiction over Claim for Unpaid Commission
There being no employer-employee relationship between Pamana and Consulta, the Labor Arbiter and the NLRC
had no jurisdiction to entertain and rule on Consulta’s money claim.
Article 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 file involving wages, rates of pay,
hours of work and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and
lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims,
arising from employer-employee relations, including those of persons in domestic or household service, involving an
amount exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied with a claim for
reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those arising
from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements.
Consulta filed her action under Article 217(a)(6) of the Labor Code. However, since there was no employer-employee
relationship between Pamana and Consulta, the Labor Arbiter should have dismissed Consulta’s claim for unpaid
commission. Consulta’s remedy is to file an ordinary civil action to litigate her claim.
WHEREFORE, the petition is DISMISSED and the Decision of the Court of Appeals in CA-G.R. SP No. 50462 is
AFFIRMED in toto.
SO ORDERED.
G.R. No. 128024 May 9, 2000
BEBIANO M. BAÑEZ, petitioner,
vs.
HON. DOWNEY C. VALDEVILLA and ORO MARKETING, INC., respondents.
GONZAGA-REYES, J.:
The orders of respondent judge 1 dated June 20, 1996 and October 16, 1996, taking jurisdiction over an action for
damages filed by an employer against its dismissed employee, are assailed in this petition for certiorari under Rule
65 of the Rules of Court for having been issued in grave abuse of discretion.
Petitioner was the sales operations manager of private respondent in its branch in Iligan City. In 1993, private
respondent "indefinitely suspended" petitioner and the latter filed a complaint for illegal dismissal with the National
Labor Relations Commission ("NLRC") in Iligan City. In a decision dated July 7, 1994, Labor Arbiter Nicodemus G.
Palangan found petitioner to have been illegally dismissed and ordered the payment of separation pay in lieu of
reinstatement, and of backwages and attorney's fees. The decision was appealed to the NLRC, which dismissed the
same for having been filed out of time. 2 Elevated by petition for certiorari before this Court, the case was dismissed
on technical grounds3 ; however, the Court also pointed out that even if all the procedural requirements for the filing
of the petition were met, it would still be dismissed for failure to show grave abuse of discretion on the part of the
NLRC.
On November 13, 1995, private respondent filed a complaint for damages before the Regional Trial Court ("RTC") of
Misamis Oriental, docketed as Civil Case No. 95-554, which prayed for the payment of the following:
a. P709,217.97 plus 12% interest as loss of profit and/or unearned income
of three years;
b. P119,700.00 plus 12% interest as estimated cost of supplies, facilities,
properties, space, etc. for three years;
c. P5,000.00 as initial expenses of litigation; and
While seemingly the cause of action arose from employer-employee relations, the employer's
claim for damages is grounded on the nefarious activities of defendant causing damage and
prejudice to plaintiff as alleged in paragraph 7 of the complaint. The Court believes that there
was a breach of a contractual obligation, which is intrinsically a civil dispute. The averments in
the complaint removed the controversy from the coverage of the Labor Code of the Philippines
and brought it within the purview of civil law. (Singapore Airlines, Ltd. Vs. Paño, 122 SCRA 671.)
...6
Petitioner's motion for reconsideration of the above Order was denied for lack of merit on October 16, 1996. Hence,
this petition.
Acting on petitioner's prayer, the Second Division of this Court issued a Temporary Restraining Order ("TRO") on
March 5, 1997, enjoining respondents from further proceeding with Civil Case No. 95-554 until further orders from
the Court.

d. P25,000.00 as attorney's fees. 4 By way of assignment of errors, the petition reiterates the grounds raised in the Motion to Dismiss dated January 30,
1996, namely, lack of jurisdiction over the subject matter of the action, res judicata, splitting of causes of action, and
forum-shopping. The determining issue, however, is the issue of jurisdiction.
On January 30, 1996, petitioner filed a motion to dismiss the above complaint. He interposed in the court below that
the action for damages, having arisen from an employer-employee relationship, was squarely under the exclusive
original jurisdiction of the NLRC under Article 217(a), paragraph 4 of the Labor Code and is barred by reason of the Art. 217(a), paragraph 4 of the Labor Code, which was already in effect at the time of the filing of this case, reads:
final judgment in the labor case. He accused private respondent of splitting causes of action, stating that the latter
could very well have included the instant claim for damages in its counterclaim before the Labor Arbiter. He also
Art. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) Except as otherwise provided
pointed out that the civil action of private respondent is an act of forum-shopping and was merely resorted to after a
under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and
failure to obtain a favorable decision with the NLRC.
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
Ruling upon the motion to dismiss, respondent judge issued the herein questioned Order, which summarized the involving all workers, whether agricultural or non-agricultural:
basis for private respondent's action for damages in this manner:
xxx xxx xxx
Paragraph 5 of the complaint alleged that the defendant violated the plaintiff's policy re: His
business in his branch at Iligan City wherein defendant was the Sales Operations Manager, and
4. Claims for actual, moral, exemplary and other forms of damages arising
paragraph 7 of the same complaint briefly narrated the modus operandi of defendant, quoted
from the employer-employee relations;
herein: Defendant canvassed customers personally or through salesmen of plaintiff which were
hired or recruited by him. If said customer decided to buy items from plaintiff on installment
basis, defendant, without the knowledge of said customer and plaintiff, would buy the items on xxx xxx xxx
cash basis at ex-factory price, a privilege not given to customers, and thereafter required the
customer to sign promissory notes and other documents using the name and property of plaintiff,
The above provisions are a result of the amendment by Section 9 of Republic Act ("R.A.") No. 6715, which took
purporting that said customer purchased the items from plaintiff on installment basis. Thereafter,
effect on March 21, 1989, and which put to rest the earlier confusion as to who between Labor Arbiters and regular
defendant collected the installment payments either personally or through Venus Lozano, a
courts had jurisdiction over claims for damages as between employers and employees.
Group Sales Manager of plaintiff but also utilized by him as secretary in his own business for
collecting and receiving of installments, purportedly for the plaintiff but in reality on his own
account or business. The collection and receipt of payments were made inside the Iligan City It will be recalled that years prior to R.A. 6715, jurisdiction over all money claims of workers, including claims for
branch using plaintiff's facilities, property and manpower. That accordingly plaintiff's sales damages, was originally lodged with the Labor Arbiters and the NLRC by Article 217 of the Labor Code. 7 On May 1,
decreased and reduced to a considerable extent the profits which it would have earned. 5 1979, however, Presidential Decree ("P.D.") No. 1367 amended said Article 217 to the effect that "Regional Directors
shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of damages." 8 This limitation
in jurisdiction, however, lasted only briefly since on May 1, 1980, P.D. No. 1691 nullified P.D. No. 1367 and restored
In declaring itself as having jurisdiction over the subject matter of the instant controversy, respondent court stated:
Article 217 of the Labor Code almost to its original form. Presently, and as amended by R.A. 6715, the jurisdiction of
Labor Arbiters and the NLRC in Article 217 is comprehensive enough to include claims for all forms of damages
A perusal of the complaint which is for damages does not ask for any relief under the Labor "arising from the employer-employee relations"
Code of the Philippines. It seeks to recover damages as redress for defendant's breach of his
contractual obligation to plaintiff who was damaged and prejudiced. The Court believes such
Whereas this Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for
cause of action is within the realm of civil law, and jurisdiction over the controversy belongs to
damages filed by employees, 9 we hold that by the designating clause "arising from the employer-employee relations"
the regular courts.
Article 217 should apply with equal force to the claim of an employer for actual damages against its dismissed
employee, where the basis for the claim arises from or is necessarily connected with the fact of termination, and
should be entered as a counterclaim in the illegal dismissal case.
Even under Republic Act No. 875 (the "Industrial Peace Act", now completely superseded by the Labor Code),
jurisprudence was settled that where the plaintiff's cause of action for damages arose out of, or was necessarily
intertwined with, an alleged unfair labor practice committed by the union, the jurisdiction is exclusively with the (now
defunct) Court of Industrial Relations, and the assumption of jurisdiction of regular courts over the same is a
nullity. 10 To allow otherwise would be "to sanction split jurisdiction, which is prejudicial to the orderly administration of
justice." 11 Thus, even after the enactment of the Labor Code, where the damages separately claimed by the
employer were allegedly incurred as a consequence of strike or picketing of the union, such complaint for damages
is deeply rooted from the labor dispute between the parties, and should be dismissed by ordinary courts for lack of
jurisdiction. As held by this Court in National Federation of Labor vs. Eisma, 127 SCRA 419:
Certainly, the present Labor Code is even more committed to the view that on policy grounds,
and equally so in the interest of greater promptness in the disposition of labor matters, a court is
spared the often onerous task of determining what essentially is a factual matter, namely, the
damages that may be incurred by either labor or management as a result of disputes or
controversies arising from employer-employee relations.
There is no mistaking the fact that in the case before us, private respondent's claim against petitioner for actual
damages arose from a prior employer-employee relationship. In the first place, private respondent would not have
taken issue with petitioner's "doing business of his own" had the latter not been concurrently its employee. Thus, the
damages alleged in the complaint below are: first, those amounting to lost profits and earnings due to petitioner's
abandonment or neglect of his duties as sales manager, having been otherwise preoccupied by his unauthorized
installment sale scheme; and second, those equivalent to the value of private respondent's property and supplies
which petitioner used in conducting his "business ".
Second, and more importantly, to allow respondent court to proceed with the instant action for damages would be to
open anew the factual issue of whether petitioner's installment sale scheme resulted in business losses and the
dissipation of private respondent's property. This issue has been duly raised and ruled upon in the illegal dismissal
case, where private respondent brought up as a defense the same allegations now embodied in his complaint, and
presented evidence in support thereof. The Labor Arbiter, however, found to the contrary — that no business losses
may be attributed to petitioner as in fact, it was by reason of petitioner's installment plan that the sales of the Iligan
branch of private respondent (where petitioner was employed) reached its highest record level to the extent that
petitioner was awarded the 1989 Field Sales Achievement Award in recognition of his exceptional sales
performance, and that the installment scheme was in fact with the knowledge of the management of the Iligan branch
of private respondent. 12 In other words, the issue of actual damages has been settled in the labor case, which is now
final and executory.
Still on the prospect of re-opening factual issues already resolved by the labor court, it may help to refer to that
period from 1979 to 1980 when jurisdiction over employment-predicated actions for damages vacillated from labor
tribunals to regular courts, and back to labor tribunals. In Ebon vs. de Guzman, 113 SCRA 52, 1 this Court discussed:
The lawmakers in divesting the Labor Arbiters and the NLRC of jurisdiction to award moral and
other forms of damages in labor cases could have assumed that the Labor Arbiters' position-
paper procedure of ascertaining the facts in dispute might not be an adequate tool for arriving at
a just and accurate assessment of damages, as distinguished from backwages and separation
pay, and that the trial procedure in the Court of First Instance would be a more effective means
of determining such damages. . . .
Evidently, the lawmaking authority had second thoughts about depriving the Labor Arbiters and
the NLRC of the jurisdiction to award damages in labor cases because that setup would
mean duplicity of suits, splitting the cause of action and possible conflicting findings and
conclusions by two tribunals on one and the same claim.
So, on May 1, 1980, Presidential Decree No. 1691 (which substantially reenacted Article 217 in
its original form) nullified Presidential Decree No. 1367 and restored to the Labor Arbiter and the
NLRC their jurisdiction to award all kinds of damages in cases arising from employer-employee
relations. . . . (Emphasis supplied).
Clearly, respondent court's taking jurisdiction over the instant case would bring about precisely the harm that the
lawmakers sought to avoid in amending the Labor Code to restore jurisdiction over claims for damages of this nature
to the NLRC.
This is, of course, to distinguish from cases of actions for damages where the employer-employee relationship is
merely incidental and the cause of action proceeds from a different source of obligation. Thus, the jurisdiction of
regular courts was upheld where the damages, claimed for were based on tort 14 , malicious prosecution 15 , or breach
of contract, as when the claimant seeks to recover a debt from a former employee 16 or seeks liquidated damages in
enforcement of a prior employment contract. 17
Neither can we uphold the reasoning of respondent court that because the resolution of the issues presented by the
complaint does not entail application of the Labor Code or other labor laws, the dispute is intrinsically civil. Article
217(a) of the Labor Code, as amended, clearly bestows upon the Labor Arbiter original and exclusive jurisdiction
over claims for damages arising from employer-employee relations — in other words, the Labor Arbiter has
jurisdiction to award not only the reliefs provided by labor laws, but also damages governed by the Civil Code. 18
Thus, it is obvious that private respondent's remedy is not in the filing of this separate action for damages, but in
properly perfecting an appeal from the Labor Arbiter's decision. Having lost the right to appeal on grounds of
untimeliness, the decision in the labor case stands as a final judgment on the merits, and the instant action for
damages cannot take the place of such lost appeal.
Respondent court clearly having no jurisdiction over private respondent's complaint for damages, we will no longer
pass upon petitioner's other assignments of error.
WHEREFORE, the Petition is GRANTED, and the complaint in Civil Case No. 95-554 before Branch 39 of the
Regional Trial Court of Misamis Oriental is hereby DISMISSED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 89621 September 24, 1991
PEPSI COLA DISTRIBUTORS OF THE PHILIPPINES, INC., represented by its Plant General Manager
ANTHONY B. SIAN, ELEAZAR LIMBAB, IRENEO BALTAZAR & JORGE HERAYA, petitioners,
vs.
HON. LOLITA O. GAL-LANG, SALVADOR NOVILLA, ALEJANDRO OLIVA, WILFREDO CABAÑAS &
FULGENCIO LEGO, respondents.
CRUZ, J.:
The question now before us has been categorically resolved in earlier decisions of the Court that a little more diligent
research would have disclosed to the petitioners. On the basis of those cases and the facts now before us, the
petition must be denied.
The private respondents were employees of the petitioner who were suspected of complicity in the irregular
disposition of empty Pepsi Cola bottles. On July 16, 1987, the petitioners filed a criminal complaint for theft against
them but this was later withdrawn and substituted with a criminal complaint for falsification of private documents. On
November 26, 1987, after a preliminary investigation conducted by the Municipal Trial Court of Tanauan, Leyte, the
complaint was dismissed. The dismissal was affirmed on April 8, 1988, by the Office of the Provincial Prosecutor.
Meantime, allegedly after an administrative investigation, the private respondents were dismissed by the petitioner dismissing the case because it came under the jurisdiction of the labor arbiters, Justice Vicente Abad Santos said for
company on November 23, 1987. As a result, they lodged a complaint for illegal dismissal with the Regional the Court:
Arbitration Branch of the NLRC in Tacloban City on December 1, 1987, and decisions manded reinstatement with
damages. In addition, they instituted in the Regional Trial Court of Leyte, on April 4, 1988, a separate civil complaint
It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a
against the petitioners for damages arising from what they claimed to be their malicious prosecution.
simple action for damages for tortious acts allegedly committed by the defendants. Such being the case,
the governing statute is the Civil Code and not the Labor Code. It results that the orders under review are
The petitioners moved to dismiss the civil complaint on the ground that the trial court had no jurisdiction over the based on a wrong premise.
case because it involved employee-employer relations that were exclusively cognizable by the labor arbiter. The
motion was granted on February 6, 1989. On July 6, 1989, however, the respondent judge, acting on the motion for
In Singapore Airlines Ltd. v. Paño,4 where the plaintiff was suing for damages for alleged violation by the defendant
reconsideration, reinstated the complaint, saying it was "distinct from the labor case for damages now pending before
of an "Agreement for a Course of Conversion Training at the Expense of Singapore Airlines Limited," the jurisdiction
the labor courts." The petitioners then came to this Court for relief.
of the Court of First Instance of Rizal over the case was questioned. The Court, citing the earlier case of Quisaba v.
Sta. Ines Melale Veneer and Plywood, Inc.,5 declared through Justice Herrera:
The petitioners invoke Article 217 of the Labor Code and a number of decisions of this Court to support their position
that the private respondents civil complaint for damages falls under the jurisdiction of the labor arbiter. They
Stated differently, petitioner seeks protection under the civil laws and claims no benefits under the Labor
particularly cite the case of Getz Corporation v. Court of Appeals,1 where it was held that a court of first instance had
Code. The primary relief sought is for liquidated damages for breach of a contractual obligation. The other
no jurisdiction over the complaint filed by a dismissed employee "for unpaid salary and other employment benefits,
items demanded are not labor benefits demanded by workers generally taken cognizance of in labor
termination pay and moral and exemplary damages."
disputes, such as payment of wages, overtime compensation or separation pay. The items claimed are the
natural consequences flowing from breach of an obligation, intrinsically a civil dispute.
We hold at the outset that the case is not in point because what was involved there was a claim arising from the
alleged illegal dismissal of an employee, who chose to complain to the regular court and not to the labor arbiter.
In Molave Sales, Inc. v. Laron,6 the same Justice held for the Court that the claim of the plaintiff against its sales
Obviously, the claim arose from employee-employer relations and so came under Article 217 of the Labor Code
manager for payment of certain accounts pertaining to his purchase of vehicles and automotive parts, repairs of such
which then provided as follows:
vehicles, and cash advances from the corporation was properly cognizable by the Regional Trial Court of Dagupan
City and not the labor arbiter, because "although a controversy is between an employer and an employee, the Labor
ART. 217. Jurisdiction of Labor Arbiters and the Commission. — (a) The Labor Arbiters shall have the Arbiters have nojurisdiction if the Labor Code is not involved."
original and exclusive jurisdiction to hear and decide within thirty (30) working days after submission of the
case by the parties for decision, the following cases involving all workers, whether agricultural or non-
The latest ruling on this issue is found in San Miguel Corporation v. NLRC,7 where the above cases are cited and the
agricultural:
changes in Article 217 are recounted. That case involved a claim of an employee for a P60,000.00 prize for a
proposal made by him which he alleged had been accepted and implemented by the defendant corporation in the
1. Unfair labor practice cases; processing of one of its beer products. The claim was filed with the labor arbiter, who dismissed it for lack of
jurisdiction but was reversed by the NLRC on appeal. In setting aside the appealed decision and dismissing the
complaint, the Court observed through Justice Feliciano:
2. Those that workers may file involving wages, hours of work and other terms and conditions of
employment;
It is the character of the principal relief sought that appears essential, in this connection. Where such
principal relief is to be granted under labor legislation or a collective bargaining agreement, the case
3. All money claims of workers, including those based on non-payment or underpayment of wages,
should fall within the jurisdiction of the Labor Arbiter and the NLRC, even though a claim for damages
overtime compensation, separation pay and other benefits provided by law or appropriate agreement,
might be asserted as an incident to such claim.
except claims for employees' compensation, social security, medicare and maternity benefits;

xxx xxx xxx

4. Cases involving household services; and

5. Cases arising from any violation of Article 265 of this Code, including questions involving the legality of
strikes and lockouts.
(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by labor Arbiters. 2
It must be stressed that not every controversy involving workers and their employers can be resolved only by the
labor arbiters. This will be so only if there is a "reasonable causal connection" between the claim asserted and
employee-employer relations to put the case under the provisions of Article 217. Absent such a link, the complaint
will be cognizable by the regular courts of justice in the exercise of their civil and criminal jurisdiction.
Where the claim to the principal relief sought is to be resolved not by reference to the Labor Code or other
labor relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over
the dispute belongs to the regular courts of justice and not to the Labor Arbiter and the NLRC. In such
situations, resolution of the dispute requires expertise, not in labor management relations nor in wage
structures and other terms and conditions of employment, but rather in the application of the general civil
law. Clearly, such claims fall outside the area of competence or expertise ordinarily ascribed to Labor
Arbiters and the NLRC and the rationale for granting jurisdiction over such claims to these agencies
disappears.
xxx xxx xxx

In Medina v. Castro-Bartolome,3 two employees filed in the Court of First Instance of Rizal a civil complaint for While paragraph 3 above refers to "all money claims of workers," it is not necessary to suppose that the
damages against their employer for slanderous remarks made against them by the company president. On the order entire universe of money claims that might be asserted by workers against their employers has been
absorbed into the original and exclusive jurisdiction of Labor Arbiters.
 xxx xxx xxx
For it cannot be presumed that money claims of workers which do not arise out of or in connection with
their employer-employee relationship, and which would therefore fall within the general jurisdiction of the
regular courts of justice, were intended by the legislative authority to be taken away from the jurisdiction of
the courts and lodged with Labor Arbiters on an exclusive basis. The Court, therefore, believes and so
holds that the 'money claims of workers" referred to in paragraph 3 of Article 217 embraces money claims
which arise out of or in connection with the employer- employee relationship, or some aspect or incident of
such relationship. Put a little differently, that money claims of workers which now fall within the original and
exclusive jurisdiction of Labor Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship (Ibid.).
The case now before the Court involves a complaint for damages for malicious prosecution which was filed with the
Regional Trial Court of Leyte by the employees of the defendant company. It does not appear that there is a
"reasonable causal connection" between the complaint and the relations of the parties as employer and employees.
The complaint did not arise from such relations and in fact could have arisen independently of an employment
relationship between the parties. No such relationship or any unfair labor practice is asserted. What the employees
are alleging is that the petitioners acted with bad faith when they filed the criminal complaint which the Municipal Trial
Court said was intended "to harass the poor employees" and the dismissal of which was affirmed by the Provincial
Prosecutor "for lack of evidence to establish even a slightest probability that all the respondents herein have
committed the crime imputed against them." This is a matter which the labor arbiter has no competence to resolve as
the applicable law is not the Labor Code but the Revised Penal Code.
"Talents differ, all is well and wisely put," so observed the philosopher-poet.8 So it must be in the case we here
decide.
WHEREFORE, the order dated July 6, 1989, is AFFIRMED and the petition DENIED, with costs against the
petitioner.
SO ORDERED.
G.R. No. 165935 February 8, 2012
BRIGHT MARITIME CORPORATION (BMC)/DESIREE P. TENORIO, Petitioners,
vs.
RICARDO B. FANTONIAL, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari1 of the Decision of the Court of Appeals in CA-G.R. SP No. 67571, dated
October 25, 2004, reversing and setting aside the Decision of the National Labor Relations Commission (NLRC), and
reinstating the Decision of the Labor Arbiter finding that respondent Ricardo B. Fantonial was illegally dismissed, but
the Court of Appeals modified the award of damages.
The facts are as follows:
On January 15, 2000, a Contract of Employment2 was executed by petitioner Bright Maritime Corporation (BMC), a
manning agent, and its president, petitioner Desiree P. Tenorio, for and in behalf of their principal, Ranger Marine
S.A., and respondent Ricardo B. Fantonial, which contract was verified and approved by the Philippine Overseas
Employment Administration (POEA) on January 17, 2000. The employment contract provided that respondent shall
be employed as boatswain of the foreign vessel M/V AUK for one year, with a basic monthly salary of US$450, plus
an allowance of US$220. The contract also provided for a 90 hours per month of overtime with pay and a vacation
leave with pay of US$45 per month.
Respondent was made to undergo a medical examination at the Christian Medical Clinic, which was petitioner’s
accredited medical clinic. Respondent was issued a Medical Certificate3 dated January 17, 2000, which certificate
had the phrase "FIT TO WORK" stamped on its lower and upper portion.
At about 3:30 p.m. of January 17, 2000, respondent, after having undergone the pre-departure orientation seminar
and being equipped with the necessary requirements and documents for travel, went to the Ninoy Aquino
International Airport upon instruction of petitioners. Petitioners told respondent that he would be departing on that
day, and that a liaison officer would be delivering his plane ticket to him. At about 4:00 p.m., petitioners’ liaison officer
met respondent at the airport and told him that he could not leave on that day due to some defects in his medical
certificate. The liaison officer instructed respondent to return to the Christian Medical Clinic.
Respondent went back to the Christian Medical Clinic the next day, and he was told by the examining physician, Dr.
Lyn dela Cruz-De Leon, that there was nothing wrong or irregular with his medical certificate.
Respondent went to petitioners’ office for an explanation, but he was merely told to wait for their call, as he was
being lined-up for a flight to the ship's next port of call. However, respondent never got a call from petitioners.
On May 16, 2000, respondent filed a complaint against petitioners for illegal dismissal, payment of salaries for the
unexpired portion of the employment contract and for the award of moral, exemplary, and actual damages as well as
attorney’s fees before the Regional Arbitration Branch No. 7 of the NLRC in Cebu City. 4
In their Position Paper,5 petitioners stated that to comply with the standard requirements that only those who meet
the standards of medical fitness have to be sent on board the vessel, respondent was referred to their accredited
medical clinic, the Christian Medical Clinic, for pre-employment medical examination on January 17, 2000, the same
day when respondent was supposed to fly to Germany to join the vessel. Unfortunately, respondent was not declared
fit to work on January 17, 2000 due to some medical problems.
Petitioners submitted the Affidavit6 of Dr. Lyn dela Cruz-De Leon, stating that the said doctor examined respondent
on January 17, 2000; that physical and laboratory results were all within normal limits except for the finding, after
chest x-ray, of Borderline Heart Size, and that respondent was positive to Hepatitis B on screening; that respondent
underwent ECG to check if he had any heart problem, and the result showed left axis deviation. Dr. De Leon stated
that she requested for a Hepatitis profile, which was done on January 18, 2000; that on January 20, 2000, the result
of the Hepatitis profile showed non-infectious Hepatitis B. Further, Dr. De Leon stated that respondent was declared
fit to work only on January 21, 2000; however, the date of the Medical Certificate was January 17, 2000, which was
the date when she started to examine the patient per standard operating procedure.
Petitioners argued that since respondent was declared fit to work only on January 21, 2000, he could not join the
vessel anymore as it had left the port in Germany. Respondent was advised to wait for the next vacancy for
boatswain, but he failed to report to petitioners’ office, and he gave them an incorrect telephone number. During the
mandatory conference/conciliation stage of this case, petitioners offered respondent to join one of their vessels, but
he refused.
Petitioners further argued that they cannot be held liable for illegal dismissal as the contract of employment had not
yet commenced based on Section 2 of the Standard Terms and Conditions Governing the Employment of Filipino
Seafarers on Board Ocean-Going Vessels (POEA Memorandum Circular No. 055-96), which states:
SEC 2. COMMENCEMENT/DURATION OF CONTRACT
A. The employment contract between the employer and the seafarer shall commence upon actual departure of the
seafarer from the airport or seaport in the point of hire and with a POEA approved contract. It shall be effective until
the seafarer’s date of arrival at the point of hire upon termination of his employment pursuant to Section 18 of this
Contract.
Petitioners asserted that since respondent was not yet declared fit to work on January 17, 2000, he was not able to
leave on the scheduled date of his flight to Germany to join the vessel. With his non-departure, the employment
contract was not commenced; hence, there is no illegal dismissal to speak of. Petitioners prayed for the dismissal of
the complaint.
On September 25, 2000, Labor Arbiter Ernesto F. Carreon rendered a Decision7 in favor of respondent. The pertinent
portion of the decision reads:
Unarguably, the complainant and respondents have already executed a contract of employment which was duly
approved by the POEA. There is nothing left for the validity and enforceability of the contract except compliance with
what are agreed upon therein and to all their consequences. Under the contract of employment, the respondents are
under obligation to employ the complainant on board M/V AUK for twelve months with a monthly salary of 450 US$
and 220 US$ allowance. The respondents failed to present plausible reason why they have to desist from complying
with their obligation under the contract. The allegation of the respondents that the complainant was unfit to work is
ludicrous. Firstly, the respondents' accredited medical clinic had issued a medical certificate showing that the
complainant was fit to work. Secondly, if the complainant was not fit to work, a contract of employment would not
have been executed and approved by the POEA.
We are not also swayed by the argument of the respondents that since the complainant did not actually depart from
Manila his contract of employment can be withdrawn because he has not yet commenced his employment. The
commencement of the employment is not one of those requirements in order to make the contract of employment
consummated and enforceable between the parties, but only as a gauge for the payment of salary. In this case, while
it is true that the complainant is not yet entitled to the payment of wages because then his employment has not yet
commenced, nevertheless, the same did not relieve the respondents from fulfilling their obligation by unilaterally
revoking the contract as the same amounted to pre-termination of the contract without just or authorized cause
perforce, we rule to be constitutive of illegal dismissal.
Anent our finding of illegal dismissal, we condemn the respondent corporation to pay the complainant three (3)
months salary and the refund of his placement fee, including documentation and other actual expenses, which we
fixed at one month pay.
The granted claims are computed as follows:
US$670 x 4 months US$ 2,680.00
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Bright Maritime
Corporation to pay the complainant Ricardo Fantonial the peso equivalent at the time of actual payment of US$
2,680.00.
The other claims and the case against respondent Desiree P. Tenorio are dismissed for lack of merit. 8
Petitioners appealed the decision of the Labor Arbiter to the NLRC.
On May 31, 2001, the NLRC, Fourth Division, rendered a Decision9 reversing the decision of the Labor Arbiter. The
dispositive portion of the NLRC decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Ernesto F. Carreon, dated 25 September 2000, is
SET ASIDE and a new one is entered DISMISSING the complaint of the complainant for lack of merit.
SO ORDERED.10
The NLRC held that the affidavit of Dr. Lyn dela Cruz-De Leon proved that respondent was declared fit to work only
on January 21, 2000, when the vessel was no longer at the port of Germany. Hence, respondent’s failure to depart
on January 17, 2000 to join the vessel M/V AUK in Germany was due to respondent’s health. The NLRC stated that
as a recruitment agency, petitioner BMC has to protect its name and goodwill, so that it must ensure that an
applicant for employment abroad is both technically equipped and physically fit because a labor contract affects
public interest.
Moreover, the NLRC stated that the Labor Arbiter’s decision ordering petitioners to refund respondent’s placement
fee and other actual expenses, which was fixed at one month pay in the amount of US$670.00, does not have any
bases in law, because in the deployment of seafarers, the manning agency does not ask the applicant for a
placement fee. Hence, respondent is not entitled to the said amount.
Respondent filed a motion for reconsideration of the NLRC decision, which motion was denied in a
Resolution11 dated July 23, 2001.
Respondent filed a petition for certiorari before the Court of Appeals, alleging that the NLRC committed grave abuse
of discretion in rendering the Decision dated May 31, 2001and the Resolution dated July 23, 2001.
On March 12, 2002, respondent’s counsel filed a Manifestation with Motion for Substitution of Parties due to the
death of respondent on November 15, 2001, which motion was granted by the Court of Appeals.
On October 25, 2004, the Court of Appeals rendered a Decision, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us REVERSING and SETTING
ASIDE the May 31, 2001 Decision and the July 23, 2001 Resolution of the NLRC, Fourth Division, and
REINSTATING the September 25, 2000 Decision of the Labor Arbiter with the modification that the placement fee
and other expenses equivalent to one (1) month salary is deleted and that the private respondent Bright Maritime
Corporation must also pay the amounts of ₱30,000.00 and ₱10,000.00 as moral and exemplary damages,
respectively, to the petitioner.12
The Court of Appeals held that the NLRC, Fourth Division, acted with grave abuse of discretion in reversing the
decision of the Labor Arbiter who found that respondent was illegally dismissed. It agreed with the Labor Arbiter that
the unilateral revocation of the employment contract by petitioners amounted to pre-termination of the said contract
without just or authorized cause.
The Court of Appeals held that the contract of employment between petitioners and respondent had already been
perfected and even approved by the POEA. There was no valid and justifiable reason for petitioners to withhold the
departure of respondent on January 17, 2000. It found petitioners’ argument that respondent was not fit to work on
the said date as preposterous, since the medical certificate issued by petitioners’ accredited medical clinic showed
that respondent was already fit to work on the said date. The Court of Appeals stated, thus:
Private respondent's contention, which was contained in the affidavit of Dr. Lyn dela Cruz-De Leon, that the Hepatitis
profile was done only on January 18, 2000 and was concluded on January 20, 2000, is of dubious merit. For how
could the said examining doctor place in the medical certificate dated January 17, 2000 the words "CLASS-B NON-
Infectious Hepatitis" (Rollo, p. 17) if she had not conducted the hepatitis profile? Would the private respondent have
us believe that its accredited physician would fabricate medical findings?
It is obvious, therefore, that the petitioner had been fit to work on January 17, 2000 and he should have been able to
leave for Germany to meet with the vessel M/V AUK, had it not been for the unilateral act by private respondent of
preventing him from leaving. The private respondent was merely grasping at straws in attacking the medical
condition of the petitioner just so it can justify its act in preventing petitioner from leaving for abroad. 13
The Court of Appeals held that petitioners’ act of preventing respondent from leaving for Germany was tainted with
bad faith, and that petitioners were also liable to respondent for moral and exemplary damages.
Thereafter, petitioners filed this petition raising the following issues:
I preventing respondent from leaving Manila and joining the vessel M/V AUK in Germany on January 17, 2000 is valid.
WHETHER OR NOT THE HONORABLE APPELLATE COURT COMMITTED A SERIOUS ERROR AND
GRAVE ABUSE OF DISCRETION WHEN IT HELD THE PETITIONERS LIABLE FOR ILLEGALLY
TERMINATING THE PRIVATE RESPONDENT FROM HIS EMPLOYMENT.
II
WHETHER OR NOT THE HONORABLE APPELLATE COURT COMMITTED SERIOUS ERROR AND
GRAVE ABUSE OF DISCRETION IN SETTING ASIDE THE OVERWHELMING EVIDENCE SHOWING
THAT THE PRIVATE RESPONDENT FAILED TO COMPLY WITH THE REQUIREMENTS SET BY THE
POEA RULES REGARDING FITNESS FOR WORK.
III
WHETHER OR NOT THE HONORABLE APPELLATE COURT SERIOUSLY ERRED AND COMMITTED
GRAVE ABUSE OF DISCRETION WHEN IT AWARDED MONETARY BENEFITS TO THE PRIVATE
RESPONDENT DESPITE THE PROVISION OF THE POEA [STANDARD EMPLOYMENT CONTRACT]
TO THE CONTRARY.
IV
WHETHER OR NOT THE HONORABLE APPELLATE COURT COMMITTED SERIOUS ERROR WITH
REGARD TO ITS FINDINGS OF FACTS, WHICH, IF NOT CORRECTED, WOULD CERTAINLY CAUSE
GRAVE OR IRREPARABLE DAMAGE OR INJURY TO THE PETITIONERS.14
The general rule that petitions for review only allow the review of errors of law by this Court is not ironclad. 15 Where
the issue is shrouded by a conflict of factual perceptions by the lower court or the lower administrative body, such as
the NLRC in this case, this Court is constrained to review the factual findings of the Court of Appeals. 16
Petitioners contend that the Court of Appeals erred in doubting the Affidavit of Dr. Lyn dela Cruz-De Leon, which
affidavit stated that the Hepatitis profile of respondent was done only on January 18, 2000 and was concluded on
January 20, 2000. Petitioners stated that they had no intention to fabricate or mislead the appellate court and the
Labor Arbiter, but they had to explain the circumstances that transpired in the conduct of the medical examination.
Petitioners reiterated that the medical examination was conducted on January 17, 2000 and the result was released
on January 20, 2000. As explained by Dr. Lyn dela Cruz-De Leon, the date "January 17, 2000" was written on the
medical examination certificate because it was the day when respondent was referred and initially examined by her.
The medical examination certificate was dated January 17, 2000 not for any reason, but in accordance with a
generally accepted medical practice, which was not controverted by respondent.
Petitioners assert that respondent’s failure to join the vessel on January 17, 2000 should not be attributed to it for it
was a direct consequence of the delay in the release of the medical report. Respondent was not yet declared fit to
work at the time when he was supposed to be deployed on January 17, 2000, as instructed by petitioners’ principal.
Respondent’s fitness to work is a condition sine qua non for purposes of deploying an overseas contract worker.
Since respondent failed to qualify on the date designated by the principal for his deployment, petitioners had to find a
qualified replacement considering the nature of the shipping business where delay in the departure of the vessel is
synonymous to demurrage/damages on the part of the principal and on the vessel’s charterer. Without a clean bill of
health, the contract of employment cannot be considered to have been perfected as it is wanting of an important
requisite.
Based on the foregoing argument of petitioners, the first issue to be resolved is whether petitioners’ reason for
The Court rules in the negative.
The Court has carefully reviewed the records of the case, and agrees with the Court of Appeals that respondent’s
Medical Certificate17 dated January 17, 2000, stamped with the words "FIT TO WORK," proves that respondent was
medically fit to leave Manila on January 17, 2000 to join the vessel M/V AUK in Germany. The Affidavit of Dr. Lyn
dela Cruz-De Leon that respondent was declared fit to work only on January 21, 2000 cannot overcome the evidence
in the Medical Certificate dated January 17, 2000, which already stated that respondent had "Class-B Non-Infectious
Hepatitis-B," and that he was fit to work. The explanation given by Dr. Lyn dela Cruz-De Leon in her affidavit that the
Medical Certificate was dated January 17, 2000, since it carries the date when they started to examine the patient
per standard operating procedure, does not persuade as it goes against logic and the chronological recording of
medical procedures. The Medical Certificate submitted as documentary evidence18 is proof of its contents, including
the date thereof which states that respondent was already declared fit to work on January 17, 2000, the date of his
scheduled deployment.
Next, petitioners contend that respondent’s employment contract was not perfected pursuant to the POEA Standard
Employment Contract, which provides:
SEC 2. COMMENCEMENT/DURATION OF CONTRACT
A. The employment contract between the employer and the seafarer shall commence upon actual departure of the
seafarer from the airport or seaport in the point of hire and with a POEA approved contract. It shall be effective until
the seafarer’s date of arrival at the point of hire upon termination of his employment pursuant to Section 18 of this
Contract.19
Petitioners argue that, as ruled by the NLRC, since respondent did not actually depart from the Ninoy Aquino
International Airport in Manila, no employer-employee relationship existed between respondent and petitioners’
principal, Ranger Marine S.A., hence, there is no illegal dismissal to speak of, so that the award of damages must be
set aside.
Petitioners assert that they did not conceal any information from respondent related to his contract of employment,
from his initial application until the release of the result of his medical examination. They even tried to communicate
with respondent for another shipboard assignment even after his failed deployment, which ruled out bad faith. They
pray that respondent’s complaint be dismissed for lack of merit.
Petitioners’ argument is partly meritorious.
An employment contract, like any other contract, is perfected at the moment (1) the parties come to agree upon its
terms; and (2) concur in the essential elements thereof: (a) consent of the contracting parties, (b) object certain
which is the subject matter of the contract, and (c) cause of the obligation. 20 The object of the contract was the
rendition of service by respondent on board the vessel for which service he would be paid the salary agreed upon.
Hence, in this case, the employment contract was perfected on January 15, 2000 when it was signed by the parties,
respondent and petitioners, who entered into the contract in behalf of their principal, Ranger Marine S.A., thereby
signifying their consent to the terms and conditions of employment embodied in the contract, and the contract was
approved by the POEA on January 17, 2000. However, the employment contract did not commence, since
petitioners did not allow respondent to leave on January 17, 2000 to embark the vessel M/V AUK in Germany on the
ground that he was not yet declared fit to work on the day of departure, although his Medical Certificate dated
January 17, 2000 proved that respondent was fit to work.
In Santiago v. CF Sharp Crew Management, Inc.,21 the Court held that the employment contract did not commence
when the petitioner therein, a hired seaman, was not able to depart from the airport or seaport in the point of hire;
thus, no employer-employee relationship was created between the parties.
Nevertheless, even before the start of any employer-employee relationship, contemporaneous with the perfection of
the employment contract was the birth of certain rights and obligations, the breach of which may give rise to a cause
of action against the erring party.22 If the reverse happened, that is, the seafarer failed or refused to be deployed as
agreed upon, he would be liable for damages.23
The Court agrees with the NLRC that a recruitment agency, like petitioner BMC, must ensure that an applicant for
employment abroad is technically equipped and physically fit because a labor contract affects public interest.
Nevertheless, in this case, petitioners failed to prove with substantial evidence that they had a valid ground to
prevent respondent from leaving on the scheduled date of his deployment. While the POEA Standard Contract must
be recognized and respected, neither the manning agent nor the employer can simply prevent a seafarer from being
deployed without a valid reason.24
Petitioners’ act of preventing respondent from leaving and complying with his contract of employment constitutes
breach of contract for which petitioner BMC is liable for actual damages to respondent for the loss of one-year salary
as provided in the contract.25 The monthly salary stipulated in the contract is US$670, inclusive of allowance.
The Court upholds the award of moral damages in the amount of ₱30,000.00, as the Court of Appeals correctly
found petitioners’ act was tainted with bad faith,26 considering that respondent’s Medical Certificate stated that he
was fit to work on the day of his scheduled departure, yet he was not allowed to leave allegedly for medical
reasons.1âwphi1
Further, the Court agrees with the Court of Appeals that petitioner BMC is liable to respondent for exemplary
damages,27 which are imposed by way of example or correction for the public good in view of petitioner’s act of
preventing respondent from being deployed on the ground that he was not yet declared fit to work on the date of his
departure, despite evidence to the contrary. Such act, if tolerated, would prejudice the employment opportunities of
our seafarers who are qualified to be deployed, but prevented to do so by a manning agency for unjustified reasons.
Exemplary damages are imposed not to enrich one party or impoverish another, but to serve as a deterrent against
or as a negative incentive to curb socially deleterious actions.28 In this case, petitioner should be held liable to
respondent for exemplary damages in the amount of ₱50,000.00,29 following the recent case of Claudio S. Yap v.
Thenamaris Ship’s Management, et al.,30 instead of ₱10,000.00
The Court also holds that respondent is entitled to attorney’s fees in the concept of damages and expenses of
litigation.31 Attorney's fees are recoverable when the defendant's act or omission has compelled the plaintiff to incur
expenses to protect his interest.32 Petitioners’ failure to deploy respondent based on an unjustified ground forced
respondent to file this case, warranting the award of attorney’s fees equivalent to ten percent (10%) of the
recoverable amount.33
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 67571, dated
October 25, 2004, is AFFIRMED with modification. Petitioner Bright Maritime Corporation is hereby ORDERED to
pay respondent Ricardo B. Fantonial actual damages in the amount of the peso equivalent of US$8,040.00,
representing his salary for one year under the contract; moral damages in the amount Thirty Thousand Pesos
(₱30,000.00); exemplary damages that is increased from Ten Thousand Pesos (₱10,000.00) to Fifty Thousand
Pesos (₱50,000.00), and attorney’s fees equivalent to ten percent (10%) of the recoverable amount.
Costs against petitioners.
SO ORDERED.
G.R. No. 89920 October 18, 1990
UNIVERSITY OF STO. TOMAS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, UST FACULTY UNION, respondents.
GUTIERREZ, JR., J.:
May a university, pending resolution by the National Labor Relations Commission (NLRC) of its labor dispute with its
union, comply with a readmission order by granting substantially equivalent academic assignments, in lieu of actual
reinstatement, to dismissed faculty members?
On June 19, 1989, the University of Sto. Tomas (UST), through its Board of Trustees, terminated the employment of
all sixteen union officers and directors of respondent UST Faculty Union on the ground that "in publishing or causing
to be published in Strike Bulletin No. 5 dated August 4, 1987, the libelous and defamatory attacks against the Father
Rector, (each of them) has committed the offenses of grave misconduct, serious disrespect to a superior and
conduct unbecoming a faculty member." (Rollo p. 41)
As a result of the dismissal of said employees, some faculty members staged mass leaves of absence on June 28,
1989 and several days thereafter, disrupting classes in all levels at the University. (Rollo, pp. 53, 92)
On July 5, 1989, the faculty union filed a complaint for illegal dismissal and unfair labor practice with the Department
of Labor and Employment. (Rollo, p. 42)
On July 7, 1989, the labor arbiter, on a prima facie showing that the termination was causing a serious labor dispute,
certified the matter to the Secretary of Labor and Employment for a possible suspension of the effects of termination.
(Rollo, p. 51)
Secretary Franklin Drilon subsequently issued an order dated July 11, 1989, the decretal portion of which reads as
follows:
WHEREFORE, ABOVE PREMISES CONSIDERED, and in the interest of industrial peace and
pursuant to Section 33 (b) of RA 6715, the effects of the termination of Ma. Melvyn Alamis,
Eduardo Marino, Jr., Urbano Agalabia, Anthony Cura, Norma Collantes, Fulvio Guerrero, Corinta
Barranco, Porfirio Jose Guico, Lily Matias, Rene Sison, Henedino Brondial, Myrna Hilario,
Ronaldo Asuncion, Nilda Redoblado, Zenaida Burgos, and Milagros Nino are hereby suspended
and management is likewise ordered to accept them back to work under the same terms and
conditions prevailing prior to their dismissal.
In furtherance of this Order, all faculty members are directed to immediately report back for work
and for management to accept them back under the same terms and conditions prevailing prior
to the strike.
 Labor Arbiter Nieves de Castro is hereby directed to proceed with the case pending before her
and to expedite the resolution of the same.
Pending resolution, the parties are directed to cease and desist, from committing any and all
acts that might exacerbate the situation. (Rollo, p. 54)
Petitioner UST filed a motion for reconsideration on July 12, 1989 asking the Secretary of Labor and Employment to
either assume jurisdiction over the present case or certify it to the National Labor Relations Commission (NLRC) for
compulsory arbitration without suspending the effects of the termination of the 16 dismissed faculty members. (Rollo,
pp. 55-64)
On July 18, 1989, Secretary Drilon, acting on said motion for reconsideration, issued another order modifying his
previous order. The dispositive portion of the new order is quoted below:
WHEREFORE, ABOVE PREMISES CONSIDERED, the Order dated 11 July 1989 is hereby
modified. Accordingly, this Office hereby certifies the labor dispute to the National Labor
Relations Commission for compulsory arbitration pursuant to Article 263(g) of the Labor Code,
as amended by Section 27 of RA 6715.
In accordance with the above, the University of Santo Tomas is hereby ordered to readmit all its
faculty members, including the sixteen (16) union officials, under the same terms and conditions
prevailing prior to the present dispute.
The NLRC is hereby instructed to immediately call the parties and expedite the resolution of the
dispute.
The directive to the parties to cease and desist from committing any act that will aggravate the
situation is hereby reiterated. (Rollo, p. 81)
The petitioner filed a motion for clarification dated July 20, 1989 which was subsequently withdrawn. (Rollo, p. 94)
On July 27, 1989, Secretary Drilon issued another order that contained the following dispositive portion:
WHEREFORE, ABOVE PREMISES CONSIDERED, the Order dated 18 July 1989 directing the
readmission of all faculty members, including the 16 union officials, under the same terms and
conditions prevailing prior to the instant dispute is hereby affirmed.
The NLRC is hereby ordered to immediately call the parties and ensure the implementation of
this Order.
No further motion of this and any nature shall be entertained. (Rollo, p. 103)
The NLRC subsequently caned the parties to a conference on August 11, 1989 before its Labor Arbiter Romeo Go.
(Rollo, p. 9)
On August 14, 1989, the respondent union filed before the NLRC a motion to implement the orders of the Honorable
Secretary of Labor and Employment dated July 11, 18 and 27, 1989 and to cite Atty. Joselito Guianan Chan (the
petitioner's in-house counsel) for contempt. (Rollo, p. 104) The petitioner, on August 25, 1989, filed its opposition to
the private respondent's motion. (Rollo, p. 112)
On September 6, 1989, the NLRC issued a resolution, which is the subject of this petition for certiorari, set forth
below:
Certified Case No. 0531 IN RE: LABOR DISPUTE at the University of Santo Tomas. — Acting
on the Motion to Implement the Orders of the Honorable Secretary of Labor and Employment
dated July 11, 18, and 27, 1989 and to cite Joselito Guianan Chan for Contempt dated August
14, 1989 and the Urgent Ex-parte Motion to Implement Certification Orders of the Honorable
Secretary of Labor and Employment dated July 18 and 17, (Sic) 1989 and the subsequent
Manifestation dated September 4, 1989, all filed by the UST Faculty Union; and considering the
Opposition to Union's Motion to Cite Atty. Joselito Guianan Chan for Contempt and Comments
on its Motion to Implement the Orders of the Honorable Secretary of Labor and Employment
dated July 11, 18 and 27, 1989 filed on August 25, 1989 by UST through its counsel, the
Commission, after deliberation, resolved, to wit:
a) The University is hereby directed to comply and faithfully abide with the July 11, 18 and 27,
1989 Orders of the Secretary of Labor and Employment by immediately reinstating or
readmitting the following faculty members under the same terms and conditions prevailing prior
to the present dispute or merely reinstate them in the payroll:
a) Ronaldo Asuncion
b) Lily Matias
c) Nilda Redoblado
d) Zenaida Burgos
e) Eduardo Marino, Jr.
f) Milagros Nino
g) Porfirio Guico
b) To fully reinstate, by giving him additional units or through payroll reinstatement, Prof. Urbano
Agalabia who was assigned only six (6) units;
c) To fully reinstate or reinstate through payroll, Prof. Fulvio Guerrero, who was assigned only
three (3) units;
d) The University is directed to pay the above-mentioned faculty members full backwages
starting from July 13, 1989, the date the faculty members presented themselves for
reinstatement up to the date of actual reinstatement or payroll reinstatement.
e) The payroll reinstatement of the above-named faculty members is hereby allowed only up to
the end of the First semester 1989; Next semester, the University is directed to actually reinstate
the faculty members by giving them their normal teaching loads;
f) The University is directed to cease and desist from offering the aforementioned faculty
members substantially equivalent academic assignments as this is not compliance in good faith
with the Orders of the Secretary of Labor and Employment. (Rollo, pp. 30-31)
Acting on an urgent motion for the issuance of a writ of preliminary injunction and/or restraining order, the Court
resolved to issue a temporary restraining order dated October 25, 1989 enjoining respondents from enforcing or
executing the assailed NLRC resolution. (Rollo, p. 160)
The petitioner assigns the following errors:
I faculty is effected. (Rollo, pp. 13-14)
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (NLRC) GRAVELY ABUSED ITS DISCRETION
IN A MANNER AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED THE ASSAILED
RESOLUTION WHICH ORDERS THE ALTERNATIVE REMEDIES OF ACTUAL REINSTATEMENT OR PAYROLL
REINSTATEMENT OF THE DISMISSED FACULTY MEMBERS.
II
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DIRECTED THE UNIVERSITY TO PAY SOME
OF THE DISMISSED FACULTY MEMBERS ASSIGNED TO HANDLE SUBSTANTIALLY EQUIVALENT ACADEMIC
ASSIGNMENTS, 'FULL BACKWAGES STARTING FROM JULY 13, 1989, THE DATE THE FACULTY MEMBERS
PRESENTED THEMSELVES FOR REINSTATEMENT UP TO THE DATE OF ACTUAL REINSTATEMENT OR
PAYROLL REINSTATEMENT.
III
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNT ING TO LACK OR EXCESS OF JURISDICTION WHEN IT CONSIDERED AS 'NOT
COMPLIANCE IN GOOD FAITH WITH THE ORDERS OF THE SECRETARY OF LABOR AND EMPLOYMENT'
THE UNIVERSITY'S ACT OF GRANTING TO SOME OF THE DISMISSED FACULTY MEMBERS,
SUBSTANTIALLY EQUIVALENT ACADEMIC ASSIGNMENTS.
IV
THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION WHEN IT ARROGATED UPON ITSELF THE
EXERCISE OF THE RIGHT AND PREROGATIVES REPOSED BY LAW TO THE PETITIONER UNIVERSITY IN
THE LATTER'S CAPACITY AS EMPLOYER. (Rollo, pp. 9-10)
We shall deal with the first and third assignment of errors jointly because they are interrelated.
The petitioner states in its petition that: a) It has already actually reinstated six of the dismissed faculty members,
namely: Professors Alamis, Collantes, Hilario, Barranco, Brondial and Cura; b) As to Professors Agalabia and
Guerrero, whose teaching assignments were partially taken over by new faculty members, they were given back their
remaining teaching loads (not taken by new faculty members) but were likewise given substantially equivalent
academic assignments corresponding to their teachings loads already taken over by new faculty members; c) The
remaining seven faculty members, to wit: Professors Asuncion, Marino Jr., Matias, Redoblado, Burgos, Nino and
Guico, were given substantially equivalent academic assignments in lieu of actual teaching loads because all of their
teaching loads originally assigned to them at the start of the first semester of school year 1989-1990 were already
taken over by new faculty members; d) One dismissed faculty member Rene Sison, had been "absent without official
leave" or AWOL as early as the start of the first semester. (Rollo, pp. 11-12).
The petitioner advances the argument that its grant of substantially equivalent academic assignments to some of the
dismissed faculty members, instead of actual reinstatement, is well-supported by just and valid reasons. It alleges
that actual reinstatement of the dismissed faculty members whose teaching assignments were previously taken over
by new faculty members is not feasible nor practicable since this would compel the petitioner university to violate and
terminate its contracts with the faculty members who were assigned to and had actually taken over the courses. The
petitioner submits that it was never the intention of the Secretary of Labor to force it to break employment contracts
considering that those ordered temporarily reinstated could very well be accommodated with substantially equivalent
academic assignments without loss in rank, pay or privilege. Likewise, it claims that to change the faculty member
when the semester is about to end would seriously impair and prejudice the welfare and interest of the students
because dislocation, confusion and loss in momentum, if not demoralization, will surely ensue once the change in
The petitioner also avers that the faculty members who were given substantially equivalent academic assignments
were told by their respective deans to report to the Office of Academic Affairs and Research for their academic
assignments but the said faculty members failed to comply with these instructions. (Rollo, p. 118) Thus, the petitioner
postulates, mere payroll reinstatement which would give rise to the obligation of the University to pay these faculty
members, even if the latter are not working, would squarely run counter to the principle of "No Work, No Pay". (Rollo,
p. 15)
The respondent UST Faculty Union, on the other hand, decries that the petitioner is using the supposed substantially
equivalent academic assignments as a vehicle to embarrass and degrade the union leaders and that the refusal of
the petitioner to comply with the return-to-work order is calculated to deter, impede and discourage the union leaders
from pursuing their union activities. (Rollo, pp. 246, 254)
It also claims that the dismissed faculty members were hired to perform teaching functions and, indeed, they have
rendered dedicated teaching service to the University students for periods ranging from 12 to 39 years. Hence, they
maintain, their qualifications are fitted for classroom activities and the assignment to them of non-teaching duties,
such as (a) book analysis; (b) syllabi-making or revising; (c) test questions construction; (d) writing of monographs
and modules for students' use in learning "hard to understand" topics on the lectures; (e) designing modules,
transparencies, charts, diagrams for students' use as learning aids; and (f) other related assignments, is oppressive.
(Rollo, pp. 243-244)
In resolving the contentions of both parties, this Court refers to Article 263 (g), first paragraph, of the Labor Code, as
amended by Section 27 of Republic Act No. 6715, which provides:
(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout
in an industry indispensable to the national interest, the Secretary of Labor and Employment
may assume jurisdiction over the dispute and decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or certification shall have the effect of automatically
enjoining the intended or impending strike or lockout as specified in the assumption or
certification order. If one has already taken place at the time of assumption or certification, all
striking or locked out employees shall immediately return to work and the employer shall
immediately resume operations and readmit all workers under the same terms and conditions
prevailing before the strike or lockout. The Secretary of Labor and Employment or the
Commission may seek the assistance of law enforcement agencies to ensure compliance with
this provision as well as with such orders as he may issue to enforce the same. (Emphasis
supplied.)
It was in compliance with the above provision that Secretary Drilon issued his July 18, 1989 order to "readmit all its
faculty members, including the sixteen (16) union officials, under the same terms and conditions prevailing prior to
the present dispute." (Rollo, p. 81) And rightly so, since the labor controversy which brought about a temporary
stoppage of classes in a university populated by approximately 40,000 students affected national interest.
After the petitioner filed a motion for clarification which, however, was subsequently withdrawn, Secretary Drilon
issued another order dated July 27, 1989 affirming his July 18 order and directing the NLRC to immediately call the
parties and "ensure the implementation of this order" (Rollo, p. 103)
The NLRC was thereby charged with the task of implementing a valid return-to-work order of the Secretary of Labor.
As the implementing body, its authority did not include the power to amend the Secretary's order. Since the
Secretary's July 18 order specifically provided that the dismissed faculty members shall be readmitted under the
same terms and conditions prevailing prior to the present dispute, the NLRC should have directed the actual
reinstatement of the concerned faculty members. It therefore erred in granting the alternative remedy of payroll
reinstatement which, as it turned, only resulted in confusion. The remedy of payroll reinstatement is nowhere to be
found in the orders of the Secretary of Labor and hence it should not have been imposed by the public respondent
NLRC. There is no showing that the facts called for this type of alternative remedy.
For the same reason, we rule that the grant of substantially equivalent academic assignments can not be sustained.
Clearly, the giving of substantially equivalent academic assignments, without actual teaching loads, cannot be
considered a reinstatement under the same terms and conditions prevailing before the strike. Within the context of
Article 263(g), the phrase "under the same terms and conditions" contemplates actual reinstatement or the return of
actual teaching loads to the dismissed faculty members. There are academic assignments such as the research and
writing of treatises for publication or full-time laboratory work leading to exciting discoveries which professors yearn
for as badges of honor and achievement. The assignments given to the reinstated faculty members do not fall under
such desirable categories.
indispensable to the national interest. The order is issued in the exercise of the court's
compulsory power of arbitration, and therefore must be obeyed until set aside. To say that its
effectivity must wait affirmance in a motion for reconsideration is not only to emasculate it but
indeed to defeat its import, for by then the deadline fixed for the return-to-work would, in the
ordinary course, have already passed and hence can no longer be affirmed insofar as the time
element is concerned.
Additionally, although the Secretary's order of July 11 was modified by the July 18 order, the return-to-work portion of
the earlier order which states that "the faculty members should be admitted under the same terms and conditions
prevailing prior to the dispute" was affirmed.
We likewise affirm the NLRC's finding that the dismissed teachers presented themselves for reinstatement on July
13, 1989 since the factual findings of quasi-judicial agencies like the NLRC are generally accorded not only respect
but even finality if such findings are supported by substantial evidence. (Mamerto v. Inciong, 118 SCRA 265 [1982];
Baby Bus, Inc. v. Minister of Labor, 158 SCRA 221 [1988]; Packaging Products Corporation v. National Labor
Relations Commission, 152 SCRA 210 [1987]; Talisay Employees' and Laborers Association (TELA) v. Court of
Industrial Relations, 143 SCRA 213 [1986]). There is no showing that such substantial evidence is not present.

Article 263(g) was devised to maintain the status quo between the workers and management in a labor dispute
The petitioner, however, stresses that since the faculty members who were given substantially equivalent academic
causing or likely to cause a strike or lockout in an industry indispensable to the national interest, pending
assignments did not perform their assigned tasks, then they are not entitled to backwages. (Rollo, p. 19) The
adjudication of the controversy. This is precisely why the Secretary of Labor, in his July 11, 1989 order, stated that
petitioner is wrong. The reinstated faculty members' refusal to assume their substantially equivalent academic
"Pending resolution, the parties are directed to cease and desist from committing any and all acts that might
assignments does not contravene the Secretary's return-to-work order. They were merely insisting on being given
exacerbate the situation." (Rollo, p. 54) And in his order of July 18, he decreed that "The directive to the parties to
actual teaching loads, on the return-to-work order being followed. We find their persistence justified as they are
cease and desist from committing any act that will aggravate the situation is hereby reiterated." (Rollo, p. 81)
rightfully and legally entitled to actual reinstatement. Since the petitioner University failed to comply with the
Secretary's order of actual reinstatement, we adjudge that the NLRC's award of backwages until actual reinstatement
The grant of substantially equivalent academic assignments of the nature assigned by the petitioner would evidently is correct.
alter the existing status quo since the temporarily reinstated teachers will not be given their usual teaching loads. In
fact, the grant thereof aggravated the present dispute since the teachers who were assigned substantially equivalent
With respect to the fourth assignment of error, the petitioner expostulates that as employer, it has the sole and
academic assignments refused to accept and handle what they felt were degrading or unbecoming assignments, in
exclusive right and prerogative to determine the nature and kind of work of its employees and to control and manage
turn prompting the petitioner University to withhold their salaries. (Rollo, p. 109)
its own operations. Thus, it objects to the NLRC's act of substituting its judgment for that of the petitioner in the
conduct of its affairs and operations. (Rollo, pp. 23-24)
We therefore hold that the public respondent NLRC did not commit grave abuse of discretion when it ruled that the
petitioner should "cease and desist from offering the aforementioned faculty members substantially equivalent
Again, we cannot sustain the petitioner's contention. The hiring, firing, transfer, demotion and promotion of
academic assignments as this is not compliance in good faith with the order of the Secretary of Labor and
employees are traditionally Identified as management prerogatives. However, these are not absolute prerogatives.
Employment."
They are subject to limitations found in law, a collective bargaining agreement, or general principles of fair play and
justice. (Abbott Laboratories [Phil.] Inc. v. NLRC, 154 SCRA 713 [1987])
It was error for the NLRC to order the alternative remedies of payroll reinstatement or actual reinstatement. However,
the order did not amount to grave abuse of discretion. Such error is merely an error of judgment which is not
Article 263(g) is one such limitation provided by law. To the extent that Art. 263(g) calls for the admission of all
correctible by a special civil action for certiorari. The NLRC was only trying its best to work out a satisfactory ad hoc
workers under the same terms and conditions prevailing before the strike, the petitioner University is restricted from
solution to a festering and serious problem. In the light of our rulings on the impropriety of the substantially equivalent
exercising its generally unbounded right to transfer or reassign its employees. The public respondent NLRC is not
academic assignments and the need to defer the changes of teachers until the end of the first semester, the payroll
substituting its own judgment for that of the petitioner in the conduct of its own affairs and operations; it is merely
reinstatement will actually minimize the petitioners problems in the payment of full backwages.
complying with the mandate of the law.

As to the second assignment of error, the petitioner contends that the NLRC committed grave abuse of discretion in
awarding backwages from July 13, 1989, the date the faculty members presented themselves for work, up to the
date of actual reinstatement, arguing that the motion for reconsideration seasonably filed by the petitioner had
effectively stayed the Secretary's order dated July 11, 1989.
The petitioner's stand is unmeritorious. A return-to-work order is immediately effective and executory despite the
filing of a motion for reconsideration by the petitioner. As pointed out by the Court in Philippine Air Lines Employees
Association (PALEA) v. Philippine Air Lines, Inc. (38 SCRA 372 [1971]):
The very nature of a return-to-work order issued in a certified case lends itself to no other
construction. The certification attests to the urgency of the matter affecting as it does an industry
The petitioner manifests the fear that if the temporarily reinstated faculty members will be allowed to handle actual
teaching assignments in the classroom, the latter would take advantage of the situation by making the classroom the
forum not for the purpose of imparting knowledge to the students but for the purpose of assailing and lambasting the
administration. (Rollo, p. 330) There may be a basis for such a fear. We can even state that such concern is not
entirely unfounded nor farfetched. However, such a fear is speculative and does not warrant a deviation from the
principle that the dismissed faculty members must be actually reinstated pending resolution of the labor dispute.
Unpleasant situations are sometimes aftermaths of bitter labor disputes. It is the function of Government to fairly
apply the law and thereby minimize the dispute's harmful effects. It is in this light that the return to work order should
be viewed and obeyed.
One thing has not escaped this Court's attention. Professors Alamis, Cura, Collantes, Barranco, Brondial and Hilario
were already reinstated by the petitioner in compliance with the Secretary's return-to-work order. Knowing this to be
a fact, the NLRC, in its assailed resolution, dealt only with the fate of the remaining faculty members who were given
substantially equivalent academic assignments. The names of the aforementioned faculty members appear nowhere
in the disputed NLRC order. Inasmuch as these faculty members actually reinstated were not covered by the NLRC
resolution, then it follows that they were likewise not covered by the Court's temporary restraining order enjoining
respondents from enforcing or executing the NLRC resolution. The effects of the temporary restraining order did not
extend to them. Yet, after the Court issued the temporary restraining order, the petitioner lost no time in recalling
their actual teaching assignments and giving them, together with the rest of the dismissed faculty members,
substantially equivalent academic assignments.
The petitioner's dogmatic insistence in issuing substantially equivalent academic assignments stems from the fact
that the teaching loads of the dismissed professors have already been assigned to other faculty members. It wants
us to accept this remedy as one resorted to in good faith. And yet, the petitioner's employment of the temporary
restraining order as a pretext to enable it to substitute substantially equivalent academic assignments even for those
who were earlier already reinstated to their actual teaching loads runs counter to the dictates of fair play.
With respect to the private respondent's allegation of union busting by the petitioner, we do not at this time pass upon
this issue. Its determination falls within the competence of the NLRC, as compulsory arbitrator, before whom the
labor dispute is under consideration. We are merely called upon to decide the propriety of the petitioner University's
grant of substantially equivalent academic assignments pending resolution of the complaint for unfair labor pratice
and illegal dismissal filed by the private respondent.
Although we pronounce that the dismissed faculty members must be actually reinstated while the labor dispute is
being resolved, we have to take into account the fact that at this time, the first semester for schoolyear 1990-1991 is
about to end. To change the faculty members around the time of final examinations would adversely affect and
prejudice the students whose welfare and interest we consider to be of primordial importance and for whom both the
University and the faculty union must subordinate their claims and desires. This Court therefore resolves that the
actual reinstatement of the non-reinstated faculty members, pending resolution of the labor controversy before the
NLRC, may take effect at the start of the second semester of the schoolyear 1990-1991 but not later. With this
arrangement, the petitioner's reasoning that it will be violating contracts with the faculty members who took over the
dismissed professors' teaching loads becomes moot considering that, as it alleges in its petition, it operates on a
semestral basis.
Under the principle that no appointments can be made to fill items which are not yet lawfully vacant, the contracts of
new professors cannot prevail over the right to reinstatement of the dismissed personnel. However, we apply
equitable principles for the sake of the students and order actual reinstatement at the start of the second semester.
WHEREFORE, the petition is hereby DISMISSED. However, the NLRC resolution dated September 6, 1989 is
MODIFIED and the petitioner University of Sto. Tomas is directed to temporarily reinstate, pending and without
prejudice to the outcome of the labor dispute before the National Labor Relations Commission, the sixteen (16)
dismissed faculty members to their actual teaching assignments, at the start of the second semester of the
schoolyear 1990-1991. Prior to their temporary reinstatement to their actual teaching loads, the said faculty members
shall be entitled to fall wages, backwages, and other benefits. The Temporary Restraining Order dated October 25,
1989 is hereby LIFTED.
SO ORDERED.
G.R. No. 175283 March 28, 2008
JACKQUI R. MORENO, Petitioner,
vs.
SAN SEBASTIAN COLLEGE-RECOLETOS, MANILA, Respondent.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court is the Decision2 of the Court of
Appeals dated 7 November 2006 in CA-G.R. SP No. 90083. The appellate court’s Decision granted the Special Civil
Action for Certiorari filed by respondent San Sebastian College-Recoletos, Manila (SSC-R), and annulled the
Decision3 dated 23 November 2004 and the Resolution4 dated 31 March 2005 of the National Labor Relations
Commission (NLRC) in NLRC-NCR-CA No. 037175-03.
The undisputed facts of the case are as follows:
Respondent SSC-R is a domestic corporation and an educational institution duly registered under the laws of the
Philippines, located in C. M. Recto Avenue, Quiapo, Manila.
On 16 January 1999, SSC-R employed petitioner Jackqui R. Moreno (Moreno) as a teaching fellow. On 23 October
2000, Moreno was appointed as a full-time college faculty member.5 Then, on 22 October 2001, Moreno became a
member of the permanent college faculty.6 She was also offered the chairmanship7 of the Business Finance and
Accountancy Department of her college on 13 September 2002.
Subsequently, reports and rumors of Moreno’s unauthorized external teaching engagements allegedly circulated and
reached SSC-R. The Human Resource Department of the school thereafter conducted a formal investigation on the
said activities. On 24 October 2002, the Department submitted its report, 8 which stated that Moreno indeed had
unauthorized teaching assignments at the Centro Escolar University during the first semester of the School Year
2002-2003, and at the College of the Holy Spirit, Manila, during the School Years 2000-2001, 2001-2002 and the first
semester of School Year 2002-2003.
On 27 October 2002, Moreno received a memorandum 9 from the Dean of her college, requiring her to explain the
reports regarding her unauthorized teaching engagements. The said activities allegedly violated Section 2.2 of Article
II of SSC-R’s Faculty Manual,10 which reads:
Administrative permission is required for all full-time faculty members to teach part-time elsewhere. If ever teaching
permission is granted, the total teaching load should not exceed the maximum allowed by CHED rules and
regulations. Faculty members are required to report all other teaching assignments elsewhere within two (2) weeks
from start of the classes every semester.
On 28 October 2002, Moreno sent a written explanation11 in which she admitted her failure to secure any written
permission before she taught in other schools. Moreno explained that the said teaching engagements were merely
transitory in nature as the aforesaid schools urgently needed lecturers and that she was no longer connected with
them. Moreno further stated that it was never her intention to jeopardize her work in SSC-R and that she merely
wanted to improve her family’s poor financial conditions.
A Special Grievance Committee was then formed in order to investigate and make recommendations regarding
Moreno’s case. The said committee was composed of Dean Abraham Espejo of the College of Law, as chairman,
and Messrs. Dindo Bunag and Ramon Montierro, as members.
In a letter12 dated 11 November 2002, the grievance committee required Moreno to answer the following series of
questions concerning her case, to wit:
1. Did you teach in other schools without first obtaining the consent of your superiors in SSC-R?
 2. Did you ever go beyond the maximum limit for an outside load? The four (4) applications for leave of absence adduced in evidence by the respondent [SSC-R] are all undated. If the
absences indicated in the said documents were the only absences incurred by the complainant [Moreno] in her four-
year tenure, it cannot be said that she had a poor attendance. In fact, the contrary would be true. On the other hand,
3. Did you ever truthfully disclose completely to your superiors at SSC-R any outside Load?
it is conceded that in the yearly evaluation of the performance of teachers, she consistently landed among the five
best teachers. Thus, neither can it be said that her moonlighting activities adversely affected her work performance.
4. Do you deny teaching in CEU? Likewise, the undisputed fact that she was asked to be the chairman of Business Finance and Accountancy for SY
2002-2003 should be considered. This last circumstance could only mean that she was very good at her job.
5. Do you deny teaching at Holy Spirit?
There are other extenuating circumstances that should have been taken into consideration in determining the
13 propriety of the penalty of dismissal meted upon the complainant. These circumstances are the fact that it was her
Moreno answered the above queries in a letter dated 12 November 2002. Moreno admitted she did not formally
first offense in four years of unblemished employment, and the fact that she candidly admitted her fault. x x x
disclose her teaching loads at the College of the Holy Spirit and at the Centro Escolar University for fear that the
priest administrators may no longer grant her permission, as prior similar requests had already been declined; that
the Dean of her college was aware of her external teaching loads; that she went beyond the maximum limit for an Moreover, it is settled that the existence of some rules agreed upon between the employer and employee on the
outside load in the School Years 2000 until 2002, because she needed to support her mother and sister, her subject of dismissal cannot preclude the State from inquiring whether its rigid application would work too harshly on
masteral studies, and her sister’s canteen business, all of which coincided with the payment of the emergency loan the employee. (Gelmart Industries Phils. Inc. vs. NLRC, 176 SCRA 295 cited in Caltex Refinery Employees
from the SSC-R administrators that paid for her mother’s illness; that she did not deny teaching part-time in the Association vs. NLRC, 246 SCRA 271).
aforementioned schools; and that she did not wish to resign because she felt she deserved a second chance.
Thus, in the instant case, it must be concluded that the penalty of dismissal meted upon the complainant [Moreno]
On the same day that Moreno sent her letter, the grievance committee issued its resolution, 14 which unanimously was too harsh and unreasonable under the circumstances. At most, a one-year suspension with a warning against
found that she violated the prohibition against a full-time faculty having an unauthorized external teaching load. The the repetition of the same offense would have been more in keeping with the generally accepted principles of law.
majority of the grievance committee members recommended Moreno’s dismissal from employment in accordance
with the school manual, but Dean Espejo dissented and called only for a suspension for one semester.
WHEREFORE, the decision appealed from is hereby REVERSED. The respondent [SSC-R] is hereby ordered to
REINSTATE the complainant [Moreno] to her former position, and to pay her full backwages counted from November
Thereafter, SSC-R sent a letter15 to Moreno that was signed by the College President, informing her that they had 16, 2003 up to the date of her actual reinstatement.17
approved and adopted the findings and recommendations of the grievance committee and, in accordance therewith,
her employment was to be terminated effective 16 November 2002.
SSC-R filed a Motion for Reconsideration18 of the NLRC Decision, which was denied for lack of merit in a
Resolution19 dated 31 March 2005.1avvphi1
Moreno thus instituted with the NLRC a complaint for illegal termination against SSC-R, docketed as NLRC-NCR
Case No. 11-10077-02, seeking reinstatement, money claims, backwages, separation pay if reinstatement is not
Thus, SSC-R instituted with the Court of Appeals a Petition for Certiorari under Rule 65 of the Rules of Court, with a
viable, and attorney’s fees.
prayer for the issuance of a temporary restraining order and/or a writ of preliminary injunction,20 docketed as CA-G.R.
SP No. 90083, alleging grave abuse of discretion on the part of the NLRC.
In the Decision16 dated 30 April 2003, Labor Arbiter Veneranda C. Guerrero dismissed Moreno’s complaint for lack of
merit, thus:
In a Decision21 dated 7 November 2006, the appellate court granted the petition and annulled the Decision dated 23
November 2004, and Resolution dated 31 March 2005 of the NLRC. In reinstating the Decision of the Labor Arbiter
WHEREFORE, premises considered, judgment is hereby rendered dismissing the complaint for illegal dismissal for dated 30 April 2003, the Court of Appeals ruled in this wise:
lack of merit. Respondent San Sebastian College-Recoletos is hereby ordered to pay complainant Jackqui R.
Moreno the amount of NINE THOUSAND ONE HUNDRED FORTY THREE AND 75/100 PESOS (₱9,143.75)
In the case at bar, there is clearly grave abuse of discretion on the part of the NLRC when it reversed the Decision of
representing her unpaid salaries.
the Labor Arbiter. Its conclusions are highly prejudicial to the interests of herein petitioner [SSC-R], considering the
glaring infractions committed by private respondent [Moreno], which she even expressly admitted.
All other claims are DISMISSED for lack of merit.
xxxx
The Labor Arbiter ruled that Moreno’s due acceptance of the appointment as a member of the Permanent Faculty
meant that she was bound to the condition therein not to accept any outside teaching assignments without
"Willful disobedience of the employer’s lawful orders, as a just cause for dismissal of an employee, envisages the
permission. Moreno’s admission of her violation was likewise said to have rendered her liable for the penalty of
concurrence of at least two (2) requisites: the employee’s assailed conduct must have been willful or intentional, the
dismissal as provided for in the SSC-R Faculty Manual. The Labor Arbiter held that SSC-R had adequately
willfulness being characterized by a wrongful or perverse attitude; and the order violated must have been
discharged the burden of proof imposed by law in dismissing Moreno. Except for her unpaid salary for fifteen (15)
reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to
days, which was not controverted, the rest of Moreno’s money claims were denied for being unsubstantiated.
discharge.

On appeal by Moreno, the NLRC reversed the rulings of the Labor Arbiter in a Decision dated 23 November 2004,
The foregoing requisites are all present in this case. The prohibition against unauthorized outside teaching
the relevant portion of which reads:
engagements found in the Faculty Manual and in private respondent’s [Moreno] appointment letter are deemed
reasonable under the circumstances. In fact, the petitioner’s [SSC-R] policy is actually permissive since it allows
other teaching engagements so long as its president approves of the same.
Concededly, this policy was made known to private respondent [Moreno] for as mentioned earlier, it is found not only
in the Faculty Manual, but more importantly, it is explicitly stated in her appointment letter. By her own admission, it
cannot be clearer that, in spite of her knowledge thereof, private respondent [Moreno] willfully disobeyed the said
prohibition. When she accepted the teaching opportunities offered to her by other schools and altogether concealed
the same from the petitioner [SSC-R], she risked being administratively held liable therefor. Thus, the excuses she
raised upon the petitioner’s [SSC-R] discovery of such concealment deserve scant consideration.
The policy is obviously in connection with the private respondent’s [Moreno] duties as a faculty member. It is
designed to ensure that the petitioner’s [SSC-R] teaching staff is well fit to function accordingly, not only for its
benefit, but chiefly, for the students who are under their care and instruction. Private respondent [Moreno] argues
that notwithstanding her violations, her commitments with petitioner [SSC-R] were never compromised. Be that as it
may, this fact cannot absolve her. She may be fit at the time when her infractions were revealed, but there is no
assurance that her health would not deteriorate in time if she persists in carrying on a heavy workload.
xxxx
WHEREFORE, the instant petition is GRANTED. The 23 November 2004 Decision and the 31 March 2005
Resolution of the National Labor Relations Commission (Second Division) are hereby ANNULLED and SET ASIDE.
The National Labor Relations Commission is permanently enjoined from executing its 31 March 2005 Resolution.
The Decision of the Labor Arbiter dated 30 April 2003 is hereby REINSTATED and AFFIRMED.
Accordingly, Moreno now impugns before this Court the Court of Appeals Decision dated 07 November 2006 raising
the following issues:
I.
WHETHER OR NOT THE DISMISSAL OF PETITIONER WAS PROPER AND LAWFUL.
II.
WHETHER OR NOT PETITIONER IS ENTITLED TO THE RELIEF SHE SEEKS AGAINST
RESPONDENT.
Moreno insists that her right to security of tenure is a more significant consideration in this case than the strict
application of a school policy. She laments that her dismissal from employment for failing to secure the necessary
permission is too harsh and undeserved a penalty.
The most basic of tenets in employee termination cases is that no worker shall be dismissed from employment
without the observance of substantive and procedural due process. Substantive due process means that the ground
upon which the dismissal is based is one of the just or authorized causes enumerated in the Labor Code. Procedural
due process, on the other hand, requires that an employee be apprised of the charge against him, given reasonable
time to answer the same, allowed ample opportunity to be heard and defend himself, and assisted by a
representative if the employee so desires.22 The employee must be furnished two written notices: the first notice
apprises the employee of the particular acts or omissions for which his dismissal is sought, and the second is a
subsequent notice which informs the employee of the employer's decision to dismiss him.23
Article 282 of the Labor Code provides for the just causes for the termination of employment, to wit:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
In termination cases, the burden of proof rests on the employer to show that the dismissal is for just cause. When
there is no showing of a clear, valid and legal cause for the termination of employment, the law considers the matter
a case of illegal dismissal and the burden is on the employer to prove that the termination was for a valid or
authorized cause.24
Respondent SSC-R contends that Moreno’s dismissal from employment was valid because she knowingly violated
the prohibition embodied in the aforementioned Section 2.2 of Art. II of the SSC-R Faculty Manual, in accordance
with Section 4525 of the Manual of Regulations for Private Schools, and which prohibition was likewise contained in
Moreno’s employment contract.26 In so doing, Moreno allegedly committed serious misconduct and willful
disobedience against the school, and thereby submitted herself to the corresponding penalty provided for in both the
Faculty Manual and the employment contract, which is termination for cause.
On the basis of the evidence on record, the Court finds that Moreno has indeed committed misconduct against
respondent SSC-R. Her admitted failure to obtain the required permission from the school before she engaged in
external teaching engagements is a clear transgression of SSC-R’s policy. However, said misconduct falls below the
required level of gravity that would warrant dismissal as a penalty.
Under Art. 282(a) of the Labor Code, willful disobedience of the employer’s lawful orders as a just cause for
termination of employment envisages the concurrence of at least two requisites: (1) the employee’s assailed conduct
must have been willful or intentional, the willfulness being characterized by a "wrongful and perverse
attitude"; and (2) the order violated must have been reasonable, lawful, made known to the employee and must
pertain to the duties which he has been engaged to discharge. 27
Similarly, with respect to serious misconduct, the Court has already ruled in National Labor Relations Commission v.
Salgarino28 that:
Misconduct is 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 of
judgment. The misconduct to be serious within the meaning of the act must be of such a grave and aggravated
character and not merely trivial or unimportant. Such misconduct, however serious, must nevertheless be in
connection with the work of the employee to constitute just cause from his separation.
In order to constitute serious misconduct which will warrant the dismissal of an employee under paragraph (a) of
Article 282 of the Labor Code, it is not sufficient that the act or conduct complained of has violated some established
rules or policies. It is equally important and required that the act or conduct must have been performed with
wrongful intent. (Emphasis ours.)
After examining the records of the case, the Court finds that SSC-R miserably failed to prove that Moreno’s
misconduct was induced by a perverse and wrongful intent as required in Art. 282(a) of the Labor Code. SSC-R
merely anchored Moreno’s alleged bad faith on the fact that she had full knowledge of the policy that was violated
and that it was relatively easy for her to secure the required permission before she taught in other schools. This
posture is utterly lacking.
It bears repeating that it is the employer that has the burden of proving the lawful cause sustaining the dismissal of
the employee. Even equipoise is not enough; the employer must affirmatively show rationally adequate evidence that
the dismissal was for a justifiable cause.29
In the present case, SSC-R failed to adduce any concrete evidence to prove that Moreno indeed harbored perverse
or corrupt motivations in violating the aforesaid school policy. In her letter of explanation to the grievance committee
dated 12 November 2002, Moreno explained in detail her role as the breadwinner and the grave financial conditions
of her family. As previous requests for permission had already been denied, Moreno was thus prompted to engage in
illicit teaching activities in other schools, as she desperately needed them to augment her income. Instead of
submitting controverting evidence, SSC-R simply dismissed the above statements as nothing more than a "lame
excuse"30 and are "clearly an afterthought,"31 considering that no evidence was offered to support them and that
Moreno’s salary was allegedly one of the highest among the universities in the country.
In addition, even if dismissal for cause is the prescribed penalty for the misconduct herein committed, in accordance
with the SSC-R Faculty Manual and Moreno’s employment contract, the Court finds the same to be disproportionate
to the offense.
Time and again, we have ruled that while an employer enjoys a wide latitude of discretion in the promulgation of
policies, rules and regulations on work-related activities of the employees, those directives, however, must always be
fair and reasonable, and the corresponding penalties, when prescribed, must be commensurate to the offense
involved and to the degree of the infraction.32
Special circumstances were present in the case at bar which should have been properly taken into account in the
imposition of the appropriate penalty. Moreno, in this case, had readily admitted her misconduct, which was
undisputedly the first she has ever committed against the school. Her teaching abilities and administrative skills
remained apparently unaffected by her external teaching engagements, as she was found by the grievance
committee to be one of the better professors in the Accounting Department 33 and she was even offered the
Chairmanship of her college.34 Also, the fact that Moreno merely wanted to alleviate her family’s poor financial
conditions is a justification that SSC-R failed to refute. SSC-R likewise failed to prove any resulting material damage
or prejudice on its part as a consequence of Moreno’s misconduct. The claim by SSC-R that the imposition of a
lesser penalty would set a bad precedent35 for the other faculty members who comply with the school policies is too
speculative for this Court to even consider.
Finally, the Court notes that in Moreno’s contract of employment,36 one of the provisions therein categorically stated
that should a violation of any of the terms and conditions thereof be committed, the penalty that will be imposed
would either be suspension or dismissal from employment. Thus, contrary to its position from the beginning, SSC-
R clearly had the discretion to impose a lighter penalty of suspension and was not at all compelled to dismiss Moreno
under the circumstances, just because the Faculty Manual said so.
With regard to the observance of procedural due process, neither of the parties has put the same into issue. Indeed,
based on the evidence on record, Moreno was served with the required twin notices and was afforded the
opportunity to be heard. The first notice was embodied in the memorandum37 dated 27 October 2002 sent by her
College Dean, which required her to explain her unauthorized teaching assignments. The letter38 by SSC-R that
informed Moreno that her services were being terminated effective 16 November 2002 constituted the second
required notice. Moreno was also given the opportunity to explain her side when the special grievance committee
asked her a series of questions pertaining to their investigation in a letter39 dated 11 November 2002 and to which
she replied likewise through a letter40 dated 12 November 2002.
In light of the foregoing, the Court holds that the dismissal of petitioner Moreno failed to comply with the substantive
aspect of due process. Despite SSC-R’s observance of procedural due process, it nonetheless failed to discharge its
burden of proving the legality of Moreno’s termination from employment. Thus, the imposed penalty of dismissal is
hereby declared as invalid.
In so ruling, this Court does not depreciate the misconduct committed by Moreno. Indeed, SSC-R has adequate
reasons to impose sanctions on her. However, this should not be dismissal from employment. Because of the
serious implications of this penalty, "our Labor Code decrees that an employee cannot be dismissed, except for the
most serious causes."41
Considering the presence of extenuating circumstances in the instant case, the Court deems it appropriate to impose
the penalty of suspension of one (1) year on Moreno, to be counted from 16 November 2002, the effective date of
her illegal dismissal. However, given the period of time in which Moreno was actually prevented from working in the
respondent school, the said suspension should already be deemed served.
Furthermore, the Court holds that Moreno should be reinstated to her former position, without loss of seniority rights
and other privileges, but without payment of backwages.
As a general rule, the normal consequences of a finding that an employee has been illegally dismissed are, firstly,
that the employee becomes entitled to reinstatement without loss of seniority rights; and secondly, the payment of
backwages corresponding to the period from his illegal dismissal up to his actual reinstatement. The two forms of
relief are, however, distinct and separate from each other. Though the grant of reinstatement commonly carries with
it an award of backwages, the appropriateness or non-availability of one does not carry with it the inappropriateness
or non-availability of the other.42
In accordance with Durabuilt Recapping Plant & Co. v. National Labor Relations Commission, 43 the Court may not
only mitigate, but also absolve entirely, the liability of the employer to pay backwages where good faith is evident.
Likewise, backwages may be withheld from a dismissed employee where exceptional circumstances are availing. 44
In the present case, the good faith of SSC-R is apparent. The termination of Moreno from her employment cannot be
said to have been carried out in a malevolent, arbitrary or oppressive manner. Indeed, the only mistake that the
respondent school has committed was to strictly apply the provisions of its Faculty Manual and its contract with
Moreno without regard for the aforementioned special circumstances that were attendant in this case. Even then,
Moreno’s right to procedural due process was fully respected, as she was given the required twin notices and an
ample opportunity to be heard. This fact was not even disputed by Moreno herself.
With respect to Moreno’s claim for moral and exemplary damages, the same were never satisfactorily pleaded and
substantiated.45 Thus, they are hereby denied. Neither is Moreno entitled to the award of the monetary claims 46 in her
petition, as no basis and proof for the grant thereof were ever adduced.
The Court cannot likewise award attorney’s fees to Moreno in view of the above-mentioned finding of good faith on
the part of SSC-R47. It is a well-settled principle that even if a claimant is compelled to litigate with third persons or to
incur expenses to protect the claimant’s rights, attorney’s fees may still not be awarded where no sufficient showing
of bad faith could be reflected in a party’s persistence in a case other than an erroneous conviction of the
righteousness of his cause.48
WHEREFORE, the Petition for Review is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No 90083
dated 7 November 2006 is hereby REVERSED. Respondent San Sebastian College-Recoletos, Manila, is hereby
ordered to reinstate Petitioner Jackqui R. Moreno without loss of seniority rights and other privileges. No
pronouncement as to cost.
SO ORDERED.
[G.R. No. 63742. April 17, 1989.]
TANJAY WATER DISTRICT, represented by Engr. JOEL B. BORROMEO, Manager, Petitioner, v. HON. PEDRO
GABATON, MUN. OF PAMPLONA, APOLINARIO ARNAIZ, ROMULO ALPAS, WENCESLAO DURAN, SERGIO
SALMA, APOLLO BOBON, CATALINO ORTEGA, FRANCISCO ZERNA, ANTONIO DIVINAGRACIA, PEDRO
 SINCERO, DIONISIO TABALOC, ROMEO RAMIREZ, FRANCISCO CABILAO and ESPERIDION
MOSO, Respondents.
SYLLABUS
1. POLITICAL LAW; PUBLIC CORPORATIONS; LOCAL WATER DISTRICTS HELD TO BE QUASI-PUBLIC
CORPORATIONS. — The question of the corporate personality of local water districts is not new. The Court ruled in
the recent case of Hagonoy Water District v. NLRC, G.R. No. 81490, August 31, 1988, that they are quasi public
corporations whose employees belong to the civil service, hence, the dismissal of those employees shall be
governed by the civil service law, rules and regulations.
2. ADMINISTRATIVE LAW; EMPLOYEE OF GOVERNMENT OWNED OR CONTROLLED CORPORATIONS
SUBJECT TO CIVIL SERVICE LAW. — The hiring and firing of employees of government-owned or controlled
corporations are governed by the Civil Service Law and Civil Service Rules and Regulations. As held in National
Housing Corporation v. Juco, (134 SCRA 172, 176).
3. ID.; ID.; REITERATED UNDER THE 1987 CONSTITUTION. — Significantly, Article IX(B), Section 2(1) of the
1987 Constitution provides that" (t)he civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled corporations with original charters."
Inasmuch as PD No. 198, as amended, is the original charter of the petitioner, Tanjay Water District, and respondent
Tarlac Water District and all water districts in the country, they come under the coverage of the civil service law, rules
and regulations. (Sec. 35, Art VIII and Sec. 37, Art. IX of PD No. 807).
4. ID.; ID.; JURISDICTION; ARTICLES 88 AND 89, P.D. NO. 1067 VEST ORIGINAL JURISDICTION TO THE
NATIONAL WATER RESOURCES COUNCIL IN CASES INVOLVING WATER RIGHTS DISPUTES. — Articles 88
and 89 of The Water Code (PD No. 1067, promulgated on January 25, 1977) provide as follows: "ART. 88. The
[Water Resources] Council shall have original jurisdiction over all disputes relating to appropriation, utilization,
exploitation, development, control, conservation and protection of waters within the meaning and context of the
provisions of this Code. "The decisions of the Council on water rights controversies shall be immediately executory
and the enforcement thereof may be suspended only when a bond, in an amount fixed by the Council to answer for
damages occasioned by the suspension or stay of execution, shall have been filed by the appealing party, unless the
suspension is by virtue of an order of a competent court. "All disputes shall be decided within sixty (60) days after the
parties submit the same for decision or resolution. "The Council shall have the power to issue writs of execution and
enforce its decisions with the assistance of local or national police agencies." "ART. 89. The decisions of the Council
on water rights controversies may be appealed to the Court of First Instance of the province where the subject matter
of the controversy is situated within fifteen (15) days from the date the party appealing receives a copy of the
decision, on any of the following grounds: (1) grave abuse of discretion (2) question of law; and (3) questions of fact
and law." (Emphasis supplied.) Inasmuch as Civil Case No. 8144 involves the appropriation, utilization and control of
water, We hold that the jurisdiction to hear and decide the dispute in the first instance, pertains to the Water
Resources Council as provided in PD No. 1067 which is the special law on the subject. The Court of First Instance
(now Regional Trial Court) has only appellate jurisdiction over the case.
DECISION
GRIÑO-AQUINO, J.:
The common issue in these consolidated cases is whether or not water districts created under PD No. 198, as
amended, are private corporations or government-owned or controlled corporations. Another issue in G.R. No. 63742
is whether respondent Judge acted without, or in excess of, jurisdiction or with grave abuse of discretion in
dismissing Civil Case No. 8144 for alleged lack of jurisdiction over the subject matter.
I. G.R. No. 63742
On March 3, 1983, petitioner Tanjay Water District, represented by its manager, Joel B. Borromeo, filed in the
Regional Trial Court of Negros Oriental, Dumaguete City, 7th Judicial Region, Civil Case No. 8144, an action for
injunction with preliminary mandatory injunction and damages, against respondent Municipality of Pamplona and its
officials to prevent them from interfering in the management of the Tanjay Waterworks System.
Respondent Judge set the hearing of the application for injunction on March 16, 1983. The Municipality and its
officials answered the complaint. Esperidion Moso filed a separate answer.
When the case was called for hearing on March 16, 1983, respondent Judge gave the parties five (5) days to submit
their respective position papers on the issue of the court’s jurisdiction (or lack of it), over the action. The respondents’
position paper questioned the court’s jurisdiction over the case and asked for its dismissal of the complaint (Annex
F). Instead of a position paper, the petitioner filed a reply with opposition to the motion to dismiss (Annex G).
On March 25, 1983, respondent Judge issued an order dismissing the complaint for lack of jurisdiction over the
subject matter (water) and over the parties (both being government instrumentalities) by virtue of Art. 88 of PD No.
1067 and PD No. 242. He declared that the petitioner’s recourse to the court was premature because the
controversy should have been ventilated first before the National Water Resources Council pursuant to Arts. 88 and
89 of PD No. 1067. He further ruled that as the parties are government instrumentalities, the dispute should be
administratively settled in accordance with PD No. 242.chanroblesvirtualawlibrary
Petitioner filed a petition for certiorari in this Court alleging that respondent Judge acted without or in excess of
jurisdiction or with grave abuse of discretion in dismissing the case.
II. G.R. No. 84300
Petitioner Josefino Datuin filed a complaint for illegal dismissal against respondent Tarlac Water District in the
Department of Labor and Employment (DOLE) which decided in his favor. However, upon respondent’s motion for
reconsideration (which was treated as an appeal) the National Labor Relations Commission (NLRC) reversed the
decision and dismissed the complaint "for lack of jurisdiction," holding that as the respondent Tarlac Water District is
a corporation created by a special law (PD No. 198), its officers and employees belong to the civil service and their
separation from office should be governed by Civil Service Rules and Regulations.
Petitioner contends that this case is similar to the case of Tanjay Water District versus Hon. Pedro C. Gabaton, Et
Al., G.R. No. 63742, because the lone issue in both cases is whether or not water districts created under PD No.
198, as amended, are private corporations or government-owned or controlled corporations. The two cases were
consolidated pursuant to the resolution dated July 25, 1988 of this Court.
Actually the question of the corporate personality of local water districts is not new. The Court ruled in the recent
case of Hagonoy Water District v. NLRC, G.R. No. 81490, August 31, 1988, that they are quasi public corporations
whose employees belong to the civil service, hence, the dismissal of those employees shall be governed by the civil
service law, rules and regulations. The pertinent part of this Court’s decision reads as follows:jgc:chanrobles.com.ph
"The only question here is whether or not local water districts are government owned or controlled corporations
whose employees are subject to the provisions of the Civil Service Law. The Labor Arbiter asserted jurisdiction over
the alleged illegal dismissal of private respondent Villanueva by relying on Section 25 of Presidential Decree No.
198, known as the ‘Provincial Water Utilities Act of 1973’ which went into effect on 25 May 1973, and which provides
as follows:chanrobles.com.ph : virtual law library
‘Exemption from Civil Service. — The district and its employees, being engaged in a proprietary function, are hereby
exempt from the provisions of the Civil Service Law. Collective Bargaining shall be available only to personnel below
supervisory levels: Provided, however, That the total of all salaries, wages, emoluments, benefits or other
compensation paid to all employees in any month shall not exceed fifty percent (50%) of average net monthly
revenue, said net revenue representing income from water sales and sewerage service charges, less pro-rata share
of debt service and expenses for fuel or energy for pumping during the preceding fiscal year.’
The Labor Arbiter failed to take into account the provisions of Presidential Decree No. 1479, which went into effect
on 11 June 1978. P.D. No. 1479 wiped away Section 25 of P.D. 198 quoted above, and Section 26 of P.D. 198 was
renumbered as Section 25 in the following manner:jgc:chanrobles.com.ph
"‘Section 26 of the same decree P.D. 198 is hereby amended to read as Section 25 as follows:chanrob1es virtual
1aw library
‘Section 25. Authorization. — The district may exercise all the powers which are expressly granted by this Title or
which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose of
carrying out the objectives of this Act, a district is hereby granted the power of government domain, the exercise
thereof shall, however, be subject to review by the Administration.’
Thus, Section 25 of P.D. 198 exempting the employees of water districts from the application of the Civil Service Law
was removed from the statute books.
"This is not the first time that officials of the Department of Labor and Employment have taken the position that the
Labor Arbiter here adopted. In Baguio Water District v. Cresenciano B. Trajano, etc., Et. Al. (127 SCRA 730 [1984]),
the petitioner Water District sought review of a decision of the Bureau of Labor Relations which affirmed that of a
Med-Arbiter calling for a certification election among the regular rank-and-file employees of the Baguio Water District
(BWD). In granting the petition, the Court said:chanrob1es virtual 1aw library
‘The Baguio Water District was formed pursuant to Title II — Local Water District Law — of P.D. No. 198, as
amended. The BWD is by Sec. 6 of that decree ‘a quasi-public corporation performing public service and supplying
public wants."cralaw virtua1aw library
"x x x
"We grant the petition for the following reasons:jgc:chanrobles.com.ph
"1. Section 25 of P.D. No. 198 was repealed by Sec. 3 of P.D. No. 1479; Section 26 of P.E. No. 198 was amended to
read as Sec. 25 by Sec. 4 of P.D. No. 1479. The amendatory decree took effect on June 11, 1978.
"x x x
"3. The BWD is a corporation created pursuant to a special law - P.D. No. 198, as amended. As such its officers and
employees are part of the Civil Service. (Sec. 1, Art. XII-B, [1973] Constitution; P.D. No. 868.)"
The hiring and firing of employees of government-owned or controlled corporations are governed by the Civil Service
Law and Civil Service Rules and Regulations. In National Housing Corporation v. Juco, 134 SCRA 172, 176, We
held:jgc:chanrobles.com.ph
"There should no longer be any question at this time that employees of government-owned or controlled corporations
are governed by the civil service law and civil service rules and regulations.
"Section 1, Article XII-B of the [1973] Constitution specifically provides:jgc:chanrobles.com.ph
"The Civil Service embraces every branch, agency, subdivision, and instrumentality of the Government, including
every government-owned or controlled corporation . . .’
"The 1935 Constitution had a similar provision in its Section 1, Article XII which stated:chanrob1es virtual 1aw library
‘A Civil Service embracing all branches and subdivisions of the Government shall be provided by law.’
"The inclusion of ‘government-owned or controlled corporations’ within the embrace of the civil service shows a
deliberate effort of the framers to plug an earlier loophole which allowed government-owned or controlled
corporations to avoid the full consequences of the all-encompassing coverage of the civil service system. The same
explicit intent is shown by the addition of ‘agency’ and ‘instrumentality’ to branches and subdivisions of the
Government. All offices and firms of the government are covered.chanrobles virtual lawlibrary
"The amendments introduced in 1973 are not idle exercises or meaningless gestures. They carry the strong
message that civil service coverage is broad and all-embracing insofar as employment in the government in any of
its governmental or corporate arms is concerned.
"x x x
"Section 1 of Article XII-B, 1973 Constitution uses the word ‘every’ to modify the phrase ‘government-owned or
controlled corporation’
"‘Every’ means each one of a group, without exception. It means all possible and all, taken one by one. Of course,
our decision in this case refers to a corporation created as a government-owned or controlled entity. It does not cover
cases involving private firms taken over by the government in foreclosure or similar proceedings. We reserve
judgment on these latter cases when the appropriate controversy is brought to this Court." (Italics ours)
Significantly, Article IX(B), Section 2(1) of the 1987 Constitution provides that" (t)he civil service embraces all
branches, subdivisions, instrumentalities, and agencies of the government, including government-owned or
controlled corporations with original charters." Inasmuch as PD No. 198, as amended, is the original charter of the
petitioner, Tanjay Water District, and respondent Tarlac Water District and all water districts in the country, they
come under the coverage of the civil service law, rules and regulations. (Sec. 35, Art VIII and Sec. 37, Art. IX of PD
No. 242.
In G.R. No. 63742, respondent Judge ruled that as the subject matter of Civil Case No. 8144 was water, the case
should have been brought first to the National Water Resources Council in accordance with Articles 88 and 89 of PD
No. 1067, and, as the parties are government instrumentalities (The Tanjay Water District and the Municipality of
Pamplona), the dispute should be administratively settled in accordance with PD No. 242.
Articles 88 and 89 of The Water Code (PD No. 1067, promulgated on January 25, 1977) provide as
follows:jgc:chanrobles.com.ph
"ART. 88. The [Water Resources] Council shall have original jurisdiction over all disputes relating to appropriation,
utilization, exploitation, development, control, conservation and protection of waters within the meaning and context
of the provisions of this Code.
"The decisions of the Council on water rights controversies shall be immediately executory and the enforcement
thereof may be suspended only when a bond, in an amount fixed by the Council to answer for damages occasioned
by the suspension or stay of execution, shall have been filed by the appealing party, unless the suspension is by
virtue of an order of a competent court.
"All disputes shall be decided within sixty (60) days after the parties submit the same for decision or resolution.
"The Council shall have the power to issue writs of execution and enforce its decisions with the assistance of local or
national police agencies."cralaw virtua1aw library
"ART. 89. The decisions of the Council on water rights controversies may be appealed to the Court of First Instance
of the province where the subject matter of the controversy is situated within fifteen (15) days from the date the party
appealing receives a copy of the decision, on any of the following grounds: (1) grave abuse of discretion (2) question
of law; and (3) questions of fact and law." (Italics supplied.)
Inasmuch as Civil Case No. 8144 involves the appropriation, utilization and control of water, We hold that the
jurisdiction to hear and decide the dispute in the first instance, pertains to the Water Resources Council as provided
in PD No. 1067 which is the special law on the subject. The Court of First Instance (now Regional Trial Court) has
only appellate jurisdiction over the case.cralawnad
P.D. No. 242 which was issued on July 9, 1973, prescribes administrative procedures for the settlement
of:jgc:chanrobles.com.ph
". . . all disputes, claims and controversies solely between or among the departments, bureaus, offices, agencies and
instrumentalities of the National Government, including government-owned or controlled corporations but excluding
constitutional offices or agencies, arising from the interpretation and application of statutes, contracts or
agreements."cralaw virtua1aw library
by either the Secretary of Justice, or the Solicitor General, or the Government Corporate Counsel, depending on the
parties involved and whether the case raises pure questions of law or mixed questions of law and fact.
P.D. No. 242 is inapplicable to this case because the controversy herein did not arise from the "interpretation and
application of statutes, contracts, or agreements" of the parties herein. As previously stated, it involves the
appropriation, utilization, and control of water.
Our determination in the earlier cases (Baguio Water District v. Trajano, 127 SCRA 730; Hagonoy Water District v.
NLRC, G.R. No. 81490, August 31, 1988) that water districts are government instrumentalities and that their
employees belong to the civil service, disposes of Datuin’s petition in G.R. No. 84300. The National Labor Relations
Commission has no jurisdiction over his complaint for illegal dismissal.
WHEREFORE, both petitions in G.R. Nos. 63742 and 84300 are dismissed without prejudice to the petitioners in
G.R. No. 63742 filing their complaint in the National Water Resources Council and the petitioner in G.R. No. 84300
seeking redress in the Civil Service Commission. No costs.
SO ORDERED.
G.R. No. 148415 July 14, 2008
RICARDO G. PALOMA, Petitioner,
vs.
PHILIPPINE AIRLINES, INC. and THE NATIONAL LABOR RELATIONS COMMISSION, Respondents.
DECISION
VELASCO, JR., J.:
The Case
Before us are these two consolidated petitions for review under Rule 45 separately interposed by Ricardo G. Paloma
and Philippine Airlines, Inc. (PAL) to nullify and set aside the Amended Decision1 dated May 31, 2001 of the Court of
Appeals (CA) in CA-G.R. SP No. 56429, as effectively reiterated in its Resolution2 of January 14, 2003.
The Facts
Paloma worked with PAL from September 1957, rising from the ranks to retire, after 35 years of continuous service,
as senior vice president for finance. In March 1992, or some nine (9) months before Paloma retired on November 30,
1992, PAL was privatized.
By way of post-employment benefits, PAL paid Paloma the total amount of PhP 5,163,325.64 which represented his
separation/retirement gratuity and accrued vacation leave pay. For the benefits thus received, Paloma signed a
document denominated Release and Quitclaim 3 but inscribed the following reservation therein: "Without prejudice to
my claim for further leave benefits embodied in my aide memoire transmitted to Mr. Roberto Anonas covered by my
27 Nov. 1992 letter x x x."
The leave benefits Paloma claimed being entitled to refer to his 450-day accrued sick leave credits which PAL
allegedly only paid the equivalent of 18 days. He anchored his entitlement on Executive Order No. (EO) 1077 4dated
January 9, 1986, and his having accumulated a certain number of days of sick leave credits, as acknowledged in a
letter of Alvia R. Leaño, then an administrative assistant in PAL. Leaño’s letter dated November 12, 1992 pertinently
reads:
At your request, we are pleased to confirm herewith the balance of your sick leave credits as they appear in our
records: 230 days.
According to our existing policy, an employee is entitled to accumulate sick leave with pay only up to a maximum of
230 days.
Had there been no ceiling as mandated by Company policy, your sick leave credits would have totaled 450 days to
date.5
Answering Paloma’s written demands for conversion to cash of his accrued sick leave credits, PAL asserted having
paid all of Paloma’s commutable sick leave credits due him pursuant to company policy made applicable to PAL
officers starting 1990.
The company leave policy adverted to grants PAL’s regular ground personnel a graduated sick leave benefits, those
having rendered at least 25 years of service being entitled to 20 days of sick leave for every year of service. An
employee, under the policy, may accumulate sick leaves with pay up to 230 days. Subject to defined qualifications,
sick leave credits in excess of 230 days shall be commutable to cash at the employee’s option and shall be paid in
lump sum on or before May 31st of the following year they were earned. 6 Per PAL’s records, Paloma appears to
have, for the period from 1990 to 1992, commuted 58 days of his sick leave credits, broken down as follows: 20 days
each in 1990 and 1991 and 18 days in 1992.
Subsequently, Paloma filed before the Arbitration Branch of the National Labor Relations Commission (NLRC) a
Complaint7 for Commutation of Accrued Sick Leaves Totaling 392 days. In the complaint, docketed as NLRC-NCR-
Case No. 00-08-05792-94, Paloma alleged having accrued sick leave credits of 450 days commutable upon his
retirement pursuant to EO 1077 which allows retiring government employees to commute, without limit, all his
accrued vacation and sick leave credits. And of the 450-day credit, Paloma added, he had commuted only 58 days,
leaving him a balance of 392 days of accrued sick leave credits for commutation.
Ruling of the Labor Arbiter
Issues having been joined with the filing by the parties of their respective position papers, 8 the labor arbiter rendered
on June 30, 1995 a Decision9 dispositively reading:
WHEREFORE, premises considered, respondent PHILIPPINE AIRLINE[S], INC. is hereby ordered to pay within ten
(10) days from receipt hereof herein complainant Ricardo G. Paloma, the sum of Six Hundred Seventy Five
Thousand Pesos (P675,000.00) representing his one Hundred sixty two days [162] accumulated sick leave credits,
plus ten (10%) percent attorney’s fees of P67,500.00, or a total sum of P742,500.00.
SO ORDERED.
The labor arbiter held that PAL is not covered by the civil service system and, accordingly, its employees, like
Paloma, cannot avail themselves of the beneficent provision of EO 1077. This executive issuance, per the labor
arbiter’s decision, applies only to government officers and employees covered by the civil service, exclusive of the
members of the judiciary whose leave and retirement system is covered by a special law.
However, the labor arbiter ruled that Paloma is entitled to a commutation of his alternative claim for 202 accrued sick
leave credits less 40 days for 1990 and 1991. Thus, the grant of commutation for 162 accrued leave credits.
Both parties appealed10 the decision of the labor arbiter to the NLRC.
 Ruling of the NLRC in NLRC NCR CA No. 009652-95
(NLRC-NCR-Case No. 00-08-05792-94)
On November 26, 1997, the First Division of the NLRC rendered a Decision affirming that of the labor arbiter, thus:
WHEREFORE, as recommended, both appeals are DISMISSED. The decision of Labor Arbiter Felipe T. Garduque II
dated June 30, 1995 is AFFIRMED.
SO ORDERED.11
Both parties moved for reconsideration. In its Resolution of November 10, 1999, the NLRC, finding Paloma to have,
upon his retirement, commutable accumulated sick leave credits of 230 days, modified its earlier decision, disposing
as follows:
In view of all the foregoing, our decision dated November 26, 1997, be modified by increasing the sick leave benefits
of complainant to be commuted to cash from 162 days to 230 days.
SO ORDERED.12
From the above modificatory resolution of the NLRC, PAL went to the CA on a petition for certiorari under Rule 65,
the recourse docketed as CA-G.R. SP No. 56429.
Ruling of the CA in its April 28, 2000 Decision
By a Decision dated April 28, 2000, the CA found for PAL, thus:
WHEREFORE, the petition is granted. Public respondent’s November 10, 1999 Resolution is set aside. And the
complaint of Ricardo Paloma is hereby DISMISSED. Without costs.
SO ORDERED.13
In time, Paloma sought reconsideration.14
The May 31, 2001 Amended Decision
On May 31, 2001, the CA issued the assailed Amended Decision reversing its April 28, 2000 Decision. The fallo of
the Amended Decision reads:
WHEREFORE, premises considered, our Judgment, dated 28 April 2000 is hereby vacated and, set aside, and
another one entered reinstating the Resolution, dated 10 November 1999, issued by the public respondent National
Labor Relations Commission in NLRC NCR Case No. 00-08-05792-94 [NLRC NCR CA No. 009652-95], entitled
Ricardo G. Paloma v. Philippine Airlines, Incorporated, with the only modification that the total sums granted by
Labor Arbiter Felipe T. Garduque II (P742,500.00, inclusive of the ten percent (10%) attorney’s fees), as affirmed by
public respondent National Labor Relations Commission, First Division, in said NLRC Case No. 00-08-05792-94,
shall earn legal interest from the date of the institution of the complaint until fully paid/discharged. (Art. 2212, New
Civil Code).
SO ORDERED.15
Justifying its amendatory action, the CA stated that EO 1077 applies to PAL and necessarily to Paloma on the
following rationale: Section 2(1) of Article IX(B) of the 1987 Constitution applies prospectively and, thus, the
expressed limitation therein on the applicability of the civil service law only to government-owned and controlled
corporations (GOCCs) with original charters does not preclude the applicability of EO 1077 to PAL and its then
employees. This conclusion, the CA added, becomes all the more pressing considering that PAL, at the time of the
issuance of EO 1077, was still a GOCC and that Paloma had already 29 years of service at that time. The appellate
court also stated that since PAL had then no existing retirement program, the provisions of EO 1077 shall serve as a
retirement program for Paloma who had meanwhile acquired vested rights under the EO pursuant to Arts. 10016and
28717 of the Labor Code.
Significantly, despite affirmatively positing the applicability of EO 1077, the Amended Decision still deferred to PAL’s
existing policy on the 230-day limit for accrued sick leave with pay that may be credited to its employees.
Incongruously, while the CA reinstated the November 10, 1999 Resolution of the NLRC, it decreed the
implementation of the labor arbiter’s Decision dated June 30, 1995. As may be recalled, the NLRC, in its November
10, 1999 Resolution, allowed a 230-day sick leave commutation, up from the 162 days granted under the June 30,
1995 Decision of the labor arbiter.
Paloma immediately appealed the CA’s Amended Decision via a Petition for Review on Certiorari under Rule 45,
docketed as G.R. No. 148415. On the other hand, PAL first sought reconsideration of the Amended Decision,
coming to us after the CA, per its January 14, 2003 Resolution, denied the desired reconsideration. In net effect then,
PAL’s Petition for Review on Certiorari, docketed as G.R. No. 156764, assails both the Amended Decision and
Resolution of the CA.
The Issues
In G.R. No. 148415, Paloma raises the sole issue of:
WHETHER OR NOT THE [CA], IN HOLDING THAT E.O. NO. 1077 IS APPLICABLE TO PETITIONER AND YET
APPLYING COMPANY POLICY BY AWARDING THE CASH EQUIVALENT OF ONLY 162 DAYS SICK LEAVE
CREDITS INSTEAD OF THE 450 DAYS SICK LEAVE CREDITS PETITIONER IS ENTITLED TO UNDER E.O. NO.
1077, DECIDED A QUESTION OF SUBSTANCE IN A MANNER CONTRARY TO LAW AND APPLICABLE
JURISPRUDENCE.18
In G.R. No. 156764, PAL raises the following issues for our consideration:
1. May an employee of a non-government corporation [invoke EO] 1077 which the then President
Ferdinand E. Marcos issued on January 9, 1986, solely for the benefit of government officers and
employees covered by the civil service?
2. Can a judicial body modify or alter a company policy by ordering the commutation of sick leave credits
which, under company policy is non-commutable?19
The issues submitted boil down to the question of whether or not EO 1077, before PAL’s privatization, applies to its
employees, and corollarily, whether or not Paloma is entitled to a commutation of his accrued sick leave credits.
Subsumed to the main issue because EO 1077 applies only to government employees subject to civil service law is
the question of whether or not PAL—which, as early as 1960 until its privatization, had been considered as a
government-controlled corporation—is covered by and subject to the limitations peculiar under the civil service
system.
There can be no quibbling, as a preliminary consideration, about PAL having been incorporated as a private
corporation whose controlling stocks were later acquired by the GSIS, which is wholly owned by the government.
Through the years before GSIS divested itself of its controlling interests over the airline, PAL was considered a
government-controlled corporation, as we said as much in Phil. Air Lines Employees’ Assn. v. Phil. Air Lines, Inc.,20a
case commenced in August 1958 and finally resolved by the Court in 1964. The late Blas Ople, former Labor
Secretary and a member of the 1986 Constitutional Commission, described PAL and other like entities spun off from
the GSIS as "second generation corporations functioning as private subsidiaries." 21 Before the coming into force of
the 1973 Constitution, a subsidiary of a wholly government-owned corporation or a government corporation with
original charter was covered by the Labor Code. Following the ratification of the 1973 Constitution, these subsidiaries
theoretically came within the pale of the civil service on the strength of this provision: "[T]he civil service embraces
every branch, agency, subdivision and instrumentality of the Government, including every [GOCC] x x x."22 Then
came the 1987 Constitution which contextually delimited the coverage of the civil service only to a GOCC "with
original charter."23
The Court’s Ruling
Considering the applicable law and jurisprudence in the light of the undisputed factual milieu of the instant case, the
setting aside of the assailed amended decision and resolution of the CA is indicated.
Core Issue: Applicability of EO 1077
Insofar as relevant, EO 1077 dated January 9, 1986, entitled Revising the Computation of Creditable Vacation and
Sick Leaves of Government Officers and Employees, provides:
WHEREAS, under existing law and civil service regulations, the number of days of vacation and sick leaves
creditable to a government officer or employee is limited to 300 days;
WHEREAS, by special law, members of the judiciary are not subject to such restriction;
WHEREAS, it is the continuing policy of the government to institute to the extent possible a uniform and equitable
system of compensation and benefits and to enhance the morale and performance in the civil service.
xxxx
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me
by the Constitution, do hereby order and direct the following:
Section 1. Any officer [or] employee of the government who retires or voluntary resigns or is separated from the
service through no fault of his own and whose leave benefits are not covered by special law, shall be entitled to the
commutation of all the accumulated vacation and/or sick leaves to his credit, exclusive of Saturdays, Sundays, and
holidays, without limitation as to the number of days of vacation and sick leaves that he may accumulate. (Emphasis
supplied.)
Paloma maintains that he comes within the coverage of EO 1077, the same having been issued in 1986, before he
severed official relations with PAL, and at a time when the applicable constitutional provision on the coverage of the
civil service made no distinction between GOCCs with original charters and those without, like PAL which was
incorporated under the Corporation Code. Implicit in Paloma’s contention is the submission that he earned the bulk
of his sick leave credits under the aegis of the 1973 Constitution when PAL, being then a government-controlled
corporation, was under civil service coverage.
The contention is without merit.
PAL never ceased to be operated as a private corporation, and was not subjected to the Civil Service Law
The Court can allow that PAL, during the period material, was a government-controlled corporation in the sense that
the GSIS owned a controlling interest over its stocks. One stubborn fact, however, remains: Through the years, PAL
functioned as a private corporation and managed as such for profit. Their personnel were never considered
government employees. It may perhaps not be amiss for the Court to take judicial notice of the fact that the civil
service law and rules and regulations have not actually been made to apply to PAL and its employees. Of governing
application to them was the Labor Code. Consider: (a) Even during the effectivity of the 1973 Constitution but prior to
the promulgation on January 17, 1985 of the decision in No. L-64313 entitled National Housing Corporation v.
Juco,24 the Court no less recognized the applicability of the Labor Code to, and the authority of the NLRC to exercise
jurisdiction over, disputes involving discipline, personnel movements, and dismissal in GOCCs, among them
PAL;25 (b) Company policy and collective bargaining agreements (CBAs), instead of the civil service law and rules,
govern the terms and conditions of employment in PAL. In fact, Ople rhetorically asked how PAL can be covered by
the civil service law when, at one time, there were three (3) CBAs in PAL, one for the ground crew, one for the flight
attendants, and one for the pilots;26 and (c) When public sector unionism was just an abstract concept, labor unions
in PAL with the right to engage in strike and other concerted activities were already active. 27
Not to be overlooked of course is the 1964 case of Phil. Air Lines Employees’ Assn., wherein the Court stated that
"the Civil Service Law has not been actually applied to PAL."28
Given the foregoing considerations, Paloma cannot plausibly be accorded the benefits of EO 1077 which, to stress,
was issued to narrow the gap between the leave privileges between the members of the judiciary, on one hand, and
other government officers and employees in the civil service, on the other. That PAL and Paloma may have, at a
time, come within the embrace of the civil service by virtue of the 1973 Constitution is of little moment at this juncture.
As held in National Service Corporation v. National Labor Relations Commission (NASECO),29 the issue of whether
or not a given GOCC falls within the ambit of the civil service subject, vis-à-vis disputes respecting terms and
conditions of employment, to the jurisdiction of the Civil Service Commission or the NLRC, as the case may be,
resolves itself into the question of which between the 1973 Constitution, which does not distinguish between a
GOCC with or without an original charter, and the 1987 Constitution, which does, is in place. To borrow from the
1988 NASECO ruling, it is the 1987 Constitution, which delimits the coverage of the civil service, that should govern
this case because it is the Constitution in place at the time the case was decided, even if, incidentally, the cause of
action accrued during the effectivity of the 1973 Constitution. This has been the consistent holding of the Court in
subsequent cases involving GOCCs without original charters.30
It cannot be overemphasized that when Paloma filed his complaint for commutation of sick leave credits, private
interests already controlled, if not owned, PAL. Be this as it may, Paloma, when he filed said complaint, cannot even
assert being covered by the civil service and, hence, entitled to the benefits attached to civil service employment,
such as the right under EO 1077 to accumulate and commute leave credits without limit. In all, then, Paloma, while
with PAL, was never a government employee covered by the civil service law. As such, he did not acquire any
vested rights on the retirement benefits accorded by EO 1077.
Paloma not entitled to the benefits granted in EO 1077; existing company policy on the matter applies
What governs Paloma’s entitlement to sick leave benefits and the computation and commutation of creditable
benefits is not EO 1077, as the labor arbiter and originally the NLRC correctly held, but PAL’s company policy on the
matter which, as found below, took effect in 1990. The text of the policy is reproduced in the CA’s April 28, 2000
Decision and sets out the following pertinent rules:
POLICY
Regular employees shall be entitled to a yearly period of sick leave with pay, the exact number of days to be
determined on the basis of the employee’s category and length of service in the company.
RULES
A. For ground personnel
2. Sick leave shall be granted only upon certification by a company physician that an employee is incapable of
discharging his duties due to illness or injury x x x.
xxxx
3. Sick leave entitlement accrues from the date of an employee’s regular employment x x x.
In case of direct conversion from temporary/daily/project/contract to regular status, regular employment shall be
deemed to have begun on the date of the employee’s conversion as a regular employee.
xxxx
4. An employee may accumulate sick leave with pay up to Two Hundred Thirty (230) days;
An employee who has accumulated seventy-five (75) days sick leave credit at the end of each year may, at his
option, commute seventy-five percent (75%) of his current sick leave entitlement to cash and the other twenty-five
percent (25%) to be added to his accrued sick leave credits up to two hundred thirty (230) calendar days.
The seventy-five percent (75%) commutable to cash as above provided, shall be paid up in lump sum on or before
May 31st of the following year.
Sick leave credits in excess of two hundred thirty (230) days shall be commutable to cash at the employee’s
option, and shall be paid in lump sum on or before May 31st of the following year it was earned.31 (Emphasis
ours.)
As may be gathered from the records, accrued sick leave credits in excess of 230 days were not, if earned before
1990 when the above policy took effect, commutable to cash; they were simply forfeited. Those earned after 1990,
but still subject to the 230-day threshold rule, were commutable to cash to the extent of 75% of the employee’s
current entitlement, and payable on or before May 31st of the following year, necessarily implying that the privilege to
commute is time-bound.
It appears that Paloma had, as of 1990, more than 230 days of accrued sick leave credits. Following company policy,
Paloma was deemed to have forfeited the monetary value of his leave credits in excess of the 230-day ceiling. Now,
then, it is undisputed that he earned additional accrued sick leave credits of 20 days in 1990 and 1991 and 18 days
in 1992, which he duly commuted pursuant to company policy and received with the corresponding cash value.
Therefore, PAL is correct in contending that Paloma had received whatever was due on the commutation of his
accrued sick leave credits in excess of the 230 days limit, specifically the 58 days commutation for 1990, 1991, and
1992.
No commutation of 230 days accrued sick leave credits
The query that comes next is how the 230 days accrued sick leave credits Paloma undoubtedly had when he retired
are to be treated. Is this otherwise earned credits commutable to cash? These should be answered in the negative.
The labor arbiter granted 162 days commutation, while the NLRC allowed the commutation of the maximum 230
days. The CA, while seemingly affirming the NLRC’s grant of 230 days commutation, actually decreed a 162-day
commutation. We cannot sustain any of the dispositions thus reached for lack of legal basis, for PAL’s company
policy upon which either disposition was predicated did not provide for a commutation of the first 230 days accrued
sick leave credits employees may have upon their retirement. Hence, the NLRC and the CA, by their act of allowing
commutation to cash, erred as they virtually read in the policy something not written or intended therein. Indeed, no
law provides for commutation of unused or accrued sick leave credits in the private sector. Commutation is allowed
by way of voluntary endowment by an employer through a company policy or by a CBA. None of such medium
presently obtains and it would be incongruous if the Court fills up the vacuum.
Confronted with a similar situation as depicted above, the Court, in Baltazar v. San Miguel Brewery, Inc., declared as
follows:
In connection with the question of whether or not appellee is entitled to the cash value of six months accumulated
sick leave, it appears that while under the last paragraph of Article 5 of appellant’s Rules and Regulations of the
Health, Welfare and Retirement Plan (Exhibit 3), unused sick leave may be accumulated up to a maximum of six
months, the same is not commutable or payable in cash upon the employee’s option.
In our view, the only meaning and import of said rule and regulation is that if an employee does not choose to enjoy
his yearly sick leave of thirty days, he may accumulate such sick leave up to a maximum of six months and enjoy this
six months sick leave at the end of the sixth year but may not commute it to cash. 321avvphi1
In fine, absent any provision in the applicable company policy authorizing the commutation of the 230 days accrued
sick leave credits existing upon retirement, Paloma may not, as a matter of enforceable right, insist on the
commutation of his sick leave credits to cash.
As PAL’s senior vice-president for finance upon his retirement, Paloma knew or at least ought to have known the
company policy on accrued sick leave credits and how it was being implemented. Had he acted on that knowledge in
utmost good faith, these proceedings would have not come to pass.
WHEREFORE, the petition under G.R. No. 148415 is hereby DISMISSED for lack of merit, while the petition
under G.R. No. 156764 is hereby GIVEN DUE COURSE. The Amended Decision dated May 31, 2001 of the CA in
CA-G.R. SP No. 56429 and its Resolution of January 14, 2003 are hereby ANNULLED and SET ASIDE, and the CA
Decision dated April 28, 2000 is accordingly REINSTATED.
Costs against Ricardo G. Paloma.
SO ORDERED.
G.R. No. 79182 September 11, 1991
PNOC-ENERGY DEVELOPMENT CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Third Division) and DANILO MERCADO, respondents.
PARAS, J.:
This is a petition for certiorari to set aside the Resolution * dated July 3, 1987 of respondent National Labor Relations
Commission (NLRC for brevity) which affirmed the decision dated April 30, 1986 of Labor Arbiter Vito J. Minoria of
the NLRC, Regional Arbitration Branch No. VII at Cebu City in Case No. RAB-VII-0556-85 entitled "Danilo Mercado,
Complainant, vs. Philippine National Oil Company-Energy Development Corporation, Respondent", ordering the
reinstatement of complainant Danilo Mercado and the award of various monetary claims.
The factual background of this case is as follows:
Private respondent Danilo Mercado was first employed by herein petitioner Philippine National Oil Company-Energy
Development Corporation (PNOC-EDC for brevity) on August 13, 1979. He held various positions ranging from clerk,
general clerk to shipping clerk during his employment at its Cebu office until his transfer to its establishment at
Palimpinon, Dumaguete, Oriental Negros on September 5, 1984. On June 30, 1985, private respondent Mercado
was dismissed. His last salary was P1,585.00 a month basic pay plus P800.00 living allowance (Labor Arbiter's
Decision, Annex "E" of Petition, Rollo, p. 52).
The grounds for the dismissal of Mercado are allegedly serious acts of dishonesty committed as follows:
1. On ApriI 12, 1985, Danilo Mercado was ordered to purchase 1,400 pieces of nipa shingles from Mrs.
Leonardo Nodado of Banilad, Dumaguete City, for the total purchase price of Pl,680.00. Against company
policy, regulations and specific orders, Danilo Mercado withdrew the nipa shingles from the supplier but
paid the amount of P1,000.00 only. Danilo Mercado appropriated the balance of P680.00 for his personal
use;
2. In the same transaction stated above, the supplier agreed to give the company a discount of P70.00
which Danilo Mercado did not report to the company;
3. On March 28, 1985, Danilo Mercado was instructed to contract the services of Fred R. Melon of
Dumaguete City, for the fabrication of rubber stamps, for the total amount of P28.66. Danilo Mercado paid
the amount of P20.00 to Fred R. Melon and appropriated for his personal use the balance of P8.66.
In addition, private respondent, Danilo Mercado violated company rules and regulations in the following
instances:
1. On June 5, 1985, Danilo Mercado was absent from work without leave, without proper turn-over of his
work, causing disruption and delay of company work activities;
2. On June 15, 1985, Danilo Mercado went on vacation leave without prior leave, against company policy,
rules and regulations. (Petitioner's Memorandum, Rollo, p. 195).
On September 23, 1985, private respondent Mercado filed a complaint for illegal dismissal, retirement benefits,
separation pay, unpaid wages, etc. against petitioner PNOC-EDC before the NLRC Regional Arbitration Branch No.
VII docketed as Case No. RAB-VII-0556-85.
After private respondent Mercado filed his position paper on December 16, 1985 (Annex "B" of the Petition, Rollo,
pp. 28-40), petitioner PNOC-EDC filed its Position Paper/Motion to Dismiss on January 15, 1986, praying for the
dismissal of the case on the ground that the Labor Arbiter and/or the NLRC had no jurisdiction over the case (Annex
"C" of the Petition, Rollo, pp. 41-45), which was assailed by private respondent Mercado in his Opposition to the
Position Paper/Motion to Dismiss dated March 12, 1986 (Annex "D" of the Petition, Rollo, pp. 46-50).
The Labor Arbiter ruled in favor of private respondent Mercado. The dispositive onion of said decision reads as
follows:
WHEREFORE, in view of the foregoing, respondents are hereby ordered:
1) To reinstate complainant to his former position with full back wages from the date of his dismissal up to
the time of his actual reinstatement without loss of seniority rights and other privileges;
2) To pay complainant the amount of P10,000.00 representing his personal share of his savings account
with the respondents;
3) To pay complainants the amount of P30,000.00 moral damages; P20,000.00 exemplary damages and
P5,000.00 attorney's fees;
4) To pay complainant the amount of P792.50 as his proportionate 13th month pay for 1985.
Respondents are hereby further ordered to deposit the aforementioned amounts with this Office within ten
days from receipt of a copy of this decision for further disposition.
SO ORDERED.
(Labor Arbiter's Decision, Rollo, p. 56)
The appeal to the NLRC was dismissed for lack of merit on July 3, 1987 and the assailed decision was affirmed.
Hence, this petition.
The issues raised by petitioner in this instant petition are:
1. Whether or not matters of employment affecting the PNOC-EDC, a government-owned and controlled
corporation, are within the jurisdiction of the Labor Arbiter and the NLRC.
2. Assuming the affirmative, whether or not the Labor Arbiter and the NLRC are justified in ordering the
reinstatement of private respondent, payment of his savings, and proportionate 13th month pay and
payment of damages as well as attorney's fee.
Petitioner PNOC-EDC alleges that it is a corporation wholly owned and controlled by the government; that the
Energy Development Corporation is a subsidiary of the Philippine National Oil Company which is a government entity
created under Presidential Decree No. 334, as amended; that being a government-owned and controlled corporation,
it is governed by the Civil Service Law as provided for in Section 1, Article XII-B of the 1973 Constitution, Section 56
of Presidential Decree No. 807 (Civil Service Decree) and Article 277 of Presidential Decree No. 442, as amended
(Labor Code).
The 1973 Constitution provides:
The Civil Service embraces every branch, agency, subdivision and instrumentality of the government
including government-owned or controlled corporations.
Petitioner PNOC-EDC argued that since Labor Arbiter Minoria rendered the decision at the time when the 1973
Constitution was in force, said decision is null and void because under the 1973 Constitution, government-owned
and controlled corporations were governed by the Civil Service Law. Even assuming that PNOC-EDC has no original
or special charter and Section 2(i), Article IX-B of the 1987 Constitution provides that:
The Civil Service embraces all branches, subdivision, instrumentalities and agencies of the Government,
including government-owned or controlled corporations with original charters.
such circumstances cannot give validity to the decision of the Labor Arbiter (Ibid., pp. 192-193).
This issue has already been laid to rest in the case of PNOC-EDC vs. Leogardo, 175 SCRA 26 (July 5, 1989),
involving the same petitioner and the same issue, where this Court ruled that the doctrine that employees of
government-owned and/or con controlled corporations, whether created by special law or formed as subsidiaries
under the General Corporation law are governed by the Civil Service Law and not by the Labor Code, has been
supplanted by the present Constitution. "Thus, under the present state of the law, the test in determining whether a
government-owned or controlled corporation is subject to the Civil Service Law are the manner of its creation, such
that government corporations created by special charter are subject to its provisions while those incorporated under
the General Corporation Law are not within its coverage."
Specifically, the PNOC-EDC having been incorporated under the General Corporation Law was held to be a
government owned or controlled corporation whose employees are subject to the provisions of the Labor Code
(Ibid.).
The fact that the case arose at the time when the 1973 Constitution was still in effect, does not deprive the NLRC of
jurisdiction on the premise that it is the 1987 Constitution that governs because it is the Constitution in place at the
time of the decision (NASECO v. NLRC, G.R. No. 69870, 168 SCRA 122 [1988]).
In the case at bar, the decision of the NLRC was promulgated on July 3, 1987. Accordingly, this case falls squarely
under the rulings of the aforementioned cases.
As regards the second issue, the record shows that PNOC-EDC's accusations of dishonesty and violations of
company rules are not supported by evidence. Nonetheless, while acknowledging the rule that administrative bodies
are not governed by the strict rules of evidence, petitioner PNOC-EDC alleges that the labor arbiter's propensity to
decide the case through the position papers submitted by the parties is violative of due process thereby rendering
the decision null and void (Ibid., p. 196).
On the other hand, private respondent contends that as can be seen from petitioner's Motion for Reconsideration
and/or Appeal dated July 28, 1986 (Annex "F" of the Petition, Rollo, pp. 57- 64), the latter never questioned the
findings of facts of the Labor Arbiter but simply limited its objection to the lack of legal basis in view of its stand that
the NLRC had no jurisdiction over the case (Private Respondent's Memorandum, Rollo, p. 104).
Petitioner PNOC-EDC filed its Position Paper/Motion to Dismiss dated January 15, 1986 (Annex "C" of the Petition
Rollo, pp. 41-45) before the Regional Arbitration Branch No. VII of Cebu City and its Motion for Reconsideration
and/or Appeal dated July 28, 1986 (Annex "F" of the Petition, Rollo, pp. 57-64) before the NLRC of Cebu City.
Indisputably, the requirements of due process are satisfied when the parties are given an opportunity to submit
position papers. What the fundamental law abhors is not the absence of previous notice but rather the absolute lack
of opportunity to ventilate a party's side. There is no denial of due process where the party submitted its position
paper and flied its motion for reconsideration (Odin Security Agency vs. De la Serna, 182 SCRA 472 [February 21,
1990]). Petitioner's subsequent Motion for Reconsideration and/or Appeal has the effect of curing whatever
irregularity might have been committed in the proceedings below (T.H. Valderama and Sons, Inc. vs. Drilon, 181
SCRA 308 [January 22, 1990]).
Furthermore, it has been consistently held that findings of administrative agencies which have acquired expertise
because their jurisdiction is confined to specific matters are accorded not only respect but even finality (Asian
Construction and Development Corporation vs. NLRC, 187 SCRA 784 [July 27, 1990]; Lopez Sugar Corporation vs.
Federation of Free Workers, 189 SCRA 179 [August 30, 1990]). Judicial review by this Court does not go so far as to
evaluate the sufficiency of the evidence but is limited to issues of jurisdiction or grave abuse of discretion (Filipinas
Manufacturers Bank vs. NLRC, 182 SCRA 848 [February 28, 1990]). A careful study of the records shows no
substantive reason to depart from these established principles.
While it is true that loss of trust or breach of confidence is a valid ground for dismissing an employee, such loss or
breach of trust must have some basis (Gubac v. NLRC, 187 SCRA 412 [July 13, 1990]). As found by the Labor
Arbiter, the accusations of petitioner PNOC-EDC against private respondent Mercado have no basis. Mrs. Leonardo
Nodado, from whom the nipa shingles were purchased, sufficiently explained in her affidavit (Rollo, p. 36) that the
total purchase price of P1,680.00 was paid by respondent Mercado as agreed upon. The alleged discount given by
Mrs. Nodado is not supported by evidence as well as the alleged appropriation of P8.66 from the cost of fabrication
of rubber stamps. The Labor Arbiter, likewise, found no evidence to support the alleged violation of company rules.
On the contrary, he found respondent Mercado's explanation in his affidavit (Rollo, pp. 38-40) as to the alleged
violations to be satisfactory. Moreover, these findings were never contradicted by petitioner petitioner PNOC-EDC.
PREMISES CONSIDERED, the petition is DENIED and the resolution of respondent NLRC dated July 3, 1987 is
AFFIRMED with the modification that the moral damages are reduced to Ten Thousand (P10,000.00) Pesos, and the
exemplary damages reduced to Five Thousand (P5,000.00) Pesos.
SO ORDERED.
G.R. No. 181866 March 18, 2010
EMMANUEL S. HUGO, LOURENTE V. CRUZ, DIOSDADO S. DOLORES, RAMON B. DE LOS REYES,
ORLANDO B. FLORES, ROGELIO R. MARTIN, JOSE ROBERTO A. PAMINTUAN, MELVIN R. GOMEZ,
REYNALDO P. SOLISA, EMMANUEL A. PALADO, JR., ANSELMO V. TALAGTAG, JR., ANTHONY C.
RONQUILLO, ARTHUR G. CONCEPCION, ORLANDO MALAYBA, LEANDRO C. PAGURAYAN III, MARVIN L.
GABRIEL, FERNANDO V. DIAZ, ALFREDO CHAN, JUAN G. OBIAS, JR., EMIL P. BELCHEZ, RODELIO H.
LASTIMA, and AUGUSTO LAGOS, Petitioners,
vs.
LIGHT RAIL TRANSIT AUTHORITY, Respondent.
DECISION
CARPIO MORALES, J.:
Respondent Light Rail Transit Authority (LRTA), a government-owned and controlled corporation, constructed a light
rail transit system which traverses
from Baclaran in Parañaque City to Monumento in Kalookan City, Metro Manila pursuant to its mandate under its
charter, Executive Order No. 603, Series of 1980, as amended. 1
To effectively carry out its mandate, LRTA entered into a ten-year Agreement for the Management and Operation of
the Metro Manila Light Rail Transit System (the Agreement) from June 8, 1984 until June 8, 1994 with Metro Transit
Organization, Inc. (METRO).2 One of the stipulations in the Agreement was
METRO shall be free to employ such employees and officers as it shall deem necessary in order to carry out the
requirements of the Agreement. Such employees and officers shall be the employees of METRO and not of LRTA.
METRO shall prepare a compensation schedule for the salaries and fringe benefits of its personnel (Article 3, par.
3.05).3 (emphasis and underscoring supplied)
METRO thus hired its own employees including herein petitioners-members of the Pinag-isang Lakas ng
Manggagawa sa METRO, Inc.-National Federation of Labor, otherwise known as PIGLAS-METRO, INC.-NFL-KMU
(the Union), the certified exclusive collective bargaining representative of METRO’s rank-and-file employees.
LRTA later purchased the shares of stocks of METRO via Deed of Sale of June 9, 1989. The two entities, however,
continued with their distinct and
separate juridical personalities such that when the ten-year Agreement expired on June 8, 1994, they renewed the
same.4
On July 25, 2000, on account of a deadlock in the negotiation for the forging of a new collective bargaining
agreement between METRO and the Union, petitioners filed a Notice of Strike before the National Conciliation and
Mediation Board, National Capital Region (NCR). On even date, the Union went on strike, completely paralyzing the
operations of the light rail transit system.
Then Secretary of Labor Bienvenido E. Laguesma assumed jurisdiction over the conflict and directed the striking
employees including herein petitioners to immediately return to work and METRO to accept them back under the
same terms and conditions of employment prevailing prior to the strike.
By LRTA’s claim, the striking employees including petitioners defied the return-to-work order. Contradicting such
claim, petitioners alleged that upon learning of the order, they attempted to comply with it but the security guards of
METRO barred them from entering their workplace for security reasons, the latter being afraid that they (the striking
employees) might sabotage the vital machineries and equipment of the light rail transit system. 5
When the Agreement expired on July 31, 2000, LRTA did not renew it. It instead took over the management and
operations of the light rail transit system, hiring new personnel for the purpose. METRO thus considered the
employment of all its personnel terminated effective September 30, 2000.
On February 28, 2002, petitioners filed a complaint6 for illegal dismissal and unfair labor practice with prayer for
reinstatement and damages against METRO and LRTA before the NCR Arbitration Branch, National Labor Relations
Commission (NLRC), docketed as NLRC Case No. NCR-30-02-01191-02.
In impleading LRTA in their complaint, petitioners alleged that the "non-renewal of the [Agreement] is but an
ingenious, albeit unlawful, scheme carried out by the respondents to get rid of personnel they perceived as activists
and troublemakers, thus, terminating the complainants without any just or lawful cause."7
LRTA filed a motion to dismiss8 the complaint on the ground that the Labor Arbiter and the NLRC
have nojurisdiction over it, for, by petitioners’ own admission, there was no employer-employee relationship between
it and petitioners.
By Order9 of December 17, 2002, Labor Arbiter Felipe P. Pati granted the motion of LRTA and
accordingly dismissed petitioners’ complaint for lack of jurisdiction.
On appeal by petitioners, the NLRC, by Resolution10 of July 31, 2003, reversed the Labor Arbiter’s dismissal of
petitioners’ complaint and rendered a new one "declaring that the Labor Arbiter and this Commission can exercise
jurisdiction over the person of Respondent LRTA," LRTA being considered an "indirect employer" on account of the
Agreement; and that LRTA is a "necessary party" which ought to be joined as party for a complete determination of
petitioners’ claims that the non-renewal of the Agreement by LRTA and the cessation of business by METRO were
carried out with the intent to cover up the illegal dismissal of petitioners. The NLRC thus ordered the remand of the
records of the case to the Labor Arbiter for further proceedings.111avvphi1
After the conclusion of the proceedings before his office, Labor Arbiter Pati found for petitioners, by Decision of
August 18, 2004.
LRTA appealed the decision to the NLRC and filed
a motion for leave to post a property bond in lieu of cash orsurety bond.
By Resolution12 of April 28, 2005, the NLRC dismissed LRTA’s appeal due to
its failure to perfect the same, no cashor surety bond having been posted.
13
Its motion for reconsideration having been denied by Resolution of August 31, 2005, LRTA filed a Petition for
Certiorari before the Court of Appeals which, by the challenged Decision14 of February 20, 2008, it granted and
accordingly reversed the assailed issuances of the NLRC.
The appellate court, holding that "(t)he property bond offered by LRTA should be deemed substantial compliance
with the rules,"15 directed the NLRC to give due course to LRTA’s appeal upon filing of the appeal bond within such
reasonable period of time it may set.
Hence, petitioners’ present Petition for Review on Certiorari alleging that, inter alia, LRTA’s failure to perfect its
appeal by posting a cash or surety bond "renders the [Labor Arbiter’s] judgment final and executory and the appeal
ineffective and invalid."16
The Labor Arbiter and the NLRC do not have jurisdiction over LRTA. Petitioners themselves admitted in their
complaint that LRTA "is a government agency organized and existing pursuant to
an original charter (ExecutiveOrder No. 603)," and that they are employees of METRO.
Light Rail Transit Authority v. Venus, Jr.,17 which has a similar factual backdrop, holds that LRTA, being a
government-owned or controlled corporation created by an original charter, is beyond the reach of the Department of
Labor and Employment which has jurisdiction over workers in the private sector, viz:
. . . [E]mployees of petitioner METRO cannot be considered as employees of petitioner LRTA. The employees hired
by METRO are covered by the Labor Code and are under the jurisdiction of the Department of Labor and
Employment, whereas the employees of petitioner LRTA, a government-owned and controlled corporation with
original charter, are covered by civil service rules. Herein private respondent workers cannot have the best of two
worlds, e.g., be considered government employees of petitioner LRTA, yet allowed to strike as private employees
under our labor laws. x x x.
xxxx
. . . [I]t is inappropriate to pierce the corporate veil of petitioner METRO. x x x.
In the instant case, petitioner METRO, formerly Meralco Transit Organization, Inc., was originally owned by the
Manila Electric Company and registered with the Securities and Exchange Commission more than a decade before
the labor dispute. It then entered into a ten-year agreement with petitioner LRTA in 1984. And, even if petitioner
LRTA eventually purchased METRO in 1989, both parties maintained their separate and distinct juridical
personality and allowed the agreement to proceed. In 1990, this Court, in Light Rail Transit Authority v. Commission
on Audit (G.R. No. 88365, January 9, 1990), even upheld the validity of the said agreement. Consequently, the
agreement was extended beyond its ten-year period. In 1995, METRO’s separate juridical identity was again
recognized when it entered into a collective bargaining agreement with the workers’ union. All these years, METRO’s
distinct corporate personality continued quiescently, separate and apart from the juridical personality of petitioner
LRTA.
The labor dispute only arose in 2000, after a deadlock occurred during the collective bargaining between petitioner
METRO and the workers’ union. This alone is not a justification to pierce the corporate veil of petitioner METRO and
make petitioner LRTA liable to private respondent workers. There are no badges of fraud or any wrongdoing to
pierce the corporate veil of petitioner METRO.
xxxx
In sum, petitioner LRTA cannot be held liable to the employees of petitioner METRO.18 (emphasis and underscoring
supplied)
IN FINE, the Labor Arbiter’s decision against LRTA was rendered without jurisdiction, hence, it is void, thus rendering
it improper for the remand of the case to the NLRC, as ordered by the appellate court, for it (NLRC) to give due
course to LRTA’s appeal.
A final word. It bears emphasis that this Court’s present Decision treats only with respect to the Labor Arbiter’s
decision against respondent LRTA.
WHEREFORE, the assailed Decision of the Court of the Appeals is REVERSED and SET ASIDE. Petitioners’
complaint in NLRC Case No. NCR-30-02-01191-02, insofar as herein respondent Light Rail Transit Authority is
concerned, is DISMISSED.
SO ORDERED.
G.R. No. 147402 January 14, 2004
ENGR. RANULFO C. FELICIANO, in his capacity as General Manager of the Leyte Metropolitan Water District
(LMWD), Tacloban City, petitioner,
vs.
COMMISSION ON AUDIT, Chairman CELSO D. GANGAN, Commissioners RAUL C. FLORES and EMMANUEL
M. DALMAN, and Regional Director of COA Region VIII, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for certiorari1 to annul the Commission on Audit’s ("COA") Resolution dated 3 January 2000 and the
Decision dated 30 January 2001 denying the Motion for Reconsideration. The COA denied petitioner Ranulfo C.
Feliciano’s request for COA to cease all audit services, and to stop charging auditing fees, to Leyte Metropolitan
Water District ("LMWD"). The COA also denied petitioner’s request for COA to refund all auditing fees previously
paid by LMWD.
Antecedent Facts
A Special Audit Team from COA Regional Office No. VIII audited the accounts of LMWD. Subsequently, LMWD
received a letter from COA dated 19 July 1999 requesting payment of auditing fees. As General Manager of LMWD,
petitioner sent a reply dated 12 October 1999 informing COA’s Regional Director that the water district could not pay
the auditing fees. Petitioner cited as basis for his action Sections 6 and 20 of Presidential Decree 198 ("PD 198") 2 ,
as well as Section 18 of Republic Act No. 6758 ("RA 6758"). The Regional Director referred petitioner’s reply to the
COA Chairman on 18 October 1999.
On 19 October 1999, petitioner wrote COA through the Regional Director asking for refund of all auditing fees LMWD
previously paid to COA.
On 16 March 2000, petitioner received COA Chairman Celso D. Gangan’s Resolution dated 3 January 2000 denying
his requests. Petitioner filed a motion for reconsideration on 31 March 2000, which COA denied on 30 January 2001.
On 13 March 2001, petitioner filed this instant petition. Attached to the petition were resolutions of the Visayas
Association of Water Districts (VAWD) and the Philippine Association of Water Districts (PAWD) supporting the
petition.
The Ruling of the Commission on Audit
The COA ruled that this Court has already settled COA’s audit jurisdiction over local water districts in Davao City
Water District v. Civil Service Commission and Commission on Audit,3 as follows:
The above-quoted provision [referring to Section 3(b) PD 198] definitely sets to naught petitioner’s
contention that they are private corporations. It is clear therefrom that the power to appoint the members
who will comprise the members of the Board of Directors belong to the local executives of the local
subdivision unit where such districts are located. In contrast, the members of the Board of Directors or the
trustees of a private corporation are elected from among members or stockholders thereof. It would not be
amiss at this point to emphasize that a private corporation is created for the private purpose, benefit, aim
and end of its members or stockholders. Necessarily, said members or stockholders should be given a free
hand to choose who will compose the governing body of their corporation. But this is not the case here and
this clearly indicates that petitioners are not private corporations.
The COA also denied petitioner’s request for COA to stop charging auditing fees as well as petitioner’s request for
COA to refund all auditing fees already paid.
The Issues
Petitioner contends that COA committed grave abuse of discretion amounting to lack or excess of jurisdiction by
auditing LMWD and requiring it to pay auditing fees. Petitioner raises the following issues for resolution:
1. Whether a Local Water District ("LWD") created under PD 198, as amended, is a government-owned or
controlled corporation subject to the audit jurisdiction of COA;
2. Whether Section 20 of PD 198, as amended, prohibits COA’s certified public accountants from auditing
local water districts; and
3. Whether Section 18 of RA 6758 prohibits the COA from charging government-owned and controlled
corporations auditing fees.
The Ruling of the Court
The petition lacks merit.
The Constitution and existing laws4 mandate COA to audit all government agencies, including government-owned
and controlled corporations ("GOCCs") with original charters. An LWD is a GOCC with an original charter. Section
2(1), Article IX-D of the Constitution provides for COA’s audit jurisdiction, as follows:
SECTION 2. (1) The Commission on Audit shall have the power, authority and duty to examine, audit, and
settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and
property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies,
or instrumentalities, including government-owned and controlled corporations with original charters,
and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal
autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-
owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving
subsidy or equity, directly or indirectly, from or through the government, which are required by law or the
granting institution to submit to such audit as a condition of subsidy or equity. However, where the internal
control system of the audited agencies is inadequate, the Commission may adopt such measures,
including temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies. It
shall keep the general accounts of the Government and, for such period as may be provided by law,
preserve the vouchers and other supporting papers pertaining thereto. (Emphasis supplied)
The COA’s audit jurisdiction extends not only to government "agencies or instrumentalities," but also to "government-
owned and controlled corporations with original charters" as well as "other government-owned or controlled
corporations" without original charters.
Whether LWDs are Private or Government-Owned
and Controlled Corporations with Original Charters
Petitioner seeks to revive a well-settled issue. Petitioner asks for a re-examination of a doctrine backed by a long line
of cases culminating in Davao City Water District v. Civil Service Commission5 and just recently reiterated in De
Jesus v. Commission on Audit.6 Petitioner maintains that LWDs are not government-owned and controlled LWDs exist by virtue of PD 198, which constitutes their special charter. Since under the Constitution only
corporations with original charters. Petitioner even argues that LWDs are private corporations. Petitioner asks the government-owned or controlled corporations may have special charters, LWDs can validly exist only if they are
Court to consider certain interpretations of the applicable laws, which would give a "new perspective to the issue of government-owned or controlled. To claim that LWDs are private corporations with a special charter is to admit that
the true character of water districts."7 their existence is constitutionally infirm.

Petitioner theorizes that what PD 198 created was the Local Waters Utilities Administration ("LWUA") and not the Unlike private corporations, which derive their legal existence and power from the Corporation Code, LWDs derive
LWDs. Petitioner claims that LWDs are created "pursuant to" and not created directly by PD 198. Thus, petitioner their legal existence and power from PD 198. Sections 6 and 25 of PD 19814 provide:
concludes that PD 198 is not an "original charter" that would place LWDs within the audit jurisdiction of COA as
defined in Section 2(1), Article IX-D of the Constitution. Petitioner elaborates that PD 198 does not create LWDs
Section 6. Formation of District. — This Act is the source of authorization and power to form and
since it does not expressly direct the creation of such entities, but only provides for their formation on an optional or
maintain a district. For purposes of this Act, a district shall be considered as a quasi-public
voluntary basis.8 Petitioner adds that the operative act that creates an LWD is the approval of the Sanggunian
corporation performing public service and supplying public wants. As such, a district shall
Resolution as specified in PD 198.
exercise the powers, rights and privileges given to private corporations under existing laws, in
addition to the powers granted in, and subject to such restrictions imposed, under this Act.
Petitioner’s contention deserves scant consideration.
(a) The name of the local water district, which shall include the name of the city, municipality, or province,
We begin by explaining the general framework under the fundamental law. The Constitution recognizes two classes or region thereof, served by said system, followed by the words "Water District".
of corporations. The first refers to private corporations created under a general law. The second refers to
government-owned or controlled corporations created by special charters. Section 16, Article XII of the Constitution
(b) A description of the boundary of the district. In the case of a city or municipality, such boundary may
provides:
include all lands within the city or municipality. A district may include one or more municipalities, cities or
provinces, or portions thereof.
Sec. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of
private corporations. Government-owned or controlled corporations may be created or established by special
(c) A statement completely transferring any and all waterworks and/or sewerage facilities managed,
charters in the interest of the common good and subject to the test of economic viability.
operated by or under the control of such city, municipality or province to such district upon the filing of
resolution forming the district.
The Constitution emphatically prohibits the creation of private corporations except by a general law applicable to all
citizens.9 The purpose of this constitutional provision is to ban private corporations created by special charters, which
(d) A statement identifying the purpose for which the district is formed, which shall include those purposes
historically gave certain individuals, families or groups special privileges denied to other citizens.10
outlined in Section 5 above.

In short, Congress cannot enact a law creating a private corporation with a special charter. Such legislation would be
(e) The names of the initial directors of the district with the date of expiration of term of office for each.
unconstitutional. Private corporations may exist only under a general law. If the corporation is private, it must
necessarily exist under a general law. Stated differently, only corporations created under a general law can qualify as
private corporations. Under existing laws, that general law is the Corporation Code, 11 except that the Cooperative (f) A statement that the district may only be dissolved on the grounds and under the conditions set forth in
Code governs the incorporation of cooperatives.12 Section 44 of this Title.

The Constitution authorizes Congress to create government-owned or controlled corporations through special (g) A statement acknowledging the powers, rights and obligations as set forth in Section 36 of this Title.
charters. Since private corporations cannot have special charters, it follows that Congress can create corporations
with special charters only if such corporations are government-owned or controlled.
Nothing in the resolution of formation shall state or infer that the local legislative body has the power to
dissolve, alter or affect the district beyond that specifically provided for in this Act.
Obviously, LWDs are not private corporations because they are not created under the Corporation Code. LWDs are
not registered with the Securities and Exchange Commission. Section 14 of the Corporation Code states that "[A]ll
corporations organized under this code shall file with the Securities and Exchange Commission articles of If two or more cities, municipalities or provinces, or any combination thereof, desire to form a single district,
incorporation x x x." LWDs have no articles of incorporation, no incorporators and no stockholders or members. a similar resolution shall be adopted in each city, municipality and province.
There are no stockholders or members to elect the board directors of LWDs as in the case of all corporations
registered with the Securities and Exchange Commission. The local mayor or the provincial governor appoints the xxx
directors of LWDs for a fixed term of office. This Court has ruled that LWDs are not created under the Corporation
Code, thus:
Sec. 25. Authorization. — The district may exercise all the powers which are expressly granted by
this Title or which are necessarily implied from or incidental to the powers and purposes herein
From the foregoing pronouncement, it is clear that what has been excluded from the coverage of the CSC stated. For the purpose of carrying out the objectives of this Act, a district is hereby granted the power of
are those corporations created pursuant to the Corporation Code. Significantly, petitioners are not eminent domain, the exercise thereof shall, however, be subject to review by the Administration.
created under the said code, but on the contrary, they were created pursuant to a special law and (Emphasis supplied)
are governed primarily by its provision.13 (Emphasis supplied)
Clearly, LWDs exist as corporations only by virtue of PD 198, which expressly confers on LWDs corporate
powers. Section 6 of PD 198 provides that LWDs "shall exercise the powers, rights and privileges given to private
corporations under existing laws." Without PD 198, LWDs would have no corporate powers. Thus, PD 198
constitutes the special enabling charter of LWDs. The ineluctable conclusion is that LWDs are government-owned
and controlled corporations with a special charter.
The phrase "government-owned and controlled corporations with original charters" means GOCCs created under
special laws and not under the general incorporation law. There is no difference between the term "original charters"
and "special charters." The Court clarified this in National Service Corporation v. NLRC15 by citing the deliberations
in the Constitutional Commission, as follows:
THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed amendment to now read as
follows: "including government-owned or controlled corporations WITH ORIGINAL CHARTERS." The
purpose of this amendment is to indicate that government corporations such as the GSIS and SSS, which
have original charters, fall within the ambit of the civil service. However, corporations which are
subsidiaries of these chartered agencies such as the Philippine Airlines, Manila Hotel and Hyatt are
excluded from the coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does the Committee say?
MR. FOZ. Just one question, Mr. Presiding Officer. By the term "original charters," what exactly do
we mean?
MR. ROMULO. We mean that they were created by law, by an act of Congress, or by special law.
MR. FOZ. And not under the general corporation law.
MR. ROMULO. That is correct. Mr. Presiding Officer.
MR. FOZ. With that understanding and clarification, the Committee accepts the amendment.
MR. NATIVIDAD. Mr. Presiding Officer, so those created by the general corporation law are out.
MR. ROMULO. That is correct. (Emphasis supplied)
Again, in Davao City Water District v. Civil Service Commission,16 the Court reiterated the meaning of the phrase
"government-owned and controlled corporations with original charters" in this wise:
By "government-owned or controlled corporation with original charter," We mean government
owned or controlled corporation created by a special law and not under the Corporation Code of
the Philippines. Thus, in the case of Lumanta v. NLRC (G.R. No. 82819, February 8, 1989, 170 SCRA
79, 82), We held:
"The Court, in National Service Corporation (NASECO) v. National Labor Relations
Commission, G.R. No. 69870, promulgated on 29 November 1988, quoting extensively
from the deliberations of the 1986 Constitutional Commission in respect of the intent and
meaning of the new phrase ‘with original charter,’ in effect held that government-owned
and controlled corporations with original charter refer to corporations chartered by
special law as distinguished from corporations organized under our general
incorporation statute — the Corporation Code. In NASECO, the company involved had been
organized under the general incorporation statute and was a subsidiary of the National
Investment Development Corporation (NIDC) which in turn was a subsidiary of the Philippine
National Bank, a bank chartered by a special statute. Thus, government-owned or controlled
corporations like NASECO are effectively, excluded from the scope of the Civil Service."
(Emphasis supplied)
Petitioner’s contention that the Sangguniang Bayan resolution creates the LWDs assumes that the Sangguniang
Bayan has the power to create corporations. This is a patently baseless assumption. The Local Government
Code17 does not vest in the Sangguniang Bayan the power to create corporations. 18 What the Local Government
Code empowers the Sangguniang Bayan to do is to provide for the establishment of a waterworks system "subject to
existing laws." Thus, Section 447(5)(vii) of the Local Government Code provides:
SECTION 447. Powers, Duties, Functions and Compensation. — (a) The sangguniang bayan, as the
legislative body of the municipality, shall enact ordinances, approve resolutions and appropriate funds for
the general welfare of the municipality and its inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the municipality as provided for under Section 22 of this Code,
and shall:
xxx
(vii) Subject to existing laws, provide for the establishment, operation, maintenance, and repair
of an efficient waterworks system to supply water for the inhabitants; regulate the construction,
maintenance, repair and use of hydrants, pumps, cisterns and reservoirs; protect the purity and
quantity of the water supply of the municipality and, for this purpose, extend the coverage of
appropriate ordinances over all territory within the drainage area of said water supply and within
one hundred (100) meters of the reservoir, conduit, canal, aqueduct, pumping station, or
watershed used in connection with the water service; and regulate the consumption, use or
wastage of water;
x x x. (Emphasis supplied)
The Sangguniang Bayan may establish a waterworks system only in accordance with the provisions of PD 198. The
Sangguniang Bayan has no power to create a corporate entity that will operate its waterworks system. However, the
Sangguniang Bayan may avail of existing enabling laws, like PD 198, to form and incorporate a water district.
Besides, even assuming for the sake of argument that the Sangguniang Bayan has the power to create corporations,
the LWDs would remain government-owned or controlled corporations subject to COA’s audit jurisdiction. The
resolution of the Sangguniang Bayan would constitute an LWD’s special charter, making the LWD a government-
owned and controlled corporation with an original charter. In any event, the Court has already ruled in Baguio Water
District v. Trajano19 that the Sangguniang Bayan resolution is not the special charter of LWDs, thus:
While it is true that a resolution of a local sanggunian is still necessary for the final creation of a district, this
Court is of the opinion that said resolution cannot be considered as its charter, the same being intended
only to implement the provisions of said decree.
Petitioner further contends that a law must create directly and explicitly a GOCC in order that it may have an original
charter. In short, petitioner argues that one special law cannot serve as enabling law for several GOCCs but only for
one GOCC. Section 16, Article XII of the Constitution mandates that "Congress shall not, except by general
law,"20 provide for the creation of private corporations. Thus, the Constitution prohibits one special law to create one
private corporation, requiring instead a "general law" to create private corporations. In contrast, the same Section 16
states that "Government-owned or controlled corporations may be created or established by special charters." Thus,
the Constitution permits Congress to create a GOCC with a special charter. There is, however, no prohibition on
Congress to create several GOCCs of the same class under one special enabling charter.
The rationale behind the prohibition on private corporations having special charters does not apply to GOCCs. There
is no danger of creating special privileges to certain individuals, families or groups if there is one special law creating
each GOCC. Certainly, such danger will not exist whether one special law creates one GOCC, or one special
enabling law creates several GOCCs. Thus, Congress may create GOCCs either by special charters specific to each
GOCC, or by one special enabling charter applicable to a class of GOCCs, like PD 198 which applies only to LWDs.
Petitioner also contends that LWDs are private corporations because Section 6 of PD 198 21 declares that LWDs
"shall be considered quasi-public" in nature. Petitioner’s rationale is that only private corporations may be deemed
"quasi-public" and not public corporations. Put differently, petitioner rationalizes that a public corporation cannot be
deemed "quasi-public" because such corporation is already public. Petitioner concludes that the term "quasi-public"
can only apply to private corporations. Petitioner’s argument is inconsequential.
Petitioner forgets that the constitutional criterion on the exercise of COA’s audit jurisdiction depends on the
government’s ownership or control of a corporation. The nature of the corporation, whether it is private, quasi-public,
or public is immaterial.
The Constitution vests in the COA audit jurisdiction over "government-owned and controlled corporations with
original charters," as well as "government-owned or controlled corporations" without original charters. GOCCs with
original charters are subject to COA pre-audit, while GOCCs without original charters are subject to COA post-audit.
GOCCs without original charters refer to corporations created under the Corporation Code but are owned or
controlled by the government. The nature or purpose of the corporation is not material in determining COA’s audit
jurisdiction. Neither is the manner of creation of a corporation, whether under a general or special law.
The determining factor of COA’s audit jurisdiction is government ownership or control of the corporation.
In Philippine Veterans Bank Employees Union-NUBE v. Philippine Veterans Bank,22 the Court even ruled that
the criterion of ownership and control is more important than the issue of original charter, thus:
This point is important because the Constitution provides in its Article IX-B, Section 2(1) that "the Civil
Service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charters." As the Bank is not owned or
controlled by the Government although it does have an original charter in the form of R.A. No.
3518,23 it clearly does not fall under the Civil Service and should be regarded as an ordinary
commercial corporation. Section 28 of the said law so provides. The consequence is that the relations of
the Bank with its employees should be governed by the labor laws, under which in fact they have already
been paid some of their claims. (Emphasis supplied)
Certainly, the government owns and controls LWDs. The government organizes LWDs in accordance with a specific
law, PD 198. There is no private party involved as co-owner in the creation of an LWD. Just prior to the creation of
LWDs, the national or local government owns and controls all their assets. The government controls LWDs because
under PD 198 the municipal or city mayor, or the provincial governor, appoints all the board directors of an LWD for a
fixed term of six years.24 The board directors of LWDs are not co-owners of the LWDs. LWDs have no private
stockholders or members. The board directors and other personnel of LWDs are government employees subject to
civil service laws25 and anti-graft laws.26
While Section 8 of PD 198 states that "[N]o public official shall serve as director" of an LWD, it only means that the
appointees to the board of directors of LWDs shall come from the private sector. Once such private sector
representatives assume office as directors, they become public officials governed by the civil service law and anti-
graft laws. Otherwise, Section 8 of PD 198 would contravene Section 2(1), Article IX-B of the Constitution declaring
that the civil service includes "government-owned or controlled corporations with original charters."
If LWDs are neither GOCCs with original charters nor GOCCs without original charters, then they would fall under
the term "agencies or instrumentalities" of the government and thus still subject to COA’s audit jurisdiction. However,
the stark and undeniable fact is that the government owns LWDs. Section 4527 of PD 198 recognizes government
ownership of LWDs when Section 45 states that the board of directors may dissolve an LWD only on the condition
that "another public entity has acquired the assets of the district and has assumed all obligations and liabilities
attached thereto." The implication is clear that an LWD is a public and not a private entity.
Petitioner does not allege that some entity other than the government owns or controls LWDs. Instead, petitioner
advances the theory that the "Water District’s owner is the District itself."28 Assuming for the sake of argument that an
LWD is "self-owned,"29 as petitioner describes an LWD, the government in any event controls all LWDs. First,
government officials appoint all LWD directors to a fixed term of office. Second, any per diem of LWD directors in
excess of P50 is subject to the approval of the Local Water Utilities Administration, and directors can receive no
other compensation for their services to the LWD.30 Third, the Local Water Utilities Administration can require LWDs
to merge or consolidate their facilities or operations.31 This element of government control subjects LWDs to COA’s
audit jurisdiction.
Petitioner argues that upon the enactment of PD 198, LWDs became private entities through the transfer of
ownership of water facilities from local government units to their respective water districts as mandated by PD 198.
Petitioner is grasping at straws. Privatization involves the transfer of government assets to a private entity. Petitioner
concedes that the owner of the assets transferred under Section 6 (c) of PD 198 is no other than the LWD
itself.32 The transfer of assets mandated by PD 198 is a transfer of the water systems facilities "managed, operated
by or under the control of such city, municipality or province to such (water) district."33 In short, the transfer is from
one government entity to another government entity. PD 198 is bereft of any indication that the transfer is to privatize
the operation and control of water systems.
Finally, petitioner claims that even on the assumption that the government owns and controls LWDs, Section 20 of
PD 198 prevents COA from auditing LWDs. 34 Section 20 of PD 198 provides:
Sec. 20. System of Business Administration. — The Board shall, as soon as practicable, prescribe and
define by resolution a system of business administration and accounting for the district, which shall be
patterned upon and conform to the standards established by the Administration. Auditing shall be
performed by a certified public accountant not in the government service. The Administration may,
however, conduct annual audits of the fiscal operations of the district to be performed by an auditor
retained by the Administration. Expenses incurred in connection therewith shall be borne equally by the
water district concerned and the Administration.35 (Emphasis supplied)
Petitioner argues that PD 198 expressly prohibits COA auditors, or any government auditor for that matter, from
auditing LWDs. Petitioner asserts that this is the import of the second sentence of Section 20 of PD 198 when it
states that "[A]uditing shall be performed by a certified public accountant not in the government service." 36
PD 198 cannot prevail over the Constitution. No amount of clever legislation can exclude GOCCs like LWDs from
COA’s audit jurisdiction. Section 3, Article IX-C of the Constitution outlaws any scheme or devise to escape COA’s
audit jurisdiction, thus:
Sec. 3. No law shall be passed exempting any entity of the Government or its subsidiary in any guise
whatever, or any investment of public funds, from the jurisdiction of the Commission on Audit. (Emphasis
supplied)
The framers of the Constitution added Section 3, Article IX-D of the Constitution precisely to annul provisions of
Presidential Decrees, like that of Section 20 of PD 198, that exempt GOCCs from COA audit. The following
exchange in the deliberations of the Constitutional Commission elucidates this intent of the framers:
MR. OPLE: I propose to add a new section on line 9, page 2 of the amended committee report which
reads: NO LAW SHALL BE PASSED EXEMPTING ANY ENTITY OF THE GOVERNMENT OR ITS
SUBSIDIARY IN ANY GUISE WHATEVER, OR ANY INVESTMENTS OF PUBLIC FUNDS, FROM THE
JURISDICTION OF THE COMMISSION ON AUDIT.
May I explain my reasons on record.
We know that a number of entities of the government took advantage of the absence of a
legislature in the past to obtain presidential decrees exempting themselves from the jurisdiction of
the Commission on Audit, one notable example of which is the Philippine National Oil Company which is
really an empty shell. It is a holding corporation by itself, and strictly on its own account. Its funds were not
very impressive in quantity but underneath that shell there were billions of pesos in a multiplicity of
companies. The PNOC — the empty shell — under a presidential decree was covered by the jurisdiction of
the Commission on Audit, but the billions of pesos invested in different corporations underneath it were
exempted from the coverage of the Commission on Audit.
Another example is the United Coconut Planters Bank. The Commission on Audit has determined that the
coconut levy is a form of taxation; and that, therefore, these funds attributed to the shares of 1,400,000
coconut farmers are, in effect, public funds. And that was, I think, the basis of the PCGG in undertaking
that last major sequestration of up to 94 percent of all the shares in the United Coconut Planters Bank. The
charter of the UCPB, through a presidential decree, exempted it from the jurisdiction of the Commission on
Audit, it being a private organization.
So these are the fetuses of future abuse that we are slaying right here with this additional section.
May I repeat the amendment, Madam President: NO LAW SHALL BE PASSED EXEMPTING ANY
ENTITY OF THE GOVERNMENT OR ITS SUBSIDIARY IN ANY GUISE WHATEVER, OR ANY
INVESTMENTS OF PUBLIC FUNDS, FROM THE JURISDICTION OF THE COMMISSION ON AUDIT.
THE PRESIDENT: May we know the position of the Committee on the proposed amendment of
Commissioner Ople?
MR. JAMIR: If the honorable Commissioner will change the number of the section to 4, we will accept the
amendment.
MR. OPLE: Gladly, Madam President. Thank you.
MR. DE CASTRO: Madam President, point of inquiry on the new amendment.
THE PRESIDENT: Commissioner de Castro is recognized.
MR. DE CASTRO: Thank you. May I just ask a few questions of Commissioner Ople.
Is that not included in Section 2 (1) where it states: "(c) government-owned or controlled corporations and
their subsidiaries"? So that if these government-owned and controlled corporations and their subsidiaries
are subjected to the audit of the COA, any law exempting certain government corporations or subsidiaries
will be already unconstitutional.
So I believe, Madam President, that the proposed amendment is unnecessary.
MR. MONSOD: Madam President, since this has been accepted, we would like to reply to the point raised
by Commissioner de Castro.
THE PRESIDENT: Commissioner Monsod will please proceed.
MR. MONSOD: I think the Commissioner is trying to avoid the situation that happened in the past,
because the same provision was in the 1973 Constitution and yet somehow a law or a decree was passed
where certain institutions were exempted from audit. We are just reaffirming, emphasizing, the role of the
Commission on Audit so that this problem will never arise in the future. 37
There is an irreconcilable conflict between the second sentence of Section 20 of PD 198 prohibiting COA auditors
from auditing LWDs and Sections 2(1) and 3, Article IX-D of the Constitution vesting in COA the power to audit all
GOCCs. We rule that the second sentence of Section 20 of PD 198 is unconstitutional since it violates Sections 2(1)
and 3, Article IX-D of the Constitution.
On the Legality of COA’s
Practice of Charging Auditing Fees
Petitioner claims that the auditing fees COA charges LWDs for audit services violate the prohibition in Section 18 of
RA 6758,38 which states:
Sec. 18. Additional Compensation of Commission on Audit Personnel and of other Agencies. – In order to
preserve the independence and integrity of the Commission on Audit (COA), its officials and employees
are prohibited from receiving salaries, honoraria, bonuses, allowances or other emoluments from any
government entity, local government unit, government-owned or controlled corporations, and government
financial institutions, except those compensation paid directly by COA out of its appropriations
and contributions.
Government entities, including government-owned or controlled corporations including financial institutions
and local government units are hereby prohibited from assessing or billing other government entities,
including government-owned or controlled corporations including financial institutions or local government
units for services rendered by its officials and employees as part of their regular functions for purposes of
paying additional compensation to said officials and employees. (Emphasis supplied)
Claiming that Section 18 is "absolute and leaves no doubt,"39 petitioner asks COA to discontinue its practice of
charging auditing fees to LWDs since such practice allegedly violates the law.
Petitioner’s claim has no basis.
Section 18 of RA 6758 prohibits COA personnel from receiving any kind of compensation from any government entity
except "compensation paid directly by COA out of its appropriations and contributions." Thus, RA 6758 itself
recognizes an exception to the statutory ban on COA personnel receiving compensation from GOCCs. In Tejada v.
Domingo,40 the Court declared:
There can be no question that Section 18 of Republic Act No. 6758 is designed to strengthen further the
policy x x x to preserve the independence and integrity of the COA, by explicitly PROHIBITING: (1) COA
officials and employees from receiving salaries, honoraria, bonuses, allowances or other emoluments from
any government entity, local government unit, GOCCs and government financial institutions, except such
compensation paid directly by the COA out of its appropriations and contributions, and (2)
government entities, including GOCCs, government financial institutions and local government units from
assessing or billing other government entities, GOCCs, government financial institutions or local
government units for services rendered by the latter’s officials and employees as part of their regular
functions for purposes of paying additional compensation to said officials and employees.
xxx
 The first aspect of the strategy is directed to the COA itself, while the second aspect is addressed directly
against the GOCCs and government financial institutions. Under the first, COA personnel assigned to
auditing units of GOCCs or government financial institutions can receive only such salaries,
allowances or fringe benefits paid directly by the COA out of its appropriations and contributions.
The contributions referred to are the cost of audit services earlier mentioned which cannot include
the extra emoluments or benefits now claimed by petitioners. The COA is further barred from
assessing or billing GOCCs and government financial institutions for services rendered by its personnel as
part of their regular audit functions for purposes of paying additional compensation to such personnel. x x
x. (Emphasis supplied)
In Tejada, the Court explained the meaning of the word "contributions" in Section 18 of RA 6758, which allows COA
to charge GOCCs the cost of its audit services:
x x x the contributions from the GOCCs are limited to the cost of audit services which are based on the
actual cost of the audit function in the corporation concerned plus a reasonable rate to cover overhead
expenses. The actual audit cost shall include personnel services, maintenance and other operating
expenses, depreciation on capital and equipment and out-of-pocket expenses. In respect to the
allowances and fringe benefits granted by the GOCCs to the COA personnel assigned to the former’s
auditing units, the same shall be directly defrayed by COA from its own appropriations x x x. 41
COA may charge GOCCs "actual audit cost" but GOCCs must pay the same directly to COA and not to COA
auditors. Petitioner has not alleged that COA charges LWDs auditing fees in excess of COA’s "actual audit cost."
Neither has petitioner alleged that the auditing fees are paid by LWDs directly to individual COA auditors. Thus,
petitioner’s contention must fail.
WHEREFORE, the Resolution of the Commission on Audit dated 3 January 2000 and the Decision dated 30 January
2001 denying petitioner’s Motion for Reconsideration are AFFIRMED. The second sentence of Section 20 of
Presidential Decree No. 198 is declared VOID for being inconsistent with Sections 2 (1) and 3, Article IX-D of the
Constitution. No costs.
SO ORDERED.
[G.R. NO. 141020 : June 12, 2008]
CASINO LABOR ASSOCIATION, Petitioner, v. COURT OF APPEALS, PHIL. CASINO OPERATORS
CORPORATION (PCOC) and PHIL. SPECIAL SERVICES CORPORATION (PSSC), Respondents.
DECISION
PUNO, C.J.:
1 2 3
This petition for certiorari assails the Decision and Resolution of the Court of Appeals (CA) in CA-G.R. SP No.
50826. The CA dismissed the petition for certiorari filed by the petitioner against the First Division of the National
Labor Relations Commission (NLRC) and denied petitioner's motion for reconsideration.
The series of events which ultimately led to the filing of the petition at bar started with the consolidated cases 4 filed
by the petitioner labor union with the Arbitration Branch of the NLRC. In an Order5 dated 20 July 1987, the Labor
Arbiter dismissed the consolidated cases for lack of jurisdiction over the respondents therein, Philippine Amusement
and Gaming Corporation (PAGCOR) and Philippine Casino Operators Corporation (PCOC).
On appeal to the NLRC, the Commission en banc issued a Resolution6 dated 15 November 1988, which dismissed
the separate appeals filed by the petitioner on the ground that the NLRC has no jurisdiction over PAGCOR.
Petitioner then elevated the case to this Court, via a Petition for Review on Certiorari, 7 entitled Casino Labor
Association v. National Labor Relations Commission, Philippine Amusement & Gaming Corporation,
Philippine Casino Operators Corporation and Philippine Special Services Corporation and docketed as G.R.
No. 85922. In a Resolution8 dated 23 January 1989, the Third Division of the Court dismissed the petition for failure
of the petitioner to show grave abuse of discretion on the part of the NLRC.
Petitioner filed a motion for reconsideration, but the same was denied with finality in a 15 March 1989
Resolution.9 The Resolution states, in part:
x x x Any petitions brought against private companies will have to be brought before the appropriate agency or office
of the Department of Labor and Employment.
Based solely on that statement, petitioner filed a Manifestation/Motion10 with the NLRC praying that the records of the
consolidated cases be "remanded to the Arbitration Branch for proper prosecution and/or disposition thereof against
private respondents Philippine Casino Operators Corporation (PCOC) and Philippine Special Services Corporation
(PSSC)."
Acting on the Manifestation/Motion, the NLRC First Division issued an Order11 dated 30 June 1989, which granted
the motion and ordered that the records of the cases be forwarded to the Arbitration Branch for further proceedings.
Respondents PCOC and PSSC filed a motion for reconsideration. In an Order12 dated 22 July 1994, the NLRC First
Division granted the motion, set aside the 30 June 1989 Order for having been issued without legal basis, and
denied with finality the petitioner's Manifestation/Motion. Petitioner's motion for reconsideration was likewise denied
in a Resolution13 dated 28 November 1997.
Petitioner filed a petition for certiorari 14 with this Court asserting that the NLRC First Division committed grave abuse
of discretion in ignoring the mandate of G.R. No. 85922. Petitioner argued that, with the statement "(a)ny petitions
brought against private companies will have to be brought before the appropriate agency or office of the Department
of Labor and Employment," this Court laid down the law of the case and mandated that petitions against respondents
PCOC and PSSC should be brought before the NLRC. By way of resolution,15 this Court referred the case to the CA
in accordance with the ruling in St. Martin Funeral Homes v. NLRC.16
On 22 June 1999, the CA rendered its Decision dismissing the petition for certiorari . The CA found no grave abuse
of discretion on the part of the NLRC First Division when it issued: (a) the 22 July 1994 Order, which set aside its 30
June 1989 Order remanding the case to the Arbitration Branch for further proceedings; and (b) the 28 November
1998 Resolution, which denied petitioner's motion for reconsideration. Petitioner filed a motion for reconsideration,
which the CA denied in its 6 December 1999 Resolution.
Hence, the instant petition for certiorari in which the petitioner raises this sole issue:
CAN THE COURT OF APPEALS IGNORE THE MANDATE OF THE HONORABLE SUPREME COURT'S
RESOLUTION IN G.R. 85922, THAT PETITIONS AGAINST PRIVATE RESPONDENTS PCOC AND PSSC
SHOULD BE TRIED BY THE COMMISSION (NLRC) THRU ITS ARBITRATION BRANCH?
To determine whether the CA acted with grave abuse of discretion correctable by certiorari, it is necessary to resolve
one core issue: whether the Supreme Court, in G.R. No. 85922, mandated that the NLRC assume jurisdiction over
the cases filed against PCOC and PSSC.
The resolution of the case at bar hinges on the intended meaning of the Third Division of the Court when it stated in
its 15 March 1989 Resolution in G.R. No. 85922, viz:
x x x Any petitions brought against private companies will have to be brought before the appropriate agency or office
of the Department of Labor and Employment.
Petitioner considers the foregoing statement as a legal mandate warranting the remand of the consolidated labor
cases to the Arbitration Branch of the NLRC for further proceedings against respondents PCOC and PSSC.
We do not agree.
A court decision must be read as a whole. With regard to interpretation of judgments, Republic v. De Los
Angeles stated:
As a general rule, judgments are to be construed like other written instruments. The determinative factor is the
intention of the court, as gathered from all parts of the judgment itself. In applying this rule, effect must be given to
that which is unavoidably and necessarily implied in a judgment, as well as to that which is expressed in the most
appropriate language. Such construction should be given to a judgment as will give force and effect to every word of
it, if possible, and make it as a whole consistent, effective and reasonable. 17
Hence, a close scrutiny of the full text of the 23 January and 15 March 1989 Resolutions in G.R. No. 85922 sheds
much needed light. In the first Resolution, the Third Division of this Court dismissed the petitioner's case in this wise:
The issue in this case is whether or not the National Labor Relations Commission has jurisdiction over employee-
employer problems in the Philippine Amusement and Gaming Corporation (PAGCOR), the Philippine Casino
Operators Corporation (PCOC), and the Philippine Special Services Corporation (PSSC).
The present Constitution specifically provides in Article IX B, Section 2(1) that "the civil service embraces all
branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or
controlled corporations with original charters." (Emphasis supplied)cralawlibrary
There appears to be no question from the petition and its annexes that the respondent corporations were created by
an original charter, P.D. No. 1869 in relation to P.D. Nos. 1067-A, 1067-C, 1399 and 1632.
In the recent case of National Service Corporation, et al. v. Honorable Third Division, National Labor Relations
Commission, et al. (G.R. No. 69870, November 29, 1988), this Court ruled that subsidiary corporations owned by
government corporations like the Philippine National Bank but which have been organized under the General
Corporation Code are not governed by Civil Service Law. They fall under the jurisdiction of the Department of Labor
and Employment and its various agencies. Conversely, it follows that government corporations created under an
original charter fall under the jurisdiction of the Civil Service Commission and not the Labor Department.
Moreover, P.D. 1869, Section 18, specifically prohibits formation of unions among casino employees and exempts
them from the coverage of Labor Code provisions. Under the new Constitution, they may now form unions but
subject to the laws passed to regulate unions in offices and corporations governed by the Civil Service Law.
CONSIDERING the failure of the petitioner to show grave abuse of discretion on the part of the public respondent,
the COURT RESOLVED to DISMISS the petition.
Thus, in resolving the issue of whether or not the NLRC has jurisdiction over employer-employee relations in
PAGCOR, PCOC and PSSC, the Third Division made the definitive ruling that "there appears to be no question from
the petition and its annexes that the respondent corporations were created by an original charter." The Court
collectively referred to all respondent corporations, including PCOC and PSSC, and held that in accordance with the
Constitution and jurisprudence, corporations with original charter "fall under the jurisdiction of the Civil Service
Commission and not the Labor Department." The Court stated further that P.D. 1869 exempts casino employees
from the coverage of Labor Code provisions and although the employees are empowered by the Constitution to form
unions, these are "subject to the laws passed to regulate unions in offices and corporations governed by the Civil
Service Law." Thus, in dismissing the petition, the ruling of the Third Division was clear - - - it is the Civil Service
Commission, and not the NLRC, that has jurisdiction over the employer-employee problems in PAGCOR, PCOC and
PSSC.
In its motion for reconsideration, petitioner lamented that its complaint might be treated as a "pingpong ball" by the
Department of Labor and Employment and the Civil Service Commission. It argued:
x x x the petitioner will now be in a dilemna (sic) for the reason, that the charter creating PAGCOR expressly
exempts it from the coverage of the Civil Service Laws and therefore the petitioner, will now be in a quandary
whether it will be allowed to prosecute its case against PAGCOR before the Civil Service Commission while its own
charter expressly exempts it from the coverage of the Civil Service Law x x x18
The Third Division denied the motion for reconsideration in a Resolution dated 15 March 1989, which contained the
statement upon which the petitioner's whole case relies. The Court stated:
The petitioner states in its motion for reconsideration that the PAGCOR charter expressly exempts it from the
coverage of the Civil Service Laws and, consequently, even if it has an original charter, its disputes with
management should be brought to the Department of Labor and Employment. This argument has no merit.
Assuming that there may be some exemptions from the coverage of Civil Service Laws insofar as eligibility
requirements and other rules regarding entry into the service are concerned, a law or charter cannot supersede a
provision of the Constitution. The fear that the petitioner's complaint will be rejected by the Civil Service Commission
is unfounded as the Commission must act in accordance with its coverage as provided by the Constitution. Any
petitions brought against private companies will have to be brought before the appropriate agency or office
of the Department of Labor and Employment.
CONSIDERING THE FOREGOING, the COURT RESOLVED to DENY the motion for reconsideration. This DENIAL
is FINAL. (emphasis added)
Petitioner contends that the "private companies" referred to therein pertain to respondents PCOC and PSSC, and
consequently, this Court has laid down the law of the case in G.R. No. 85922 and has directed that the cases against
PCOC and PSSC should be prosecuted before the Department of Labor and Employment or NLRC.
Petitioner's contention is untenable. It is well-settled that to determine the true intent and meaning of a decision, no
specific portion thereof should be resorted to, but the same must be considered in its entirety. 19 Hence, petitioner
cannot merely view a portion of the 15 March 1989 Resolution in isolation for the purpose of asserting its position.
The 23 January 1989 Resolution already ruled on the NLRC's lack of jurisdiction over all the respondents in the case
- PAGCOR, PCOC and PSSC. The Third Division neither veered away nor reversed such ruling in its 15 March 1989
Resolution to petitioner's motion for reconsideration. A reading of the two aforementioned resolutions clearly shows
that the phrase "private companies" could not have referred to PCOC and PSSC for that would substantially alter the
Court's ruling that petitioner's labor cases against the respondents are cognizable by the Civil Service Commission,
and not by the NLRC. In its assailed decision, the Court of Appeals ratiocinated:
Evidently, the [March 15] Resolution containing the questioned pronouncement did not give legal mandate to
petitioner to file its Petition with the Department of Labor and Employment or any of its agencies. On the contrary, the
Resolution decided with finality that petitions brought against the PAGCOR or similar agencies/instrumentalities of
the government must be filed with the Civil Service Commission which has jurisdiction on the matter. The questioned
pronouncement, to Our mind, was made only to illustrate the instance when jurisdiction is instead conferred on the
Department of Labor vis - à-vis the Civil Service Commission; that is, when the petitions are filed [against] private
companies.
Finally, as pointed out by the Office of the Solicitor General, the subject matter of the pronouncement in question is
"any petition" not the petition filed by petitioners. Likewise, the petition must be one which is brought against "private
companies" not against private respondents. Apparently, the abovequoted pronouncement is intended to be a
general rule that will govern petitions filed against private companies. It is not intended to be a specific rule that will
apply only to the petition filed by herein petitioners. Where the law makes no distinctions, one does not distinguish.
A fortiori, where the questioned pronouncement makes no distinctions, one does not distinguish.
We agree with the CA. The statement that "(a)ny petitions brought against private companies will have to be brought
before the appropriate agency or office of the Department of Labor and Employment," upon which petitioner's entire
case relies, is of no consequence. It is obiter dictum.
In its memorandum,20 petitioner presents a second issue not otherwise raised in its petition for certiorari, contending
that respondents waived their rights to controvert petitioner's valid and just claims when they filed a motion to dismiss
the consolidated cases with the labor arbiter on the ground of lack of jurisdiction. However, in our 20 August 2003
Resolution requiring the parties to submit their respective memoranda, we specifically stated that "no new issues
may be raised by a party in his/its Memorandum." Moreover, petitioner, in support of this additional issue, presents
its arguments on the merits of the consolidated labor cases. This Court is not a trier of facts. In Santiago v.
Vasquez, we reiterated:
We discern in the proceedings in this case a propensity on the part of petitioner, and, for that matter, the same may
be said of a number of litigants who initiate recourses before us, to disregard the hierarchy of courts in our judicial
system by seeking relief directly from this Court despite the fact that the same is available in the lower courts in the
exercise of their original or concurrent jurisdiction, or is even mandated by law to be sought therein. This practice
must be stopped, not only because of the imposition upon the precious time of this Court but also because of the
inevitable and resultant delay, intended or otherwise, in the adjudication of the case which often has to be remanded
or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the
issues since this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this Court will not entertain
direct resort to it unless the redress desired cannot be obtained in the appropriate courts or where exceptional and
compelling circumstances justify availment of a remedy within and calling for the exercise of our primary
jurisdiction.21
In this case, the Civil Service Commission is the proper venue for petitioner to ventilate its claims.
The Court is not oblivious to petitioner's plea for justice after waiting numerous years for relief since it first filed its
claims with the labor arbiter in 1986. However, petitioner is not completely without fault. The 23 January 1989
Resolution in G.R. No. 85922, declaring the lack of jurisdiction by the NLRC over PAGCOR, PCOC and PSSC,
became final and executory on March 27, 1989. The petitioner did not file a second motion for reconsideration nor
did it file a motion for clarification of any statement by the Court which petitioner might have thought was ambiguous.
Neither did petitioner take the proper course of action, as laid down in G.R. No. 85922, to file its claims before the
Civil Service Commission. Instead, petitioner pursued a protracted course of action based solely on its erroneous
understanding of a single sentence in the Court's resolution to a motion for reconsideration.
IN VIEW WHEREOF, the instant petition for certiorari is DISMISSED. The assailed 22 June 1999 Decision and 6
December 1999 Resolution of the Court of Appeals in CA-G.R. SP No. 50826 are AFFIRMED.
SO ORDERED.
G.R. No. 155146 January 24, 2006
DR. PERLA A. POSTIGO, FRANCISCO F. ALMACEN, NARCISO M. ALMENDRAL, NENA E. BASTO, JUANITO
M. BERNARDINO, ADELFA B. CRESCINI, MARCIAL R. DE JESUS, DR. PEDRO LOPEZ DE LEON, PREMIA M.
DUMLAO, DAVID F. ESTACIO, LINA G. ESTRELLA, GENOVEVA V. HERNANDEZ, PEDRO A. PARIL, PEDRO H.
SINGSON, ALBERTO A. TUDIO, MARIETTA B. ULIT, LOURDES C. LEGASPI, PEDRO PEROCHO, LANI
CORTEZ, GUADALUPE B. MACATANGAY, DOLORES C. FERNANDEZ, LUMINOSA G. REYNO, ESTRELLA P.
SURATOS, LYDIA E. DE BOSCH, ZENAIDA C. CARRIEDO, DR. FINAFLOR C. TAN, Petitioners,
vs.
PHILIPPINE TUBERCULOSIS SOCIETY, INC., Respondent.
DECISION
QUISUMBING, J.:
This petition assails the Decision1 dated June 13, 2002 of the Court of Appeals in CA-G.R. SP No. 59597, which set
aside the Resolution2 dated January 31, 2000 of the National Labor Relations Commission (NLRC) in NLRC NCR
CN 00-02-02148-99. The NLRC had dismissed the respondent’s appeal from the Decision of the Labor Arbiter, who
ordered the payment of retirement benefits under Republic Act No. 7641 to petitioners. This petition likewise assails
the Resolution3 dated September 3, 2002 of the Court of Appeals denying petitioners’ motion for reconsideration.
The antecedent facts, as summarized by the Court of Appeals and borne by the records, are as follows:
Petitioners Dr. Perla A. Postigo, et al., were regular employees of the respondent Philippine Tuberculosis Society,
Inc. (PTSI). They retired on various dates from 1996 to 1998. Upon retirement from service, some of the petitioners
who were compulsory members of the Government Service Insurance System (GSIS) obtained retirement benefits
from the GSIS.
At the time the petitioners retired, Article 287 of the Labor Code had been amended by Republic Act No. 7641. 4Rep.
Act No. 7641 granted retirement pay to qualified employees in the private sector, in the absence of any retirement
plan or agreement with the company. As the respondent did not have a retirement plan for its employees, aside from
its contribution to the GSIS, petitioners claimed from the respondent their retirement benefits under Rep. Act No.
7641. The respondent denied their claims on the ground that the accommodation extended by the GSIS to the
petitioners removed them from the coverage of the law.
The petitioners then sought the opinion of the Bureau of Working Conditions (BWC) of the Department of Labor and
Employment regarding their entitlement to the retirement benefits provided in Rep. Act No. 7641. 5 The BWC
confirmed their entitlement.6 The same opinion was rendered and submitted by the respondent’s legal counsel, Atty.
Rene V. Sarmiento, to its Board of Directors.7 Despite this, respondent PTSI refused to pay the petitioners their
retirement benefits.
The petitioners then filed a complaint before the Labor Arbiter.
In a Decision8 dated June 30, 1999, the Labor Arbiter declared petitioners entitled to retirement benefits under Rep.
Act No. 7641. However, one petitioner, Dr. Finaflor C. Tan who was awarded her terminal leave pay, was not
included in the award of retirement benefits.
Aggrieved, respondent PTSI appealed to the NLRC. Instead of posting the required cash or surety bond equivalent
to the amount of the award, the respondent filed a Motion to Reduce Bond on the ground that the amount awarded
by the Labor Arbiter was erroneous. On January 31, 2000, the NLRC dismissed the appeal for failure to post the
required cash or surety bond.
Undaunted, the respondent elevated the matter to the Court of Appeals. On June 13, 2002, the CA reversed the
NLRC’s decision in this wise:
Indeed, in several occasions, the Supreme Court has cautioned the NLRC to give Article 223 of the Labor Code, as
amended, particularly the provisions on requiring a bond on appeals involving monetary awards, a liberal
interpretation in line with the desired objective of resolving controversies on the merits.
Hence, considering the timeliness of the filing of the motion to reduce the appeal bond and the meritorious ground
upon which it relies, We believe and so hold that the legal requirement of posting an appeal bond has been
substantially satisfied. Public respondent acted with grave abuse of discretion in dismissing the appeal without
passing upon the motion to reduce the appeal bond.
WHEREFORE, the petition is hereby GRANTED. Resolutions dated 31 January 2000 and 24 May 2000 in NLRC-
NCR CN 00-02-02148-99 of public respondent National Labor Relations Commission are hereby SET ASIDE. The
NLRC is directed to act on the Motion to Reduce Bond and to give due course to the Appeal.
SO ORDERED.9
The petitioners now submit the following issues for our consideration:
I. Whether or not the remand of the case to the NLRC would only further delay the resolution of this case.
II. Whether or not the Honorable Court of Appeals decided the instant case in accordance with law and
applicable jurisprudence and based on the evidence on record for having failed to apply the jurisprudential
precepts that:
a. errors in the computation of the monetary award are properly a subject of appeal and should
be ventilated at the appropriate time, not in a mere motion to reduce bond; and
b. the posting of a bond is an indispensable requirement to perfect an employer’s appeal.
III. Whether or not Petitioners are entitled to the benefits of the Retirement Pay Law.
IV. Whether or not Petitioners are entitled to interest on their retirement benefits for the unjustified
withholding thereof.
V. Whether or not Petitioner Dr. Tan should be made similarly entitled to her retirement pay, which was
inadvertently excluded by the Labor Arbiter, pursuant to the timely motion to render judgment nunc pro
tuncshe filed before the Labor Arbiter and which was consistently raised all the way up to this Honorable
Court, in order to effect a complete disposition of the instant case. 10
In short, petitioners raise for our resolution these issues: (1) Did the Court of Appeals err in granting the petition and
directing the NLRC to act on the Motion to Reduce Bond and to give due course to the appeal? and (2) Are the
petitioners entitled to benefits under Rep. Act No. 7641?
On the first issue, petitioners contend that (1) errors in the computation of the monetary award are properly a subject
of appeal and should be ventilated at the appropriate time, not in a mere motion to reduce bond; and (2) the posting
of a bond is an indispensable requirement to perfect an employer’s appeal.
Respondent counters that in case the monetary award is being disputed, an appeal may still be filed without the
appeal bond, provided that a motion to reduce bond is filed within the reglementary period.
We think that the Court of Appeals did not err in granting the petition and holding that there was substantial
compliance in the posting of a cash or surety bond. We likewise find Nationwide Security and Allied Services, Inc. v.
NLRC11 and Rosewood Processing, Inc. v. NLRC12 inapplicable to this case.
In Nationwide Security, the petitioners therein filed a motion to reduce bond instead of an appeal or surety bond. The
NLRC denied the motion on the grounds that petitioners’ alleged inability to post the bond was without basis, and to
grant the motion on the grounds stated therein would be tantamount to ruling on the merits. In affirming the decision
of the NLRC, the Court noted that petitioners had funds from its other businesses to post the required bond. Further,
the errors raised in the motion dealt with matters that would go into the merits of the case and were thus more
appropriate in an appeal.
In this case, respondent deferred the posting of the surety bond in view of the alleged erroneous computation by the
Labor Arbiter of the monetary award. While the Labor Arbiter awarded P5,480,484.2513 as retirement benefits,
only P5,072,277.73,14 according to the respondent’s computation was due and owing to the petitioners. Since the
motion raised a pure mathematical error, the same may be resolved without going into the merits of the case.
In Rosewood, the petitioner therein filed a motion to reduce the bond with the appeal bond, albeit not in the amount
equivalent to the monetary award in the judgment appealed from. The Court held that the NLRC gravely abused its
discretion in dismissing the appeal since a consideration of the merits appearing in the appeal as well as the filing of
the appeal bond show that there was substantial compliance with the rules governing appeal.
Here, aside from the fact that the filing of the motion was justified, the respondent immediately submitted
a supersedeas bond15 with its motion for reconsideration of the NLRC resolution dismissing its appeal. In Ong v.
Court of Appeals,16 we ruled that the aggrieved party may file the appeal bond within the ten-day reglementary period
following the receipt of the resolution of the NLRC to forestall the finality of such resolution. 17 Hence, while the appeal
of a decision involving a monetary award in labor cases may be perfected only upon the posting of a cash or surety
bond and the posting of the bond is an indispensable requirement to perfect such an appeal, a relaxation of the
appeal bond requirement could be justified by substantial compliance with the rule.
Article 223 of the Labor Code provides that an appeal from a decision of the Labor Arbiter must be made within ten
calendar days from receipt of a copy of the decision by the aggrieved party; and if the decision involves a monetary
award, an appeal by the aggrieved party may be perfected only upon the posting of a cash or surety bond issued by
a reputable bonding company duly accredited by the NLRC in the amount equivalent to the monetary award. In
addition, Section 6, Rule VI of the New Rules of Procedure of the NLRC provides that the Commission may, in
justifiable cases and upon motion of the aggrieved party, reduce the amount of the bond. Further, the filing of the
motion to reduce bond does not stop the running of the period to perfect appeal.
Time and again, this Court has ruled that while the above-mentioned rule treats the filing of a cash or surety bond in
the amount equivalent to the monetary award in the judgment appealed from, as a jurisdictional requirement to
perfect an appeal, the bond requirement on appeals involving awards is sometimes given a liberal interpretation in
line with the desired objective of resolving controversies on the merits.18
The special circumstances in this case, upon which the motion to reduce the bond was predicated, justify the
relaxation of the appeal bond requirement. However, considering that the claim for retirement benefits was made
sometime in 1999 to support the petitioners during the twilight years of their lives, there is no doubt that a remand of
the case to the NLRC will only unduly delay the determination of their entitlement to such benefits. Moreover, since
the case calls for the resolution of a question of law, we consider it more appropriate to resolve the appeal at this
juncture, rather than remand the case to the NLRC.
We come now to the second issue. The petitioners contend that despite their compulsory membership in the GSIS,
they are still covered by Rep. Act No. 7641 for the following reasons: (1) the respondent is registered with the
Securities and Exchange Commission as a non-stock and non-profit corporation; hence, it is a private entity and its
employees are employees in the private sector; and (2) the petitioners are not included in the exemptions from
coverage of Rep. Act No. 7641.
Respondent PTSI counters that as an employer in the public sector, it is not covered by Rep. Act No. 7641 which
applies only to employees in the private sector. It relies on Section 3, Rule I of the Amended Rules Implementing
Title II, Book IV of the Labor Code, to wit:
SEC. 3. Employer–(a) The term shall mean any person natural or juridical, domestic or foreign, who carries on in the controlled corporation, and petitioners are employees in the public sector, then, they should have been covered by
Philippines any trade, business, industry, undertaking or activity of any kind and uses the services of another person said law. The truth, however, is that, the respondent is a non-profit but private corporation organized under the
who is under his orders as regards the employment. Corporation Code, and the petitioners are covered by the Labor Code and not by the Civil Service Law.

(b) An employer shall belong to either:
(1) The public sector covered by the GSIS, comprising the National Government, including government-
owned or controlled corporations, the Philippine Tuberculosis Society, the Philippine National Red Cross,
and the Philippine Veterans Bank; or
(2) The private sector covered by the SSS, comprising all employers other than those defined in the
immediately preceding paragraph.
From the foregoing, it is clear to us that the petitioners are employees in the private sector, hence entitled to the
benefits of Rep. Act No. 7641.
Even assuming that by virtue of their compulsory inclusion in the GSIS, the petitioners became employees in the
public sector, they are still entitled to the benefits of Rep. Act No. 7641 since they are not covered by the Civil
Service Law and its regulations. This much is certain upon reading the implementing rules of Title II, Book VI of the
Labor Code as afore-cited as well as the Labor Advisory on Retirement Pay Law.21 Under the said advisory, the
coverage of, as well as the exclusion from, Rep. Act No. 7641 has been delineated as follows:

RA 7641 or the Retirement Pay Law shall apply to all employees in the private sector, regardless of their position,
Respondent’s reliance on the afore-quoted rules is unfounded. The definition of a public sector employer as quoted
designation or status and irrespective of the method by which their wages are paid. They shall include part-time
above is relevant only for purposes of coverage under the Employees’ Compensation and State Insurance Fund.
employees, employees of service and other job contractors and domestic helpers or persons in the personal service
Instead, it is the implementing rules of Title II, Book VI of the Labor Code, which provides for the coverage and
of another.
exemptions of retirement benefits. Thus:

The law does not cover employees of retail, service and agricultural establishments or operations employing not
SECTION 1. General Statement on Coverage. – This Rule shall apply to all employees in the private sector,
more than (10) employees or workers and employees of the National Government and its political subdivisions,
regardless of their position, designation or status and irrespective of the method by which their wages are paid,
including Government-owned and/or controlled corporations, if they are covered by the Civil Service Law and its
except to those specifically exempted under Section 2 hereof. As used herein, the term "Act" shall refer to Republic
regulations. (Underscoring ours.)
Act No. 7641 which took effect on January 7, 1993.

Neither do we find merit in the respondent’s argument that the rationale behind the enactment of Rep. Act No. 7641
SEC. 2. Exemption. – This Rule shall not apply to the following employees:
justifies the exclusion of employees in the public sector, who are already enjoying retirement benefits under the GSIS
law, from the New Retirement Law.
2.1 Employees of the National Government and its political subdivisions, including Government-owned and/or –
controlled corporations, if they are covered by the Civil Service Law and its regulations.
We direct the respondent’s attention to Section 2 of Rep. Act No. 7641, to wit:

...
SEC. 2. Nothing in this Act shall deprive any employee of benefits to which he may be entitled under existing laws or
company policies or practices.
Having determined the applicable implementing rules, we now proceed to resolve whether the respondent is a
private corporation or a public corporation; and consequently, whether the petitioners are employees in the private
In addition, Rule II of the Rules Implementing Book VI of the Labor Code provides as follows:
sector or in the public sector.

SEC. 8. Relation to agreements and regulations. – Nothing in this Rule shall justify an employer from withdrawing
On this score, the case of Feliciano v. Commission on Audit,19 finds strong relevance. Although with different factual
or reducing any benefits, supplements or payments as provided in existing laws, individual or collective agreements
circumstances, the Court discussed therein the two classes of corporations recognized by the 1987 Constitution. The
or employment practices or policies.
first refers to private corporations created under a general law; the second refers to government-owned or controlled
corporations created by special charters. We also reiterated that under Section 14 of the Corporation Code, "[a]ll
corporations organized under this Code shall file with the Securities and Exchange Commission articles of ...
incorporation …"
In Juco v. NLRC,22 we clarified that employees of government-owned and controlled corporations with special
The respondent was incorporated on March 11, 1960 as a non-profit, benevolent and non-stock corporation under charters are covered under the Civil Service. On the other hand, employees of government-owned and controlled
the Corporation Code.20 Having been created under the general corporation law instead of a special charter, we hold corporations under the Corporation Code are governed by the provisions of the Labor Code.
that the respondent is a private and not a governmental corporation. More so, Section 2(1), Article IX(B) of the 1987
Constitution provides:
The Philippine Tuberculosis Society, Inc. (PTSI) belongs to the latter category and, therefore, covered by Rep. Act
No. 7641 which is an amendment to the Labor Code. The accommodation under Rep. Act No. 1820 extending GSIS
SECTION 2. (1) The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the coverage to PTSI employees did not take away from petitioners the beneficial coverage afforded by Rep. Act No.
Government, including government-owned or controlled corporations with original charters. 7641. Hence, the retirement pay payable under Article 287 of the Labor Code as amended by Rep. Act No. 7641
should be considered apart from the retirement benefit claimable by the petitioners under the social security law or,
as in this case, the GSIS law.
Extant on the records is the respondent’s admission that although its employees are compulsory members of the
GSIS, said employees are not governed by the Civil Service Law. If the respondent is truly a government-owned or
As to the alleged prolonged refusal by the respondent to pay the petitioners their retirement benefits, we do not think
that the respondent’s stance was entirely in bad faith. The respondent harbored the honest belief that their
compulsory coverage in the GSIS converted it into a public corporation excluded from the coverage of Rep. Act No.
7641. As noted by this Court, the respondent even filed a supersedeas bond, albeit belatedly, with its motion for
reconsideration of the NLRC resolution dismissing its appeal. Such act only demonstrates that the respondent filed
the appeal in good faith. We could not speculate and say that respondent did not intend to pay the petitioners their
retirement benefits in case the appeal is dismissed.
On the matter of petitioner Dr. Finaflor C. Tan, records show she has two causes of action: (1) non-payment of
terminal leave pay; and (2) non-payment of retirement benefits.23 While the Labor Arbiter ruled that she is entitled to
the commutation into cash of her unused leave credits which is the equivalent of her terminal leave pay, the former
did not include her in the award of retirement benefits. This was properly raised in the Motion to Render
Judgment Nunc Pro Tunc24 filed by the petitioners on October 29, 1999 before the NLRC. We see no cogent reason
why she should be excluded from the over-all award of retirement benefits considering that she has participated in
the proceedings before the Labor Arbiter.
WHEREFORE, this petition is PARTIALLY GRANTED. The Decision dated June 13, 2002 of the Court of Appeals in
CA-G.R. SP No. 59597, directing the NLRC to act on the Motion to Reduce Bond and to give due course to the
Appeal, as well as its Resolution denying the petitioners’ motion for reconsideration, are MODIFIED.
Consequently, it is DECLARED that the petitioners are entitled to retirement benefits under Rep. Act No. 7641. In
addition to retirement benefits, petitioner Dr. Finaflor C. Tan is entitled to the commutation into cash of her unused
leave credits which is the equivalent of her terminal leave pay. Likewise, the petitioners are entitled to attorney’s
fees, equivalent to 10% of the total monetary award.
Let this case be remanded to the Labor Arbiter for the computation of the retirement benefits and terminal leave pay
above-mentioned. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 129049. August 6, 1999.]
BALTAZAR G. CAMPOREDONDO, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION (NLRC), Fifth
Division, Cagayan de Oro City, THE PHILIPPINE NATIONAL RED CROSS (PNRC), represented by
GOVERNOR ROMEO C. ESPINO and DR. CELSO SAMSON, Respondents.
DECISION
PARDO, J.:
At issue in this case is whether the Philippine National Red Cross (PNRC for short) is a government owned and
controlled corporation, or it has been "impliedly converted to a private organization" subject to the jurisdiction of labor
tribunals in a complaint filed by petitioner, a former PNRC chapter administrator in Surigao del Norte, for illegal
dismissal and damages, as he was forced to "retire" after he was required to restitute shortages and unremitted
collections in the total sum of P135,927.78.
Having obviously no merit, we dismiss the petition.
All suitors must come to court with clean hands. This is especially true of paid staff of the Philippine National Red
Cross. Like its unpaid volunteers, they must be men of unquestioned honesty and integrity, serving in selfless
manner to aid the sick and wounded of armed forces in time of war, acting in voluntary relief in time of peace and
war, maintaining a system of national and international relief in meeting emergency relief needs caused by typhoons,
floods, fires, earthquakes, and other natural disasters, and promoting such service in time of peace and war to
improve the health, safety and welfare of the Filipino people. 1 Paid staff of the PNRC are government employees
who are members of the Government Service Insurance System and covered by the Civil Service Law. Unlike
government service in other agencies, Red Cross service demands of its paid staff uberrima fides, the utmost good
faith and dedication to work.chanroblesvirtuallawlibrary:red
Since 1980, petitioner was employed with the PNRC, and until his early "retirement" on December 15, 1995, he was
administrator of the Surigao del Norte Chapter, Philippine National Red Cross. 2
In July, 1995, a field auditor of the PNRC conducted an audit of the books of account of the Surigao del Norte
Chapter, headed by petitioner and found him short in the total sum of P109,000.00. 3
On November 21, 1995, Dr. Celso Samson, Secretary General of the PNRC wrote petitioner requiring him to restitute
within seventy two (72) hours from notice, the total sum of P135,927.78, representing cash shortage, technical
shortage and unremitted collections. 4
On December 15, 1995, petitioner applied for early retirement from the service, and later wrote Dr. Samson
requesting for a re-audit by an independent auditor of his accounts. However, Dr. Samson denied the request. 5
On May 28, 1996, petitioner filed with the National Labor Relations Commission, Sub-Regional Arbitration Branch X,
Butuan City, a complaint for illegal dismissal, damages and underpayment of wages against the Philippine National
Red Cross and its key officials. 6
On June 14, 1996, respondent Philippine National Red Cross filed with the Surigao del Norte provincial office,
Department of Labor and Employment, a motion to dismiss the complaint for lack of jurisdiction over the subject
matter of the case because the PNRC is a government corporation whose employees are members of the
Government Service Insurance System (GSIS), and embraced within the Civil Service Law and regulations. 7
On July 25, 1996, petitioner filed an opposition to motion to dismiss arguing that there was between the PNRC and
its duly appointed paid staff, an employer-employee relationship, governed by the Labor Code of the Philippines. 8
On October 11, 1996, the Labor Arbiter issued an order dismissing the complaint for lack of jurisdiction, finding that
the Philippine National Red Cross is a government corporation with an original charter, having been created by
Republic Act No. 95. 9
On November 12, 1996, the Labor Arbiter denied petitioner’s motion for reconsideration filed on October 14, 1996.
10
On November 20, 1996, petitioner filed a notice of appeal and appeal memorandum with the National Labor
Relations Commission. 11
On March 21, 1997, the National Labor Relations Commission, Fifth Division, issued a resolution dismissing the
appeal and confirming the decision of the Labor Arbiter that dismissed petitioner’s complaint for lack of jurisdiction.
12
Hence, this recourse.
On July 7, 1997, we resolved to require respondents to comment on the petition within ten (10) days from notice. 13
On August 7, 1997, respondent Philippine National Red Cross filed its comment. 14 On November 7, 1997, the
Solicitor General filed its comment. 15
Resolving the issue set out in the opening paragraph of this opinion, we rule that the Philippine National Red Cross
(PNRC) is a government owned and controlled corporation, with an original charter under Republic Act No. 95, as
amended. The test to determine whether a corporation is government owned or controlled, or private in nature is
simple. Is it created by its own charter for the exercise of a public function, or by incorporation under the general
corporation law? Those with special charters are government corporations subject to its provisions, and its
employees are under the jurisdiction of the Civil Service Commission, and are compulsory members of the
Government Service Insurance System. The PNRC was not "impliedly converted to a private corporation" simply
because its charter was amended to vest in it the authority to secure loans, be exempted from payment of all duties,
taxes, fees and other charges of all kinds on all importations and purchases for its exclusive use, on donations for its
disaster relief work and other services and in its benefits and fund raising drives, and be allotted one lottery draw a
year by the Philippine Charity Sweepstakes Office for the support of its disaster relief operation in addition to its
existing lottery draws for blood program.
Having served in the Philippine National Red Cross for a number of years since his initial employment, he must know
that it is a government corporation with its own charter and that he was covered by compulsory membership in the
Government Service Insurance System, which is why he could apply, as he did, for "early" retirement from the
service under Presidential Decree No. 1146 or Republic Act No. 1616. 16
WHEREFORE, the Court hereby DISMISSES the petition, and AFFIRMS the ruling of the National Labor Relations
Commission.
Double costs taxed against petitioner.chanrobles virtual lawlibrary
SO ORDERED.
G.R. No. L-49677 May 4, 1989
TRADE UNIONS OF THE PHILIPPINES AND ALLIED SERVICES, petitioner,
vs.
NATIONAL HOUSING CORPORATION and ATTY. VIRGILIO SY, as Officer-in-Charge of the Bureau of Labor
Relations, respondents.
REGALADO, J.:
The employees of the public sector comprise the largest bloc of workers in our national work force. Governmental
bureaucracy is continually being reorganized to cope with the growing complexity of the problems and needs of
political and administrative governance. As the increase in the number of government employees grows space, the
need to enhance their welfare correspondingly becomes more imperative. While it may be assumed that the
Government is exerting efforts to advance the interests of its employees, it is quite understandable that the
employees themselves should actively seek arrangements where by they can participate more meaningfully in
management and employment relationships. There is, thus, a proliferation of unions or employees' organizations,
each seeking concomitant representational recognition.
The antecedent facts which led to the filing of this special civil action for certiorari are clear and undisputed. The
juridical status and relevant circumstances of respondent corporation have been established in a case of illegal
dismissal filed against it, as previously decided by the Court and hereinafter discussed. However, submitted this time
for Our resolution is a controversy on the propriety of and requirements for certification elections in government-
owned or controlled corporations like the respondent.
Respondent National Housing Corporation (hereinafter referred to as NHC) is a corporation organized in 1959 in
accordance with Executive Order No. 399, otherwise known as the Uniform Charter of Government Corporations,
dated January 1, 1951. Its shares of stock are and have been one hundred percent (100%) owned by the
Government from its incorporation under Act 459, the former corporation law. The government entities that own its
shares of stock are the Government Service Insurance System, the Social Security System, the Development Bank
of the Philippines, the National Investment and Development Corporation and the People's Homesite and Housing
Corporation. 1 Petitioner Trade Unions of the Philippines and Allied Services (TUPAS, for brevity) is a legitimate labor
organization with a chapter in NHC.
On July 13, 1977, TUPAS filed a petition for the conduct of a certification election with Regional Office No. IV of the
Department of Labor in order to determine the exclusive bargaining representative of the workers in NHC. It was
claimed that its members comprised the majority of the employees of the corporation. 2 The petition was dismissed
by med-arbiter Eusebio M. Jimenez in an order, dated November 7, 1977, holding that NHC "being a government-
owned and/or controlled corporation its employees/workers are prohibited to form, join or assist any labor
organization for purposes of collective bargaining pursuant to Section 1, Rule II, Book V of the Rules and
Regulations Implementing the Labor Code." 3
From this order of dismissal, TUPAS appealed to the Bureau of Labor Relations 4 where, acting thereon in BLR Case
No. A-984-77 (RO4-MED-1090-77), Director Carmelo C. Noriel reversed the order of dismissal and ordered the
holding of a certification election. 5 This order was, however, set aside by Officer-in-Charge Virgilio S.J. Sy in his
resolution of November 21, 1978 6 upon a motion for reconsideration of respondent NHC.
In the instant petition for certiorari, TUPAS seeks the reversal of the said resolution and prays that a certification
election be held among the rank and file employees of NHC.
In retrospect, it will be recalled that in a former case of illegal dismissal involving the same respondent
corporation, 7We had ruled that the employees of NHC and of other government owned or controlled corporations
were governed by civil service laws, rules and regulations pursuant to the 1973 Constitution which provided that "the
civil service embraces every branch, agency, subdivision and instrumentality of the government, including
government-owned or controlled corporations." 8
It was therein stressed that to allow subsidiary corporations to be excluded from the civil service laws would be to
permit the circumvention or emasculation of the above-quoted constitutional provision. As perceptively analyzed
therein, "(i)t would be possible for a regular ministry of government to create a host of subsidiary corporations under
the Corporation Code funded by a willing legislature. A government-owned corporation could create several
subsidiary corporations. These subsidiary corporation rations would enjoy the best of two worlds. Their officials and
employees would be privileged individuals, free from the strict accountability required by the Civil Service Decree and
the regulations of the Commission on Audit. Their incomes would not be subject to the competitive restraints of the
open market nor to the terms and conditions of civil service employment."
The rule, however, was modified in the 1987 Constitution, the corresponding provision whereof declares that "(t)he
civil service embraces all branches, subdivisions, instrumentalities and agencies of the government, including
government-owned or controlled corporations with original charters." 9
Consequently, the civil service now covers only government owned or controlled corporations with original or
legislative charters, that is those created by an act of Congress or by special law, and not those incorporated under
and pursuant to a general legislation. As We recently held —
..., the situations sought to be avoided by the 1973 Constitution and expressed by this Court in
the National Housing Corporation case ... appear relegated to relative insignificance by the 1987
Constitutional provision that the Civil Service embraces government-owned controlled
corporations with original charters and therefore, by clear implication, the Civil Service does not
include government-owned or controlled corporations which are organized as subsidiaries of
government-owned or controlled corporations under the general corporation law. 10
While the aforecited cases sought different reliefs, that is, reinstatement consequent to illegal dismissal, the same lis
mota determinative of the present special civil action was involved therein.
The workers or employees of NHC undoubtedly have the right to form unions or employees' organizations. The right
to unionize or to form organizations is now explicitly recognized and granted to employees in both the governmental
and the private sectors. The Bill of Rights provides that "(t)he right of the people, including those employed in the
public and private sectors, to form unions, associations or societies for purposes not contrary to law shall not be
abridged" 11
This guarantee is reiterated in the second paragraph of Section 3, Article XIII, on Social Justice and Human Rights,
which mandates that the State "shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with law ...."
Specifically with respect to government employees, the right to unionize is recognized in Paragraph (5), Section 2, order the conduct of certification election and shall certify the winner as the exclusive representative of the rank-and-
Article IX B 12 which provides that "(t)he right to self-organization shall not be denied to government employees." The file employees in said organizational unit."
rationale of and justification for this innovation which found expression in the aforesaid provision was explained by its
proponents as follows:
Parenthetically, note should be taken of the specific qualification in the Constitution that the State "shall guarantee
the rights of all workers to self-organization, collective bargaining, and peaceful concerted activities, including the
... The government is in a sense the repository of the national sovereignty and, in that respect, it right to strike in accordance with law" and that they shall also participate in policy and decision-making processes
must be held in reverence if not in awe. It symbolizes the unity of the nation, but it does perform affecting their rights and benefits as may be provided by law." 14 (Emphasis supplied.)
a mundane task as well. It is an employer in every sense of the word except that terms and
conditions of work are set forth through a Civil Service Commission. The government is the
ON THE FOREGOING CONSIDERATIONS, the assailed resolution of the Bureau of Labor Relations, dated
biggest employer in the Philippines. There is an employer-employee relationship and we all
November 21, 1978, is ANNULLED and SET ASIDE and the conduct of a certification election among the affected
know that the accumulated grievances of several decades are now beginning to explode in our
employees of respondent National Housing Corporation in accordance with the rules therefor is hereby GRANTED.
faces among government workers who feel that the rights afforded by the Labor Code, for
example, to workers in the private sector have been effectively denied to workers in government
in what looks like a grotesque, (sic) a caricature of the equal protection of the laws. For example, SO ORDERED.
... there were many occasions under the old government when wages and cost of living
allowances were granted to workers in the private sector but denied to workers in the
government for some reason or another, and the government did not even state the reasons G.R. No. 178762 June 16, 2010
why. The government employees were being discriminated against. As a general rule, the
majority of the world's countries now entertain public service unions. What they really add up to LUZVIMINDA A. ANG, Petitioner,
is that the employees of the government form their own association. Generally, they do not vs.
bargain for wages because these are fixed in the budget but they do acquire a forum where, PHILIPPINE NATIONAL BANK, Respondent.
among other things, professional and self-development is (sic) promoted and encouraged. They
also act as watchdogs of their own bosses so that when graft and corruption is committed,
generally, it is the unions who are no longer afraid by virtue of the armor of self-organization that DECISION
become the public's own allies for detecting graft and corruption and for exposing it.... 13
ABAD, J.:
There is, therefore, no impediment to the holding of a certification election among the workers of NHC for it is clear
that they are covered by the Labor Code, the NHC being a government-owned and/or controlled corporation without This case is about the dismissal of an employee for offenses committed during her employment in a government-
an original charter. Statutory implementation of the last cited section of the Constitution is found in Article 244 of the owned corporation but which offenses were discovered after the privatized corporation rehired her to work for it.
Labor Code, as amended by Executive Order No. 111, thus:

The Facts and the Case

... Right of employees in the public service — Employees of the government corporations
established under the Corporation Code shall have the right to organize and to bargain
collectively with their respective employers. All other employees in the civil service shall have the
right to form associations for purposes not contrary to law.
The records do not show that supervening factual events have mooted the present action. It is meet, however, to
also call attention to the fact that, insofar as certification elections are concerned, subsequent statutory
developments have rendered academic even the distinction between the two types of government-owned or
controlled corporations and the laws governing employment relations therein, as hereinbefore discussed. For,
whether the employees of NHC are covered by the Labor Code or by the civil service laws, a certification election
may be conducted.
For employees in corporations and entities covered by the Labor Code, the determination of the exclusive bargaining
representative is particularly governed by Articles 255 to 259 of said Code. Article 256 provides for the procedure
when there is a representation issue in organized establishments, while Article 257 covers unorganized
establishments. These Labor Code provisions are fleshed out by Rules V to VII, Book V of the Omnibus
Implementing Rules.
With respect to other civil servants, that is, employees of all branches, subdivisions, instrumentalities and agencies of
the government including government-owned or controlled corporations with original charters and who are, therefore,
covered by the civil service laws, the guidelines for the exercise of their right to organize is provided for under
Executive Order No. 180. Chapter IV thereof, consisting of Sections 9 to 12, regulates the determination of the "sole
and exclusive employees representative"; Under Section 12, "where there are two or more duly registered
employees' organizations in the appropriate organization unit, the Bureau of Labor Relations shall, upon petition
In her Position Paper,1 petitioner Luzviminda A. Ang (Ang) claimed that respondent Philippine National Bank (PNB),
then a government-owned corporation, hired her on December 4, 1967 as a probationary clerk. But she rose from
the ranks, eventually becoming an Assistant Department Manager I, a position she held when the PNB was
privatized on May 26, 1996 and when she, like her co-employees, was deemed automatically retired. The bank
computed Ang’s gratuity benefits, the monetary value of her leave credits, and the other benefits due her and cleared
her of any accountability.
But the PNB re-employed Ang as Assistant Manager effective on May 27, 1996 and assigned her in its Tuguegarao,
Cagayan Branch.2 Less than four months later, however, or on September 3, 1996 the PNB administratively charged
her with serious misconduct and willful breach of trust for taking part in a scam, called "kiting operation," where a
depositor used a conduit bank account for depositing several unfunded checks drawn against the same depositor’s
other current accounts and from which conduit bank account he later withdrew those checks. The PNB alleged that
Ang had allowed this illegal activity from January 2 to April 3, 1996 while she was the Assistant Department Manager
I in its Tuguegarao Branch.3
On September 16, 1996 the PNB heaped other charges against Ang of serious misconduct and gross violation of the
bank’s rules and regulations as follows:
-- She issued six certificates of deposit between June 5, 1992 up to January 10, 1996 in amounts
exceeding the true deposit balance of various depositors;
 -- She issued two bank commitments dated January 24, 1994 and for providing a credit line in favor of a
government contractor without authority and in violation of SEL Cir. 2-166/91 of July 10, 1996; and
-- She committed tardiness and "under time" from October to December 1995 and January to March 1996
in violation of Gen. Cir. 1-61/91 of February 1, 1991.4
In answer to the first charge, Ang claimed that it was not a "kiting operation," but an accommodation of a very valued
client. She admitted that the checks were not funded and were converted into account receivables or
accommodation loans that the client had settled, including interests, penalties, and other charges. Consequently, the
PNB did not suffer any loss from those transactions; it even reaped enormous profits from them. 5
On the second charge, Ang claimed that the issuance of the certificates had been tolerated to accommodate valued
clients as a marketing strategy and prevent their move to other banks. These had been open transactions, said Ang,
which were known to all the officers of the branch. Again, the PNB did not suffer any loss on account of the issuance
of those certificates. The clients involved maintained their loyalty to the bank.6
On the third charge, Ang claimed that the PNB’s loan commitments in those cases amounted to mere
recommendations since she had no authority to approve loans. Furthermore, she could not have violated SEL Cir. 2-
166/91 dated July 10, 1996 since this was not yet in effect when she issued those commitments on January 24,
1994. Besides, the circular merely prescribed the fees to be collected. 7
On the last charge, Ang claimed that she was not covered by the circular governing office hours because she was a
bank officer. Managerial employees, according to her, worked beyond the usual eight hours and even worked on
Saturdays and Sundays. She added that, since the bank had already made deductions for tardiness on her pay
check, she cannot anymore be administratively charged for it.8
Ang further pointed out that the causes for her termination took place when she was yet a government official. The
PNB had since ceased to be government-owned. If she were to be charged for those causes, the jurisdiction over
her case would lie with the Civil Service Commission. Even then, since she already retired from the government
service, the employment that could be terminated no longer existed.9
Ang added that the causes for her termination had also become academic after the PNB cleared her of any
accountability when she once retired from employment with it.
Pending administrative investigation, the PNB assigned Ang to its Aparri Branch on April 3, 1997.10 Its Inspection and
Investigation Unit recommended her dismissal on June 3, 1997 to the Board of Inquiry. 11 Ang alleged that the PNB
dismissed her from work on July 25, 1997, withholding her fringe benefits, gratuity benefits, monetary value of her
leave credits, rights and interests in the provident fund, and other benefits due her as of May 26, 1996.12 She sought
reconsideration, but the bank denied it.
On January 27, 1998 Ang filed a complaint against the PNB before the National Labor Relations Commission
(NLRC), Regional Arbitration Branch II, Tuguegarao, Cagayan in NLRC RAB II CN 01-00022-98 for illegal dismissal,
illegal deductions, non-payment of 13th month pay, allowances, separation pay, and retirement benefits with prayer
for payment of moral and exemplary damages, attorney’s fees, and litigation expenses.
Answering the complaint, the PNB claimed that it observed due process in terminating Ang, notifying her of the
charges and giving her a chance to defend herself in a formal hearing but she waived this and opted to submit a
position paper. The PNB Board of Inquiry informed her of its decision before implementing the same. Indeed, she
even sought its reconsideration.13 The PNB pointed out that since it separated petitioner Ang for a just cause, she
was not entitled to termination pay. Further she ceased to be entitled to the benefits she claimed.14
The PNB also pointed out that although it cleared Ang of any accountability before her retirement as a civil servant, it
premised such clearance from existing knowledge and records. The PNB had not yet discovered her frauds and
omissions when it issued the clearance. Besides, what the PNB issued was not really a clearance but a certification
that Ang had no pending administrative case. It issued that certification on August 12, 1996 and filed the first
administrative charge against her on September 3, 1996.15
On March 30, 1999 the Labor Arbiter (LA) rendered a Decision, 16 finding the PNB’s dismissal of Ang illegal for failure
to show that the dismissal was for a valid cause and after notice and hearing. Specifically, the PNB failed to prove
any basis for loss of trust. The LA ordered the reinstatement of petitioner Ang to her former position or its substantial
equivalent, without loss of seniority rights and with full backwages and other benefits or their money value from the
time of her actual dismissal on July 25, 1996 up to her reinstatement.
Further, the LA ordered the PNB to pay Ang ₱488,567.87 in gratuity pay plus 1 percent interest per month from the
time it fell due until actual payment, ₱1 million as moral damages, and ₱500,000.00 as exemplary damages plus 10
percent of the total monetary award as attorney’s fees. The LA made the monetary value of her fringe benefits and
others, not included in the computed amount, subject to recomputation upon the finality of the NLRC decision. In
case reinstatement was not feasible, Ang was to have the option to be paid separation pay of at least one month pay
for every year of her 30 years of service in addition to her full backwages and gratuity benefits.
The PNB appealed the decision to the NLRC but the latter dismissed the appeal on January 30, 2004.17 Upon motion
for reconsideration, however, or on October 29, 2004 the NLRC reconsidered its finding of lack of due process,
considering Ang’s admission during direct examination that the PNB informed her of the charges against her and
gave her a chance to present her side with the assistance of a counsel. The NLRC deleted the award of damages
because of absence of bad faith on the part of the PNB officers but maintained the LA’s finding that the PNB had not
proved loss of trust as a ground for dismissal.
On petition for certiorari with the Court of Appeals (CA), the latter rendered a decision on January 30, 2007,18finding
valid reason to uphold Ang’s dismissal from the service for willful breach of the trust reposed in her by the PNB. As to
the procedural aspect, the CA found that without doubt the PNB observed due process in dismissing Ang. She
received two memoranda; first informing her of the charges against her, and second informing her of the decision to
terminate her services. The CA reversed the NLRC Decision and dismissed Ang’s complaint. She moved for
reconsideration, but this was denied.
The Issues Presented
Petitioner presents the following issues:
1. Whether or not the CA erred in finding that the PNB dismissed Ang based on the evidence that she
betrayed its trust in her as a bank officer;
2. Whether or not the CA erred in holding that the PNB accorded Ang due process when it dismissed her
from the service; and
3. Whether or not the CA erred in holding that Ang was not entitled to the benefits that the PNB withheld
from her.
The Court’s Ruling
One. Ang claims that her dismissal by PNB, the private corporation, was illegal since she had committed no offense
under its employ. The offense for which she was removed took place when the government still owned PNB and she
was then a government employee. But while PNB began as a government corporation, it did not mean that its
corporate being ceased and was subsequently reestablished when it was privatized. It remained the same corporate
entity before, during, and after the change over with no break in its life as a corporation.
Consequently, the offenses that Ang committed against the bank before its privatization continued to be offenses
against the bank after the privatization. But, since the PNB was already a private corporation when it looked into
Ang’s offenses, the provisions of the Labor Code governed its disciplinary action.
Ordinarily, the Court would not inquire into factual issues raised in a petition for review but, since the findings of the
CA clashed with those of the LA and the NLRC, such inquiry would be justified in this case. As to the existence of
just cause, it is clear to the Court that Ang did not deny the acts and omissions constituting the offense. The
transcript of stenographic notes taken during her direct examination on April 22, 1998 before the NLRC Regional
Arbitration Branch in Tuguegarao, Cagayan, shows that her defense consisted in her claim that she accommodated
a client’s unfunded checks and issued false bank certificates with the knowledge and consent of the branch manager
and comptroller.
But such uncorroborated defense is unsatisfactory, revealing a mind that was willing to disregard bank rules and
regulations when other branch officers concurred. The PNB rightfully separated her from work for willful breach of the
trust that it reposed in her under the Labor Code. Her defense that the PNB did not suffer any loss is of no moment.
The focal point is that she betrayed the trust of the bank in her fidelity to its interest and rules.
Two. As to the issue of due process, a review of the transcript of stenographic notes taken during Ang’s cross-
examination on December 17, 1998 before the NLRC Regional Arbitration Branch in Tuguegarao, Cagayan, reveals
that she admitted having received from the PNB a memorandum of September 15, 1996, containing the
administrative charges against her and a memorandum of June 3, 1997 containing the decision to terminate her
service.19 She likewise admitted that the bank gave her a chance to present her side and to consult a lawyer.
Three. Ang claims that she is entitled to the monetary value of her leave credits, gratuity benefits, retirement pay,
rights and interests in the provident fund, and other benefits due her as of May 26, 1996.
The PNB points out, however, that Ang did not seek reconsideration from the NLRC of its deletion of the LA’s award
of accrued compensation and other benefits to her. And, although she received an unfavorable decision from the CA,
her motion for reconsideration did not raise the matter of accrued compensation and other benefits. Only before this
Court did she raise them for the first time. But, contrary to the PNB’s position, what the NLRC decision deleted was
only the award of damages. It did not touch the benefits mentioned. Consequently, when the CA apparently deleted
these as well, Ang has a right to elevate the issue before this Court.1avvphi1
Although the transformation of the PNB from a government-owned corporation to a private one did not result in a
break in its life as juridical person, the same idea of continuity cannot be said of its employees. Section 27 of
Presidential Proclamation 50 provided for the automatic termination of employer-employee relationship upon
privatization of a government-owned and controlled corporation. Further, such privatization cannot deprive the
government employees involved of their accrued benefits or compensation. Thus:
Sec. 27. Automatic Termination of Employer-Employee Relations. — Upon the sale or other disposition of
the ownership and/or controlling interest of the government in a corporation held by the Trust, or all or
substantially all of the assets of such corporation, the employer-employee relations between the
government and the officers and other personnel of such corporations shall terminate by operation of law.
None of such officers or employees shall retain any vested right to future employment in the privatized or
disposed corporation, and the new owners or controlling interest holders thereof shall have full and
absolute discretion to retain or dismiss said officers and employees and to hire the replacement or
replacements of any one or all of them as the pleasure and confidence of such owners or controlling interest
holders may dictate.
Nothing in this section shall, however, be construed to deprive said officers and employees of their vested
entitlements in accrued benefits or the compensation and other benefits incident to their employment or attaching to
termination under applicable employment contracts, collective bargaining agreements, and applicable legislation.
Here, when PNB was privatized, Ang’s employment with it as a government-owned corporation ceased. Indeed, the
PNB already computed the retirement and other benefits to which she was entitled as a result of the cessation of her
employment. Since she had no pending administrative case on the day she ceased to be a PNB employee and had
been cleared of any accountability,20 all those benefits already accrued to her on the date of her termination.
Of course, the PNB rehired her immediately but that is another story. In the eyes of the law, her record as employee
of the government-owned PNB was untarnished at the time of her separation from it. In fact, the PNB already
computed the benefits to which she was entitled and readied their payment. The GSIS rule that the PNB now relies
on applied only to employees with pending administrative charge at the time of their retirement. Since Ang had none
of that, the cited rule did not apply to her. The Court sees no reason why she should not receive the benefits which
she earned or which accrued to her as of May 26, 1996.
As for possible benefits accruing to Ang after May 26, 1996, the same should be deemed governed by the Labor
Code since the PNB that rehired her on May 27, 1996 has become a private corporation. Under the Omnibus Rules
Implementing the Labor Code, Book VI, Rule I, Section 7, the employee’s separation from work for a just cause does
not entitle her to termination pay. Thus, the PNB may rightfully withhold Ang’s termination pay that accrued beginning
on May 27, 1996 because of her dismissal.
WHEREFORE, the Court AFFIRMS the Court of Appeals decision dated January 30, 2007 and its resolution dated
July 6, 2007 in CA-G.R. SP 88449 in favor of respondent Philippine National Bank but with the MODIFICATION that
it directs the latter to pay petitioner Luzviminda A. Ang the benefits due her from the bank as of the date of her
retirement on May 26, 1996.
SO ORDERED.
G.R. No. 113191 September 18, 1996
DEPARTMENT OF FOREIGN AFFAIRS, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER NIEVES V. DE CASTRO and JOSE C.
MAGNAYI, respondents.
VITUG, J.:
The questions raised in the petition for certiorari are a few coincidental matters relative to the diplomatic immunity
extended to the Asian Development Bank ("ADB").
On 27 January 1993, private respondent initiated NLRC-NCR Case No. 00-01-0690-93 for his alleged illegal
dismissal by ADB and the latter's violation of the "labor-only" contracting law. Two summonses were served, one
sent directly to the ADB and the other through the Department of Foreign Affairs ("DFA"), both with a copy of the
complaint. Forthwith, the ADB and the DFA notified respondent Labor Arbiter that the ADB, as well as its President
and Office, were covered by an immunity from legal process except for borrowings, guaranties or the sale of
securities pursuant to Article 50(1) and Article 55 of the Agreement Establishing the Asian Development Bank (the
"Charter") in relation to Section 5 and Section 44 of the Agreement Between The Bank And The Government Of The
Philippines Regarding The Bank's Headquarters (the "Headquarters Agreement").
The Labor Arbiter took cognizance of the complaint on the impression that the ADB had waived its diplomatic
immunity from suit. In time, the Labor Arbiter rendered his decision, dated 31 August 1993, that concluded:
WHEREFORE, above premises considered, judgment is hereby rendered declaring the
complainant as a regular employee of respondent ADB, and the termination of his services as
illegal. Accordingly, respondent Bank is hereby ordered:
1. To immediately reinstate the complainant to his former position effective September 16, 1993;
2. To pay complainant full backwages from December 1, 1992 to September 15, 1993 in the
amount of P42,750.00 (P4,500.00 x 9 months);
3. And to pay complainants other benefits and without loss of seniority rights and other privileges
and benefits due a regular employee of Asian Development Bank from the time he was
terminated on December 31, 1992;
4. To pay 10% attorney's fees of the total entitlements.1
The ADB did not appeal the decision. Instead, on 03 November 1993, the DFA referred the matter to the National
Labor Relations Commission ("NLRC"); in its referral, the DFA sought a "formal vacation of the void judgment."
Replying to the letter, the NLRC Chairman. wrote:
The undersigned submits that the request for the "investigation" of Labor Arbiter Nieves de
Castro, by the National Labor Relations Commission, has been erroneously premised on Art.
218(c) of the Labor Code, as cited in the letter of Secretary Padilla, considering that the
provision deals with "a question, matter or controversy within its (the Commission) jurisdiction"
obviously referring to a labor disputewithin the ambit of Art. 217 (on jurisdiction of Labor Arbiters
and the Commission over labor cases).
The procedure, in the adjudication of labor cases, including raising of defenses, is prescribed by
law. The defense of immunity could have been raised before the Labor Arbiter by a special
appearance which, naturally, may not be considered as a waiver of the very defense being
raised. Any decision thereafter is subject to legal remedies, including appeals to the appropriate
division of the Commission and/or a petition for certiorari with the Supreme Court, under Rule 65
of the Rules of Court. Except where an appeal is seasonably and properly made, neither the
Commission nor the undersigned may review, or even question, the property of any decision by
a Labor Arbiter. Incidentally, the Commission sits en banc (all fifteen Commissioners) only to
promulgate rules of procedure, or to formulate policies (Art. 213, Labor Code).
On the other hand, while the undersigned exercises "administrative supervision over the
Commission and its regional branches and all its personnel, including the Executive Labor
Arbiters and Labor Arbiters" (penultimate paragraph, Art. 213, Labor Code), he does not have
the competence to investigate or review any decision of a Labor Arbiter. However, on the purely
administrative aspect of the decision-making process, he may cause that an misconduct,
malfeasance or misfeasance, upon complaint properly made.
If the Department of Foreign Affairs feels that the action of Labor Arbiter Nieves de Castro
constitutes misconduct, malfeasance or misfeasance, it is suggested that an appropriate
complaint be lodged with the Office of the Ombudsman.
Thank you for kind attention. 2
Dissatisfied, the DFA lodged the instant petition for certiorari. In this Court's resolution of 31 January 1994,
respondents were required to comment. Petitioner was later constrained to make an application for a restraining
order and/or writ of preliminary injunction following the issuance, on 16 March 199, by the Labor Arbiter of a writ of
execution. In a resolution, dated 07 April 1994, the Court issued the temporary restraining order prayed for.
The Office of the Solicitor General ("OSG"), in its comment of 26 May 1994, initially assailed the claim of immunity by
the ADB. Subsequently, however, it submitted a Manifestation (dated 20 June 1994) stating, among other things, that
"after a thorough review of the case and the records," it became convinced that ADB, indeed, was correct in invoking
its immunity from suit under the Charter and the Headquarters Agreement.
The Court is of the same view.
Article 50(1) of the Charter provides:
The Bank shall enjoy immunity from every form of legal process, except in cases arising out of or
in connection with the exercise of its powers to borrow money, to guarantee obligations, or to
buy and sell or underwrite the sale of securities. 3
Under Article 55 thereof —
All Governors, Directors, alternates, officers and employees of the Bank, including experts
performing missions for the Bank:
(1) shall be immune from legal process with respect of acts performed by them in their official
capacity, except when the Bank waives the immunity. 4
Like provisions are found in the Headquarters Agreement. Thus, its Section 5 reads:
The Bank shall enjoy immunity from every form of legal process, except in cases arising out of,
or in connection with, the exercise of its powers to borrow money, to guarantee obligations, or to
buy and sell or underwrite the sale of securities. 5
And, with respect to certain officials of the bank, Section 44 of the agreement states:
Governors, other representatives of Members, Directors, the president, Vice-President and
executive officers as may be agreed upon between the Government and the Bank shall enjoy,
during their stay in the Republic of the Philippines in connection with their official duties with the
Bank:
xxx xxx xxx
(b) Immunity from legal process of every kind in respect of words spoken or written and all acts
done by them in their official
capacity. 6
The above stipulations of both the Charter and Headquarters Agreement should be able, may well enough,
to establish that, except in the specified cases of borrowing and guarantee operations, as well as the
purchase, sale and underwriting of securities, the ADB enjoys immunity from legal process of every form.
The Bank's officers, on their part, enjoy immunity in respect of all acts performed by them in their official
capacity. The Charter and the Headquarters Agreement granting these immunities and privileges are
 treaty covenants and commitments voluntarily assumed by the Philippines government which must be
respected.
In World Health Organization vs. Aquino. 7 we have declared:
It is a recognized principle of international law and under our system of separation of powers that
diplomatic immunity is essentially a political question and courts should refuse to look beyond a
determination by the executive branch of the government, and where the plea of diplomatic
immunity is recognized and affirmed by the executive branch of the government . . . it is then the
duty of the courts to accept the claim of immunity upon appropriate suggestion by the principal
law officer of the government, . . . or other officer acting under his direction. Hence, in adherence
to the settled principle that courts may not so exercise their jurisdiction . . . as to embarrass the
executive arm of the government in conducting foreign relations, it is accepted doctrine that in
"such cases the judicial department of government follows the action of the political branch and
will not embarrass the latter by assuming an antagonistic
jurisdiction." 8
To the same effect is the decision in International Catholic Migration Commission vs. Calleja, 9 which has similarly
deemed the Memoranda of the Legal Adviser of the Department of Foreign Affairs to be "a categorical recognition by
the Executive Branch of Government that ICMC . . . enjoy(s) immunities accorded to international organizations" and
which determination must be held "conclusive upon the Courts in order not to embarrass a political department of
Government." In the instant case, the filing of the petition by the DFA, in behalf of ADB, is itself an affirmance of the
government's own recognition of ADB's immunity.
Being an international organization that has been extended diplomatic status, the ADB is independent of the
municipal law. 10 In Southeast Asian Fisheries Development Center vs. Acosta. 11 The Court has cited with approval
the opinion 12 of the Minister of justice; thus —
One of the basic immunities of an international organization is immunity from local
jurisdiction, i.e., that it is immune from the legal writs and processes issued by the tribunals of
the country where it is found. (See Jenks, Id., pp. 37-44). The obvious reason for this is that the
subjection of such an organization to the authority of the local courts would afford a convenient
medium thru which the host government may interfere in their operations or even influence or
control its policies and decisions of the organization; besides, such subjection to local jurisdiction
would impair the capacity of such body to discharge its responsibilities impartially behalf of its
member-states. 13
Contrary to private respondent's assertion, the claim of immunity is not here being raised for the first time, it has been
invoked before the forum of origin through communications sent by petitioner and the ADB to the Labor Arbiter, as
well as before the NLRC following the rendition of the questioned judgment by the Labor Arbiter, but evidently to no
avail.
In its communication of 27 May 1993, the DFA, through the Office of legal Affairs, has advised the NLRC:
Respectfully returned to the Honorable Domingo B. Mabazza, Labor Arbitration Associate
Commission, National Labor Relations Commission, National Capital Judicial Region, Arbitration
Branch, Associated Bank Bldg., T.M. Kalaw St., Ermita, Manila, the attached Notice of Hearing
addressed to the Asian Development Bank, in connection with the aforestated case, for the
reason stated in the Department's 1st Indoresment dated 23 March 1993, copy attached, which
is self-explanatory.
In view of the fact that the Asian Development Bank (ADB) invokes its immunity which is
sustained by the Department of Foreign Affairs, a continuos hearing of this case erodes the
credibility of the Philippine government before the international community, let alone the
negative implication of such a suit on the official relationship of the Philippine government with
the ADB.
For the Secretary of Foreign Affairs
The Office of the President, likewise, has issued on 18 May 1993 a letter to the Secretary of Labor, viz
Dear Secretary Confesor,
I am writing to draw your attention to a case filed by a certain Jose C. Magnayi against the Asian
Development Bank and its President, Kimmasa Tarumizu, before the National Labor Relations
Commission, National Capital Region Arbitration Board (NLRC NCR Case No. 00-01690-93).
Last March 8, the Labor Arbiter charged with the case, Ms. Nieves V. de Castro, addressed a
Notice of Resolution/Order to the Bank which brought it to the attention of the Department of
Foreign Affairs on the ground that the service of such notice was in violation of the RP-ADB
Headquarters Agreement which provided, inter alia, for the immunity of the Bank, its President
and officers from every form of legal process, except only, in cases of borrowings, guarantees or
the sale of securities.
The Department of Foreign Affairs, in turn, informed Labor Arbiter Nieves V. de Castro of this
fact by letter dated March 22, copied to you.
Despite this, the labor arbiter in question persited to send summons, the latest dated May 4,
herewith attached, regarding the Magnayi case.
The Supreme Court has long settled the matter of diplomatic immunities. In WHO
vs. Aquino, SCRA 48, it ruled that courts should respect diplomatic immunities of foreign officials
recognized by the Supreme Court forms part of the law of the land.
Perhaps you should point out to Labor Arbiter Nieves V. de Castro that ignorance of the law is a
ground for dismissal.
Very truly yours,
Private respondent argues that, by centering into service contracts with different private companies, ADB has
descended to the level of an ordinary party to a commercial transaction giving rise to a waiver of its immunity from
suit. In the case of Holy See vs. Hon. Rosario, Jr., 16 the Court has held:
There are two conflicting concept of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot, without its
consent, be made a respondent in the Courts of another sovereign. According to the newer or
restrictive theory, the immunity of the sovereign is recognized only with regard to public acts or
acts jure imperii of a state, but not with regard to private act or acts jure gestionis.
xxx xxx xxx
Certainly, the mere entering into a contract by a foreign state with a private party cannot be the
ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the
foreign state is engaged in the activity in regular course of business. If the foreign state is not
engaged regularly in a business or trade, the particular act or transaction must then be tested by
 its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an
act jure imperit, especially when it is not undertaken for gain or profit. 17
The service contracts referred to by private respondent have not been intended by the ADB for profit or
gain but are official acts over which a waiver of immunity would not attack.
With regard to the issue of whether or not the DFA has the legal standing to file the present petition, and whether or
not petitioner has regarded the basic rule that certiorari can be availed of only when there is no appeal nor plain,
speedy and adequate remedy in the ordinary course of law, we hold both in the affirmative.
The DFA's function includes, among its other mandates, the determination of persons and institutions covered by
diplomatic immunities, a determination which, when challenge, entitles it to seek relief from the court so ass not to
seriously impair the conduct of the country's foreign relations. The DFA must be allowed to plead its case whenever
necessary or advisable to enable it to help keep the credibility of the Philippine government before the international
community. When international agreements are concluded, the parties therto are deemed to have likewise accepted
the responsibility of seeing to it that their agreements are duly regarded. In our country, this task falls principally of
the DFA as being the highest executive department with the competence and authority to so act in this aspect of the
international arena. 18 In Holy See vs. Hon. Rosario, Jr., 19 this Court has explained the matter in good datail; viz:
In Public International Law, when a state or international agency wishes to plead sovereign or
diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued
to convey to the court that said defendant is entitled to immunity.
In the United States, the procedure followed is the process of "suggestion," where the foreign
state or the international organization sued in an American court requests the Secretary of State
to make a determination as to whether it is entitled to immunity. If the Secretary of State finds
that the defendant is immune from suit, he, in turn, asks the attorney General to submit to the
court a "suggestion" that the defendant is entitled to immunity. In England, a similar procedure is
followed, only the Foreign Office issues a certification to the effect instead of submitting a
"suggestion" (O'Connell, In International Law 130 [1965]; Note: Immunity from Suit of Foreign
Sovereign Instrumentalities and Obligations 50 Yale Law Journal 1088 [1941]).
In the Philippines, the practice is for the foreign government or the international organization to
first secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how
the Philippine Foreign Office conveys its endorsement to the courts varies. In International
Catholic Migration Commission vs. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign
Affairs just sent a letter directly to the Secretary of Labor and Employment, informing the latter
that the respondent-employer could not be sued because it enjoyed diplomatic immunity.
In World Health Organization vs. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs
sent the trial court a telegram to that effect. In Baer vs. Tizon, 57 SCRA 1 (1974), the U.S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make, in
behalf of the Commander of the United States Naval Base at Olongapo City, Zambales, a
"suggestion" to respondent Judge. The Solicitor General embodied the "suggestion" in a
manifestation and memorandum as amicus curiae.
In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs
moved with this Court to be allowed to intervene on the side of petitioner. The Court allowed the
said Department to file its memorandum in support of petitioner's claim of sovereign immunity.
In some cases, the defense of sovereign immunity was submitted directly to the local courts by
the respondents through their private counsels (Raquiza vs. Bradford, 75 Phil. 50 [1945];
Miquiabas vs. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America vs.
Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign states bypass
the Foreign Office, the courts can in quire into the facts and make their own determination as to
the nature of the acts and transactions involved. 20
Relative to the property of the extraordinary remedy of certiorari, the Court has, under special circumstances, so
allowed and entertained such a petition when (a) the questioned order or decision is issued in excess of or without
jurisdiction, 21 or (b) where the order or decision is a patent nullity, 22 which, verily, are the circumstances that can be
said to obtain in the present case. When an adjudicator is devoid of jurisdiction on a matter before him, his action
that assumes otherwise would be a clear nullity.
WHEREFORE, the petition for certiorari is GRANTED, and the decision of the Labor Arbiter, dated 31 August 1993 is
VACATED, for being NULL AND VOID. The temporary restraining order issued by this Court on 07 April 1994 is
hereby made permanent. No costs.
SO ORDERED.
G.R. No. 108813 December 15, 1994
JUSMAG PHILIPPINES, petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION (Second Division) and FLORENCIO SACRAMENTO,
Union President, JPFCEA, respondents.
PUNO, J.:
The immunity from suit of the Joint United States Military Assistance Group to the Republic of the Philippines
(JUSMAG-Philippines) is the pivotal issue in the case at bench.
JUSMAG assails the January 29, 1993 Resolution of the NATIONAL LABOR RELATIONS COMMISSION (public
respondent), in NLRC NCR CASE NO. 00-03-02092-92, reversing the July 30, 1991 Order of the Labor Arbiter, and
ordering the latter to assume jurisdiction over the complaint for illegal dismissal filed by FLORENCIO SACRAMENTO
(private respondent) against petitioner.
First, the undisputed facts.
Private respondent was one of the seventy-four (74) security assistance support personnel (SASP) working at
JUSMAG-Philippines. 1 He had been with JUSMAG from December 18, 1969, until his dismissal on April 27, 1992.
When dismissed, he held the position of Illustrator 2 and was the incumbent President of JUSMAG PHILIPPINES-
FILIPINO CIVILIAN EMPLOYEES ASSOCIATION (JPFCEA), a labor organization duly registered with the
Department of Labor and Employment. His services were terminated allegedly due to the abolition of his position. 2He
was also advised that he was under administrative leave until April 27, 1992, although the same was not charged
against his leave.
On March 31, 1992, private respondent filed a complaint with the Department of Labor and Employment on the
ground that he was illegally suspended and dismissed from service by JUSMAG. 3 He asked for his reinstatement.
JUSMAG then filed a Motion to Dismiss invoking its immunity from suit as an agency of the United States. It further
alleged lack of employer-employee relationship and that it has no juridical personality to sue and be sued. 4
In an Order dated July 30, 1991, Labor Arbiter Daniel C. Cueto dismissed the subject complaint " for want of
jurisdiction."5 Private respondent appealed6 to the National Labor Relations Commission (public respondent),
assailing the ruling that petitioner is immune from suit for alleged violation of our labor laws. JUSMAG filed its
Opposition, 7 reiterating its immunity from suit for its non-contractual, governmental and/or public acts.
In a Resolution, dated January 29, 1993, the NLRC8 reversed the ruling of the Labor Arbiter as it held that petitioner
had lost its right not to be sued. The resolution was predicated on two grounds: (1) the principle of estoppel — that
JUSMAG failed to refute the existence of employer-employee relationship under the "control test"; and (2) JUSMAG
has waived its right to immunity from suit when it hired the services of private respondent on December 18, 1969.
The NLRC relied on the case of Harry Lyons vs. United States of America,9 where the "United States Government
(was considered to have) waived its immunity from suit by entering into (a) contract of stevedoring services, and
thus, it submitted itself to the jurisdiction of the local courts."
Accordingly, the case was remanded to the labor arbiter for reception of evidence as to the issue on illegal dismissal.
Article 14 of the 1947 Agreement provides, inter alia, that "the cost of all services required by the Group, including
compensation of locally employed interpreters, clerks, laborers, and other personnel, except personal servants, shall
be borne by the Republic of the Philippines."
This set-up was to change in 1991. In Note No 22, addressed to the Department of Foreign Affairs (DFA) of the
Philippines, dated January 23, 1991, the United States Government, thru its Embassy, manifested its preparedness
"to provide funds to cover the salaries of security assistance support personnel" and security guards, the rent of
JUSMAG occupied buildings and housing, and the cost of utilities. 12 This offer was accepted by our Government,
thru the DFA, in Note No. 911725, dated April 18, 1991.13
Consequently, a Memorandum of Agreement 14 was forged between the Armed Forces of the Philippines and
JUSMAG-Philippines, thru General Lisandro C. Abadia and U.S. Brigadier General Robert G. Sausser. The
Agreement delineated the terms of the assistance-in-kind of JUSMAG for 1991, the relevant parts of which read:

a. The term salaries as used in this agreement include those for the security guards currently
Hence, this petition, JUSMAG contends:
contracted between JUSMAG and A' Prime Security Services Inc., and the Security Assistance
Support Personnel (SASP). . . . .
I
b. The term Security Assistance Support Personnel (SASP) does not include active duty
THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING uniformed members of the Armed Forces of the Philippines performing duty at JUSMAG.
TO LACK AND/OR EXCESS OF JURISDICTION —
c. It is understood that SASP are employees of the Armed Forces of the Philippines (AFP).
A. IN REVERSING THE DECISION OF THE LABOR ARBITER AND IN Therefore, the AFP agrees to appoint, for service with JUSMAG, no more than 74 personnel to
NOT AFFIRMING THE DISMISSAL OF THE COMPLAINT IT BEING A designated positions with JUSMAG.
SUIT AGAINST THE UNITED STATES OF AMERICA WHICH HAD NOT
GIVEN ITS CONSENT TO BE SUED; AND
d. SASP are under the total operational control of the Chief, JUSMAG-Philippines. The term
"Operational Control" includes, but is not limited to, all personnel administrative actions, such as:
B. IN FINDING WAIVER BY JUSMAG OF IMMUNITY FROM SUIT; hiring recommendations; firing recommendations; position classification; discipline; nomination
and approval of incentive awards; and payroll computation. Personnel administration will be
guided by Annex E of JUSMAG-Philippines Memo 10-2. For the period of time that there is an
II exceptional funding agreement between the government of the Philippines and the United States
Government (USG), JUSMAG will pay the total payroll costs for the SASP employees. Payroll
THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING costs include only regular salary; approved overtime, costs of living allowance; medical
TO LACK AND/OR EXCESS OF JURISDICTION — insurance; regular contributions to the Philippine Social Security System, PAG-IBIG Fund and
Personnel Economic Relief Allowance (PERA); and the thirteenth-month bonus. Payroll costs do
not include gifts or other bonus payments in addition to those previously defined above.
A. WHEN IT FOUND AN EMPLOYER-EMPLOYEE RELATIONSHIP Entitlements not considered payroll costs under this agreement will be funded and paid by the
BETWEEN JUSMAG AND PRIVATE RESPONDENT; AND AFP.

B. WHEN IT CONSIDERED JUSMAG ESTOPPED FROM DENYING THAT e. All SASP employed as of July 1, 1990 will continue their service with JUSMAG at their current
PRIVATE RESPONDENT IS ITS EMPLOYEE FOR FAILURE TO rate of pay and benefits up to 30 June 1991, with an annual renewal of employment
PRESENT PROOF TO THE CONTRARY. thereafter subject to renewal of their appointment with the AFP (employees and rates of pay are
indicated at Enclosure 3). No promotion or transfer internal to JUSMAG of the listed personnel
We find the petition impressed with merit. will result in the reduction of their pay and benefits.

It is meet to discuss the historical background of the JUSMAG to determine its immunity from suit.
JUSMAG was created pursuant to the Military Assistance Agreement 10 dated March 21, 1947, between the
Government of the Republic of the Philippines and the Government of the United States of America. As agreed upon,
JUSMAG shall consist of Air, Naval and Army group, and its primary task was to advise and assist the Philippines,
on air force, army and naval matters. 11
f. All SASP will, after proper classification, be paid salaries and benefits at established AFP
civilian rates. Rules for computation of pay and allowances will be made available to the
Comptroller, JUSMAG, by the Comptroller, GHQ, AFP. Additionally, any legally mandated
changes in salary levels or methods of computation shall be transmitted within 48 hours of
receipt by Comptroller, GHQ to Comptroller, JUSMAG.
g. The AFP agrees not to terminate SASP without 60 days prior written notice to Chief,
JUSMAG-Philippines. Any termination of these personnel thought to be necessary because of
budgetary restrictions or manpower ceiling will be subject to consultations between AFP and
 JUSMAG to ensure that JUSMAG's mission of dedicated support to the AFP will not be The doctrine of state immunity from suit has undergone further metamorphosis. The view evolved that the existence
degraded or harmed in any way. of a contract does not, per se, mean that sovereign states may, at all times, be sued in local courts. The complexity
of relationships between sovereign states, brought about by their increasing commercial activities, mothered a
more restrictive application of the doctrine. 20 Thus, in United States of America vs. Ruiz, 21 we clarified that our
h. The AFP agrees to assume the severance pay/retirement pay liability for all appointed SASP.
pronouncement in Harry Lyons, supra, with respect to the waiver of State immunity, was obiter and "has no value as
(Enclosure 3 lists the severance pay liability date for current SASP). Any termination of services,
an imperative authority."
other than voluntary resignations or termination for cause, will result in immediate payments of
AFP of all termination pay to the entitled employee. Vouchers for severance/retirement pay and
accrued bonuses and annual leave will be presented to the Comptroller, GHQ, AFP, not later As it stands now, the application of the doctrine of immunity from suit has
than 14 calendar days prior to required date of payment. been restricted to sovereign or governmental activities ( jure imperii). 22 The mantle of state immunity cannot be
extended to commercial, private and proprietary acts ( jure gestionis). As aptly stated by this Court (En banc) in US
vs. Ruiz, supra:
i. All SASP listed in Enclosure 3 will continue to participate in the Philippine Social Security
System.
The restrictive application of State immunity is proper when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic affairs.
A year later, or in 1992, the United States Embassy sent another note of similar import to the Department of Foreign
Stated differently, a State may be said to have descended to the level of an individual and thus
Affairs (No. 227, dated April 8, 1992), extending the funding agreement for the salaries of SASP and security guards
can be deemed to have tacitly given its consent to be used only when it enters into business
until December 31, 1992.
contracts. It does not apply where the contract relates to the exercise of its sovereign functions.
(emphasis ours)
From the foregoing, it is apparent that when JUSMAG took the services of private respondent, it was performing a
governmental function on behalf of the United States pursuant to the Military Assistance Agreement dated March 21,
We held further, that the application of the doctrine of state immunity depends on the legal nature of the act. Ergo,
1947. Hence, we agree with petitioner that the suit is, in effect, one against the United States Government, albeit it
since a governmental function was involved — the transaction dealt with the improvement of the wharves in the
was not impleaded in the complaint. Considering that the United States has not waived or consented to the suit, the
naval installation at Subic Bay — it was held that the United States was not deemed to have waived its immunity
complaint against JUSMAG cannot not prosper.
from suit.

In this jurisdiction, we recognize and adopt the generally accepted principles of international law as part of the law of
the land. 15 Immunity of State from suit is one of these universally recognized principles. In international law,
"immunity" is commonly understood as an exemption of the state and its organs from the judicial jurisdiction of
another state. 16 This is anchored on the principle of the sovereign equality of states under which one state cannot
assert jurisdiction over another in violation of the maxim par in parem non habet imperium (an equal has no power
over an equal).17
Under the traditional rule of State immunity, a state cannot be sued in the courts of another State, without its consent
or waiver. However, in Santos, et al., vs. Santos, et al., 18 we recognized an exception to the doctrine of immunity
from suit by a state, thus:
. . . . Nevertheless, if, where and when the state or its government enters into a contract, through
its officers or agents, in furtherance of a legitimate aim and purpose and pursuant to
constitutional legislative authority, whereby mutual or reciprocal benefits accrue and rights and
obligations arise therefrom, and if the law granting the authority to enter into such contract does
not provide for or name the officer against whom action may be brought in the event of a breach
thereof, the state itself may be sued, even without its consent, because by entering into a
contract, the sovereign state has descended to the level of the citizen and its consent to be sued
is implied from the very act of entering into such contract. . . . . (emphasis ours)
19
It was in this light that the state immunity issue in Harry Lyons, Inc., vs. United States of America was decided.
In the case of Harry Lyons, Inc., the petitioner entered into a contract with the United States Government for
stevedoring services at the U.S. Naval Base, Subic Bay, Philippines. It then sought to collect from the US
government sums of money arising from the contract. One of the issues posed in the case was whether or not the
defunct Court of First Instance had jurisdiction over the defendant United States, a sovereign state which cannot be
sued without its consent. This Court upheld the contention of Harry Lyons, Inc., that "when a sovereign state enters
into a contract with a private person, the state can be sued upon the theory that it has descended to the level of an
individual from which it can be implied that it has given its consent to be sued under the contract."
Then came the case of United States vs. Hon. Rodrigo, et al. 23 In said case, Genove was employed as a cook in the
Main Club located at U.S. Air Force Recreation Center, John Hay Air Station. He was dismissed from service after he
was found to have polluted the stock of soup with urine. Genove countered with a complaint for damages.
Apparently, the restaurant services offered at the John Hay Air Station partake of the nature of a business enterprise
undertaken by the United States government in its proprietary capacity. The Court then noted that the restaurant is
well known and available to the general public, thus, the services are operated for profit, as a commercial and not a
governmental activity. Speaking through Associate Justice Isagani Cruz, the Court (En Banc) said:
The consequence of this finding is that the petitioners cannot invoke the doctrine of state
immunity to justify the dismissal of the damage suit against them by Genove. Such defense will
not prosper even if it be established that they were acting as agents of the United States when
they investigated and later dismissed Genove. For the matter, not even the United States
government itself can claim such immunity. The reason is that by entering into the employment
contract with Genove in the discharge of its proprietary functions, it impliedly divested itself of its
sovereign immunity from suit. (emphasis ours)
Conversely, if the contract was entered into in the discharge of its governmental functions, the sovereign state
cannot be deemed to have waived its immunity from suit. 24 Such is the case at bench. Prescinding from this
premise, we need not determine whether JUSMAG controls the employment conditions of the private respondent.
We also hold that there appears to be no basis for public respondent to rule that JUSMAG is stopped from denying
the existence of employer-employee relationship with private respondent. On the contrary, in its Opposition before
the public respondent, JUSMAG consistently contended that the (74) SASP, including private respondent, working in
JUSMAG, are employees of the Armed Forces of the Philippines. This can be gleaned from: (1) the Military
Assistance Agreement, supra, (2) the exchange of notes between our Government, thru Department of Foreign
Affairs, and the United States, thru the US Embassy to the Philippines, and (3) the Agreement on May 21,
1991, supra between the Armed Forces of the Philippines and JUSMAG.
We symphatize with the plight of private respondent who had served JUSMAG for more than twenty (20) years.
Considering his length of service with JUSMAG, he deserves a more compassionate treatment. Unfortunately,
JUSMAG is beyond the jurisdiction of this Court. Nonetheless, the Executive branch, through the Department of
Foreign Affairs and the Armed Forces of the Philippines, can take the cudgel for private respondent and the other
SASP working for JUSMAG, pursuant to the aforestated Military Assistance Agreement.
IN VIEW OF THE FOREGOING, the petition for certiorari is GRANTED. Accordingly, the impugned Resolution dated
January 29, 1993 of the National Labor Relations Commission is REVERSED and SET ASIDE. No costs.
SO ORDERED.
G.R. Nos. 97468-70 September 2, 1993
SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER represented by its Chief, DR. FLOR J.
LACANILAO, petitioner,
vs.
DANILO ACOSTA in his capacity as Labor Arbiter of the National Labor Relations Commission, Regional
Arbitration, Branch VI, CORAZON CANTO, DAN BALIAO, ELIZABETH SUPETRAN, CARMELITA FERRER,
CATHRYN CONTRADOR, and DORIC VELOSO, respondents.
VITUG, J.:
This is an original petition for certiorari and prohibition, with a prayer for the issuance of a restraining order, to set
aside the order of respondent labor arbiter, dated 20 September 1990, denying herein petitioner's motion to dismiss
the cases subject matter of the petition for lack of jurisdiction.
Two labor cases, docketed as RAB Case No. VI- 0156-86 and RAB case No. VI - 0214-86, were filed by the herein
private respondents against the petitioner, Southeast Asian Fisheries Development Center (SEAFDEC), before the
National Labor Relations Commission (NLRC), Regional Arbitration Branch, Iloilo City. In these cases, the private
respondents claim having been wrongfully terminated from their employment by the petitioner.
On 22 August 1990, the petitioner, contending to be an international inter-government organization, composed of
various Southeast Asian countries, filed a Motion to Dismiss, challenging the jurisdiction of the public respondent in
taking cognizance of the above cases.
On 20 September 1990, the public respondent issued the assailed order denying the Motion to Dismiss. In due
course, a Motion for Reconsideration was interposed but the same, in an order, dated 07 January 1991, was likewise
denied.
Hence, the instant petition. This Court, on 20 March 1991, issued the temporary restraining order prayed for.
The private respondents, as well as respondent labor arbiter, allege that the petitioner is not immune from suit and
assuming that if, indeed, it is an international organization, it has, however, impliedly, if not expressly, waived its
immunity by belatedly raising the issue of jurisdiction.
The Solicitor General, on his part, filed a Manifestation and Motion, which the Court granted, praying that he be
excused from filing his comment for respondent Labor Arbiter, he not being in agreement with the latter's position on
this matter.
On 30 March 1992, this Court dismissed the instant petition in a resolution which reads:
. . . — Considering the allegations, issues and arguments adduced in the petition for certiorari as
well as the separate comments thereon of the public and private respondents, and the
consolidated reply thereto of the petitioner, the Court RESOLVED to dismiss the petition for
failure to sufficiently show that the questioned judgment is tainted with grave abuse of discretion.
The temporary restraining order issued on March 20, 1991 is hereby LIFTED effective
immediately.
In time, the petitioner moved for a reconsideration, arguing that the ground for its seeking the allowance of the
petition is the labor arbiter's lack of jurisdiction over the dispute.
The court is now asked to rule upon the motion for reconsideration.
We rule for the petitioner.
It is beyond question that petitioner SEAFDEC is an international agency enjoying diplomatic immunity. This, we
have already held in Southeast Asian Fisheries Development Center-Aquaculture Department vs. National Labor
Relations Commission, G.R. No. 86773, 206 SCRA 283/1992; see also Lacanilao v. de Leon, G.R. No. 76532, 147
SCRA, 286/1987/, where we
said —
Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-
AQD) is an international agency beyond the jurisdiction of public respondent NLRC.
It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia,
Japan, Kingdom of Laos, Malaysia, Republic of the Philippines, Republic of Singapore, Kingdom
of Thailand and Republic of Vietnam . . . .
The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on
January 16, 1968. Its purpose is as follows:
The purpose of the Center is to contribute to the promotion of the fisheries
development in Southeast Asia by mutual co-operation among the member
governments of the Center, hereinafter called the 'Members', and through
collaboration with international organizations and governments external to
the Center.
(Agreement Establishing the SEAFDEC, Art. 1; . . .).
SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973
in Kuala Lumpur, Malaysia as one of the principal departments of SEAFDEC. . . . to be
established in Iloilo for the promotion of research in aquaculture. Paragraph 1, Article 6 of the
Agreement establishing mandates:
1. The Council shall be the supreme organ of the Center and all powers of
the Center shall be vested in the Council.
Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys
functional independence and freedom from control of the state in whose territory its office is
located.
As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public
International Law (p. 83,1956 ed.):
 Permanent international commissions and administrative bodies have been
created by the agreement of a considerable number of States for a variety
of international purposes, economic or social and mainly non-political.
Among the notable instances are the International Labor Organization, the
International Institute of Agriculture, the International Danube Commission.
In so far as they are autonomous and beyond the control of any one State,
they have a distinct juridical personality independent of the municipal law of
the State where they are situated. As such, according to one leading
authority they must be deemed to possess a species of international
personality of their own. (Salonga and Yap, Public International Law, 83
[1956 ed.]
Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be
represented by one Director in governing SEAFDEC Council (Agreement Establishing
SEAFDEC, Art. 5, Par. 1,. . .), and that its national laws and regulations shall apply only insofar
as its contributions to SEAFDEC of "an agreed amount of money, movable and immovable
property and services necessary for the establishment and operation of the Center" are
concerned (Art. 11, ibid). It expressly waived the application of the Philippine laws on the
disbursement of funds of petitioner SEAFDEC-AQD (Section 2, P.D. No. 292).
The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over
SEAFDEC-AQD in Opinion No. 139, Series of 1984 —
4. One of the basic immunities of an international organization is immunity from local jurisdiction,
i.e., that it is immune from the legal writs and processes issued by the tribunals of the country
where it is found. (See Jenks, Id., pp. 37-44). The obvious reason for this is that the subjection of
such an organization to the authority of the local courts would afford a convenient medium thru
which the host government may interfere in their operations or even influence or control its
policies and decisions of the organization; besides, such objection to local jurisdiction would
impair the capacity of such body to discharge its responsibilities impartially on behalf of its
member-states. In the case at bar, for instance, the entertainment by the National Labor
Relations Commission of Mr. Madamba's reinstatement cases would amount to interference by
the Philippine Government in the management decisions of the SEARCA governing board; even
worse, it could compromise the desired impartiality of the organization since it will have to suit its
actuations to the requirements of Philippine law, which may not necessarily coincide with the
interests of the other member-states. It is precisely to forestall these possibilities that in cases
where the extent of the immunity is specified in the enabling instruments of international
organizations (jurisdictional immunity, is specified in the enabling instruments of international
organizations), jurisdictional immunity from the host country is invariably among the first
accorded. (See Jenks, Id.; See Bowett. The Law of International Institutions. pp. 284-285).
At its Sixth Meeting held at Kuala Lumpur, Malaysia, on 3 to 7 July 1973, the SEAFDEC Council approved the formal
establishment of its Aquaculture Department in the province of Iloilo, Philippines, to promote research in Aquaculture
as so expressed in the "Whereas" Clauses of Presidential Decree No. 292 issued on 13 September 1973 1.
Furthermore, Section 2 of the same decree had provided for the autonomous character of SEAFDEC, thus:
. . . .All funds received by the Department shall be receipted and disbursed in accordance with
the Agreement establishing the Southeast Asian Fisheries Development Center and pertinent
resolutions duly approved by the SEAFDEC Council.
As aptly pointed out by Associate Justice Isagani Cruz of this Court—
Certain administrative bodies created by agreement among states may be vested with
international personality when two conditions concur, to wit:, that their purposes are mainly non-
political and that they are autonomous, i.e., not subject to the control of any state. 2
Anent the issue of waiver of immunity, suffice it to say at the moment that the petitioner has timely raised the issue of
jurisdiction. While the petitioner did not question the public respondent's lack of jurisdiction at the early stages of the
proceedings, it, nevertheless, did so before it rested its case and certainly well before the proceedings thereat had
terminated.
WHEREFORE, our resolution, dated 30 March 1992, dismissing the petition for certiorari, is hereby reconsidered,
and another is entered (a) granting due course to the petition; (b) setting aside the order, dated 20 September 1990,
of the public respondent; and (c) enjoining the public respondent from further proceeding with RAB Case No. VI-
0156-86 and RAB Case No. VI-0214-86. No costs.
SO ORDERED.
G.R. No. 76607 February 26, 1990
UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE REEVES, petitioners,
vs.
HON. ELIODORO B. GUINTO, Presiding Judge, Branch LVII, Regional Trial Court, Angeles City, ROBERTO T.
VALENCIA, EMERENCIANA C. TANGLAO, AND PABLO C. DEL PILAR, respondents.
CRUZ, J.:
These cases have been consolidated because they all involve the doctrine of state immunity. The United States of
America was not impleaded in the complaints below but has moved to dismiss on the ground that they are in effect
suits against it to which it has not consented. It is now contesting the denial of its motions by the respondent judges.
In G.R. No. 76607, the private respondents are suing several officers of the U.S. Air Force stationed in Clark Air
Base in connection with the bidding conducted by them for contracts for barber services in the said base.
On February 24, 1986, the Western Pacific Contracting Office, Okinawa Area Exchange, U.S. Air Force, solicited
bids for such contracts through its contracting officer, James F. Shaw. Among those who submitted their bids were
private respondents Roberto T. Valencia, Emerenciana C. Tanglao, and Pablo C. del Pilar. Valencia had been a
concessionaire inside Clark for 34 years; del Pilar for 12 years; and Tanglao for 50 years.
The bidding was won by Ramon Dizon, over the objection of the private respondents, who claimed that he had made
a bid for four facilities, including the Civil Engineering Area, which was not included in the invitation to bid.
The private respondents complained to the Philippine Area Exchange (PHAX). The latter, through its representatives,
petitioners Yvonne Reeves and Frederic M. Smouse explained that the Civil Engineering concession had not been
awarded to Dizon as a result of the February 24, 1986 solicitation. Dizon was already operating this concession, then
known as the NCO club concession, and the expiration of the contract had been extended from June 30, 1986 to
August 31, 1986. They further explained that the solicitation of the CE barbershop would be available only by the end
of June and the private respondents would be notified.
On June 30, 1986, the private respondents filed a complaint in the court below to compel PHAX and the individual
petitioners to cancel the award to defendant Dizon, to conduct a rebidding for the barbershop concessions and to
allow the private respondents by a writ of preliminary injunction to continue operating the concessions pending
litigation. 1
Upon the filing of the complaint, the respondent court issued an ex parte order directing the individual petitioners to
maintain the status quo.
On July 22, 1986, the petitioners filed a motion to dismiss and opposition to the petition for preliminary injunction on
the ground that the action was in effect a suit against the United States of America, which had not waived its non-
suability. The individual defendants, as official employees of the U.S. Air Force, were also immune from suit.
On the same date, July 22, 1986, the trial court denied the application for a writ of preliminary injunction.
On October 10, 1988, the trial court denied the petitioners' motion to dismiss, holding in part as follows:
From the pleadings thus far presented to this Court by the parties, the Court's attention is called
by the relationship between the plaintiffs as well as the defendants, including the US
Government, in that prior to the bidding or solicitation in question, there was a binding contract
between the plaintiffs as well as the defendants, including the US Government. By virtue of said
contract of concession it is the Court's understanding that neither the US Government nor the
herein principal defendants would become the employer/s of the plaintiffs but that the latter are
the employers themselves of the barbers, etc. with the employer, the plaintiffs herein, remitting
the stipulated percentage of commissions to the Philippine Area Exchange. The same
circumstance would become in effect when the Philippine Area Exchange opened for bidding or
solicitation the questioned barber shop concessions. To this extent, therefore, indeed a
commercial transaction has been entered, and for purposes of the said solicitation, would
necessarily be entered between the plaintiffs as well as the defendants.
The Court, further, is of the view that Article XVIII of the RP-US Bases Agreement does not
cover such kind of services falling under the concessionaireship, such as a barber shop
concession. 2
On December 11, 1986, following the filing of the herein petition for certiorari and prohibition with preliminary
injunction, we issued a temporary restraining order against further proceedings in the court below. 3
In G.R. No. 79470, Fabian Genove filed a complaint for damages against petitioners Anthony Lamachia, Wilfredo
Belsa, Rose Cartalla and Peter Orascion for his dismissal as cook in the U.S. Air Force Recreation Center at the
John Hay Air Station in Baguio City. It had been ascertained after investigation, from the testimony of Belsa Cartalla
and Orascion, that Genove had poured urine into the soup stock used in cooking the vegetables served to the club
customers. Lamachia, as club manager, suspended him and thereafter referred the case to a board of arbitrators
conformably to the collective bargaining agreement between the Center and its employees. The board unanimously
found him guilty and recommended his dismissal. This was effected on March 5, 1986, by Col. David C. Kimball,
Commander of the 3rd Combat Support Group, PACAF Clark Air Force Base. Genove's reaction was to file Ms
complaint in the Regional Trial Court of Baguio City against the individual petitioners. 4
On March 13, 1987, the defendants, joined by the United States of America, moved to dismiss the complaint,
alleging that Lamachia, as an officer of the U.S. Air Force stationed at John Hay Air Station, was immune from suit
for the acts done by him in his official capacity. They argued that the suit was in effect against the United States,
which had not given its consent to be sued.
This motion was denied by the respondent judge on June 4, 1987, in an order which read in part:
It is the understanding of the Court, based on the allegations of the complaint — which have
been hypothetically admitted by defendants upon the filing of their motion to dismiss — that
although defendants acted initially in their official capacities, their going beyond what their
functions called for brought them out of the protective mantle of whatever immunities they may
have had in the beginning. Thus, the allegation that the acts complained of were illegal, done.
with extreme bad faith and with pre-conceived sinister plan to harass and finally dismiss the
plaintiff, gains significance. 5
The petitioners then came to this Court seeking certiorari and prohibition with preliminary injunction.
In G.R. No. 80018, Luis Bautista, who was employed as a barracks boy in Camp O' Donnell, an extension of Clark
Air Base, was arrested following a buy-bust operation conducted by the individual petitioners herein, namely, Tomi J.
King, Darrel D. Dye and Stephen F. Bostick, officers of the U.S. Air Force and special agents of the Air Force Office
of Special Investigators (AFOSI). On the basis of the sworn statements made by them, an information for violation of
R.A. 6425, otherwise known as the Dangerous Drugs Act, was filed against Bautista in the Regional Trial Court of
Tarlac. The above-named officers testified against him at his trial. As a result of the filing of the charge, Bautista was
dismissed from his employment. He then filed a complaint for damages against the individual petitioners herein
claiming that it was because of their acts that he was removed. 6
During the period for filing of the answer, Mariano Y. Navarro a special counsel assigned to the International Law
Division, Office of the Staff Judge Advocate of Clark Air Base, entered a special appearance for the defendants and
moved for an extension within which to file an "answer and/or other pleadings." His reason was that the Attorney
General of the United States had not yet designated counsel to represent the defendants, who were being sued for
their official acts. Within the extended period, the defendants, without the assistance of counsel or authority from the
U.S. Department of Justice, filed their answer. They alleged therein as affirmative defenses that they had only done
their duty in the enforcement of the laws of the Philippines inside the American bases pursuant to the RP-US Military
Bases Agreement.
On May 7, 1987, the law firm of Luna, Sison and Manas, having been retained to represent the defendants, filed with
leave of court a motion to withdraw the answer and dismiss the complaint. The ground invoked was that the
defendants were acting in their official capacity when they did the acts complained of and that the complaint against
them was in effect a suit against the United States without its consent.
The motion was denied by the respondent judge in his order dated September 11, 1987, which held that the claimed
immunity under the Military Bases Agreement covered only criminal and not civil cases. Moreover, the defendants
had come under the jurisdiction of the court when they submitted their answer. 7
Following the filing of the herein petition for certiorari and prohibition with preliminary injunction, we issued on
October 14, 1987, a temporary restraining order. 8
In G.R. No. 80258, a complaint for damages was filed by the private respondents against the herein petitioners
(except the United States of America), for injuries allegedly sustained by the plaintiffs as a result of the acts of the
defendants. 9 There is a conflict of factual allegations here. According to the plaintiffs, the defendants beat them up,
handcuffed them and unleashed dogs on them which bit them in several parts of their bodies and caused extensive
injuries to them. The defendants deny this and claim the plaintiffs were arrested for theft and were bitten by the dogs
because they were struggling and resisting arrest, The defendants stress that the dogs were called off and the
plaintiffs were immediately taken to the medical center for treatment of their wounds.
In a motion to dismiss the complaint, the United States of America and the individually named defendants argued
that the suit was in effect a suit against the United States, which had not given its consent to be sued. The
defendants were also immune from suit under the RP-US Bases Treaty for acts done by them in the performance of
their official functions.
The motion to dismiss was denied by the trial court in its order dated August 10, 1987, reading in part as follows:
The defendants certainly cannot correctly argue that they are immune from suit. The allegations,
of the complaint which is sought to be dismissed, had to be hypothetically admitted and
whatever ground the defendants may have, had to be ventilated during the trial of the case on
the merits. The complaint alleged criminal acts against the individually-named defendants and
from the nature of said acts it could not be said that they are Acts of State, for which immunity
should be invoked. If the Filipinos themselves are duty bound to respect, obey and submit
themselves to the laws of the country, with more reason, the members of the United States
 Armed Forces who are being treated as guests of this country should respect, obey and submit
themselves to its laws. 10
and so was the motion for reconsideration. The defendants submitted their answer as required but subsequently filed
their petition for certiorari and prohibition with preliminary injunction with this Court. We issued a temporary
restraining order on October 27, 1987. 11
II
The rule that a state may not be sued without its consent, now expressed in Article XVI, Section 3, of the 1987
Constitution, is one of the generally accepted principles of international law that we have adopted as part of the law
of our land under Article II, Section 2. This latter provision merely reiterates a policy earlier embodied in the 1935 and
1973 Constitutions and also intended to manifest our resolve to abide by the rules of the international community.
Even without such affirmation, we would still be bound by the generally accepted principles of international law under
the doctrine of incorporation. Under this doctrine, as accepted by the majority of states, such principles are deemed
incorporated in the law of every civilized state as a condition and consequence of its membership in the society of
nations. Upon its admission to such society, the state is automatically obligated to comply with these principles in its
relations with other states.
As applied to the local state, the doctrine of state immunity is based on the justification given by Justice Holmes that
"there can be no legal right against the authority which makes the law on which the right depends." 12 There are other
practical reasons for the enforcement of the doctrine. In the case of the foreign state sought to be impleaded in the
local jurisdiction, the added inhibition is expressed in the maxim par in parem, non habet imperium. All states are
sovereign equals and cannot assert jurisdiction over one another. A contrary disposition would, in the language of a
celebrated case, "unduly vex the peace of nations." 13
While the doctrine appears to prohibit only suits against the state without its consent, it is also applicable to
complaints filed against officials of the state for acts allegedly performed by them in the discharge of their duties. The
rule is that if the judgment against such officials will require the state itself to perform an affirmative act to satisfy the
same, such as the appropriation of the amount needed to pay the damages awarded against them, the suit must be
regarded as against the state itself although it has not been formally impleaded. 14 In such a situation, the state may
move to dismiss the complaint on the ground that it has been filed without its consent.
The doctrine is sometimes derisively called "the royal prerogative of dishonesty" because of the privilege it grants the
state to defeat any legitimate claim against it by simply invoking its non-suability. That is hardly fair, at least in
democratic societies, for the state is not an unfeeling tyrant unmoved by the valid claims of its citizens. In fact, the
doctrine is not absolute and does not say the state may not be sued under any circumstance. On the contrary, the
rule says that the state may not be sued without its consent, which clearly imports that it may be sued if it consents.
The consent of the state to be sued may be manifested expressly or impliedly. Express consent may be embodied in
a general law or a special law. Consent is implied when the state enters into a contract or it itself commences
litigation.
The general law waiving the immunity of the state from suit is found in Act No. 3083, under which the Philippine
government "consents and submits to be sued upon any moneyed claim involving liability arising from contract,
express or implied, which could serve as a basis of civil action between private parties." In Merritt v. Government of
the Philippine Islands, 15 a special law was passed to enable a person to sue the government for an alleged tort.
When the government enters into a contract, it is deemed to have descended to the level of the other contracting
party and divested of its sovereign immunity from suit with its implied consent. 16 Waiver is also implied when the
government files a complaint, thus opening itself to a counterclaim. 17
The above rules are subject to qualification. Express consent is effected only by the will of the legislature through the
medium of a duly enacted statute. 18 We have held that not all contracts entered into by the government will operate
as a waiver of its non-suability; distinction must be made between its sovereign and proprietary acts. 19 As for the
filing of a complaint by the government, suability will result only where the government is claiming affirmative relief
from the defendant. 20
In the case of the United States of America, the customary rule of international law on state immunity is expressed
with more specificity in the RP-US Bases Treaty. Article III thereof provides as follows:
It is mutually agreed that the United States shall have the rights, power and authority within the
bases which are necessary for the establishment, use, operation and defense thereof or
appropriate for the control thereof and all the rights, power and authority within the limits of the
territorial waters and air space adjacent to, or in the vicinity of, the bases which are necessary to
provide access to them or appropriate for their control.
The petitioners also rely heavily on Baer v. Tizon, 21 along with several other decisions, to support their position that
they are not suable in the cases below, the United States not having waived its sovereign immunity from suit. It is
emphasized that in Baer, the Court held:
The invocation of the doctrine of immunity from suit of a foreign state without its consent is
appropriate. More specifically, insofar as alien armed forces is concerned, the starting point
is Raquiza v. Bradford, a 1945 decision. In dismissing a habeas corpus petition for the release of
petitioners confined by American army authorities, Justice Hilado speaking for the Court,
cited Coleman v. Tennessee, where it was explicitly declared: 'It is well settled that a foreign
army, permitted to march through a friendly country or to be stationed in it, by permission of its
government or sovereign, is exempt from the civil and criminal jurisdiction of the place.' Two
years later, in Tubb and Tedrow v. Griess, this Court relied on the ruling in Raquiza v. Bradford
and cited in support thereof excerpts from the works of the following authoritative writers: Vattel,
Wheaton, Hall, Lawrence, Oppenheim, Westlake, Hyde, and McNair and Lauterpacht. Accuracy
demands the clarification that after the conclusion of the Philippine-American Military Bases
Agreement, the treaty provisions should control on such matter, the assumption being that there
was a manifestation of the submission to jurisdiction on the part of the foreign power whenever
appropriate. More to the point is Syquia v. Almeda Lopez, where plaintiffs as lessors sued the
Commanding General of the United States Army in the Philippines, seeking the restoration to
them of the apartment buildings they owned leased to the United States armed forces stationed
in the Manila area. A motion to dismiss on the ground of non-suability was filed and upheld by
respondent Judge. The matter was taken to this Court in a mandamus proceeding. It failed. It
was the ruling that respondent Judge acted correctly considering that the 4 action must be
considered as one against the U.S. Government. The opinion of Justice Montemayor continued:
'It is clear that the courts of the Philippines including the Municipal Court of Manila have no
jurisdiction over the present case for unlawful detainer. The question of lack of jurisdiction was
raised and interposed at the very beginning of the action. The U.S. Government has not given its
consent to the filing of this suit which is essentially against her, though not in name. Moreover,
this is not only a case of a citizen filing a suit against his own Government without the latter's
consent but it is of a citizen firing an action against a foreign government without said
government's consent, which renders more obvious the lack of jurisdiction of the courts of his
country. The principles of law behind this rule are so elementary and of such general acceptance
that we deem it unnecessary to cite authorities in support thereof then came Marvel Building
Corporation v. Philippine War Damage Commission, where respondent, a United States Agency
established to compensate damages suffered by the Philippines during World War II was held as
falling within the above doctrine as the suit against it would eventually be a charge against or
financial liability of the United States Government because ... , the Commission has no funds of
its own for the purpose of paying money judgments.' The Syquia ruling was again explicitly relied
upon in Marquez Lim v. Nelson, involving a complaint for the recovery of a motor launch, plus
damages, the special defense interposed being 'that the vessel belonged to the United States
Government, that the defendants merely acted as agents of said Government, and that the
 United States Government is therefore the real party in interest.' So it was in Philippine Alien
Property Administration v. Castelo, where it was held that a suit against Alien Property
Custodian and the Attorney General of the United States involving vested property under the
Trading with the Enemy Act is in substance a suit against the United States. To the same effect
is Parreno v. McGranery, as the following excerpt from the opinion of justice Tuazon clearly
shows: 'It is a widely accepted principle of international law, which is made a part of the law of
the land (Article II, Section 3 of the Constitution), that a foreign state may not be brought to suit
before the courts of another state or its own courts without its consent.' Finally, there is Johnson
v. Turner, an appeal by the defendant, then Commanding General, Philippine Command (Air
Force, with office at Clark Field) from a decision ordering the return to plaintiff of the confiscated
military payment certificates known as scrip money. In reversing the lower court decision, this
Tribunal, through Justice Montemayor, relied on Syquia v. Almeda Lopez, explaining why it
could not be sustained.
It bears stressing at this point that the above observations do not confer on the United States of America a blanket
immunity for all acts done by it or its agents in the Philippines. Neither may the other petitioners claim that they are
also insulated from suit in this country merely because they have acted as agents of the United States in the
discharge of their official functions.
There is no question that the United States of America, like any other state, will be deemed to have impliedly waived
its non-suability if it has entered into a contract in its proprietary or private capacity. It is only when the contract
involves its sovereign or governmental capacity that no such waiver may be implied. This was our ruling
in UnitedStates of America v. Ruiz, 22 where the transaction in question dealt with the improvement of the wharves in
the naval installation at Subic Bay. As this was a clearly governmental function, we held that the contract did not
operate to divest the United States of its sovereign immunity from suit. In the words of Justice Vicente Abad Santos:
The traditional rule of immunity exempts a State from being sued in the courts of another State
without its consent or waiver. This rule is a necessary consequence of the principles of
independence and equality of States. However, the rules of International Law are not petrified;
they are constantly developing and evolving. And because the activities of states have
multiplied, it has been necessary to distinguish them — between sovereign and governmental
acts (jure imperii) and private, commercial and proprietary acts (jure gestionis). The result is that
State immunity now extends only to acts jure imperii The restrictive application of State immunity
is now the rule in the United States, the United kingdom and other states in Western Europe.
xxx xxx xxx
The restrictive application of State immunity is proper only when the proceedings arise out of
commercial transactions of the foreign sovereign, its commercial activities or economic affairs.
Stated differently, a State may be said to have descended to the level of an individual and can
thus be deemed to have tacitly given its consent to be sued only when it enters into business
contracts. It does not apply where the contract relates to the exercise of its sovereign functions.
In this case the projects are an integral part of the naval base which is devoted to the defense of
both the United States and the Philippines, indisputably a function of the government of the
highest order; they are not utilized for nor dedicated to commercial or business purposes.
The other petitioners in the cases before us all aver they have acted in the discharge of their official functions as
officers or agents of the United States. However, this is a matter of evidence. The charges against them may not be
summarily dismissed on their mere assertion that their acts are imputable to the United States of America, which has
not given its consent to be sued. In fact, the defendants are sought to be held answerable for personal torts in which
the United States itself is not involved. If found liable, they and they alone must satisfy the judgment.
In Festejo v. Fernando, 23 a bureau director, acting without any authority whatsoever, appropriated private land and
converted it into public irrigation ditches. Sued for the value of the lots invalidly taken by him, he moved to dismiss
the complaint on the ground that the suit was in effect against the Philippine government, which had not given its
consent to be sued. This Court sustained the denial of the motion and held that the doctrine of state immunity was
not applicable. The director was being sued in his private capacity for a personal tort.
With these considerations in mind, we now proceed to resolve the cases at hand.
III
It is clear from a study of the records of G.R. No. 80018 that the individually-named petitioners therein were acting in
the exercise of their official functions when they conducted the buy-bust operation against the complainant and
thereafter testified against him at his trial. The said petitioners were in fact connected with the Air Force Office of
Special Investigators and were charged precisely with the function of preventing the distribution, possession and use
of prohibited drugs and prosecuting those guilty of such acts. It cannot for a moment be imagined that they were
acting in their private or unofficial capacity when they apprehended and later testified against the complainant. It
follows that for discharging their duties as agents of the United States, they cannot be directly impleaded for acts
imputable to their principal, which has not given its consent to be sued. As we observed in Sanders v. Veridiano: 24
Given the official character of the above-described letters, we have to conclude that the
petitioners were, legally speaking, being sued as officers of the United States government. As
they have acted on behalf of that government, and within the scope of their authority, it is that
government, and not the petitioners personally, that is responsible for their acts.
The private respondent invokes Article 2180 of the Civil Code which holds the government liable if it acts through a
special agent. The argument, it would seem, is premised on the ground that since the officers are designated
"special agents," the United States government should be liable for their torts.
There seems to be a failure to distinguish between suability and liability and a misconception that the two terms are
synonymous. Suability depends on the consent of the state to be sued, liability on the applicable law and the
established facts. The circumstance that a state is suable does not necessarily mean that it is liable; on the other
hand, it can never be held liable if it does not first consent to be sued. Liability is not conceded by the mere fact that
the state has allowed itself to be sued. When the state does waive its sovereign immunity, it is only giving the plaintiff
the chance to prove, if it can, that the defendant is liable.
The said article establishes a rule of liability, not suability. The government may be held liable under this rule only if it
first allows itself to be sued through any of the accepted forms of consent.
Moreover, the agent performing his regular functions is not a special agent even if he is so denominated, as in the
case at bar. No less important, the said provision appears to regulate only the relations of the local state with its
inhabitants and, hence, applies only to the Philippine government and not to foreign governments impleaded in our
courts.
We reject the conclusion of the trial court that the answer filed by the special counsel of the Office of the Sheriff
Judge Advocate of Clark Air Base was a submission by the United States government to its jurisdiction. As we noted
in Republic v. Purisima, 25 express waiver of immunity cannot be made by a mere counsel of the government but
must be effected through a duly-enacted statute. Neither does such answer come under the implied forms of consent
as earlier discussed.
But even as we are certain that the individual petitioners in G.R. No. 80018 were acting in the discharge of their
official functions, we hesitate to make the same conclusion in G.R. No. 80258. The contradictory factual allegations
in this case deserve in our view a closer study of what actually happened to the plaintiffs. The record is too meager
to indicate if the defendants were really discharging their official duties or had actually exceeded their authority when
the incident in question occurred. Lacking this information, this Court cannot directly decide this case. The needed
inquiry must first be made by the lower court so it may assess and resolve the conflicting claims of the parties on the
basis of the evidence that has yet to be presented at the trial. Only after it shall have determined in what capacity the
petitioners were acting at the time of the incident in question will this Court determine, if still necessary, if the doctrine The Court would have directly resolved the claims against the defendants as we have done in G.R. No. 79470,
of state immunity is applicable. except for the paucity of the record in the case at hand. The evidence of the alleged irregularity in the grant of the
barbershop concessions is not before us. This means that, as in G.R. No. 80258, the respondent court will have to
receive that evidence first, so it can later determine on the basis thereof if the plaintiffs are entitled to the relief they
In G.R. No. 79470, private respondent Genove was employed as a cook in the Main Club located at the U.S. Air
seek. Accordingly, this case must also be remanded to the court below for further proceedings.
Force Recreation Center, also known as the Open Mess Complex, at John Hay Air Station. As manager of this
complex, petitioner Lamachia is responsible for eleven diversified activities generating an annual income of $2
million. Under his executive management are three service restaurants, a cafeteria, a bakery, a Class VI store, a IV
coffee and pantry shop, a main cashier cage, an administrative office, and a decentralized warehouse which
maintains a stock level of $200,000.00 per month in resale items. He supervises 167 employees, one of whom was
There are a number of other cases now pending before us which also involve the question of the immunity of the
Genove, with whom the United States government has concluded a collective bargaining agreement.
United States from the jurisdiction of the Philippines. This is cause for regret, indeed, as they mar the traditional
friendship between two countries long allied in the cause of democracy. It is hoped that the so-called "irritants" in
From these circumstances, the Court can assume that the restaurant services offered at the John Hay Air Station their relations will be resolved in a spirit of mutual accommodation and respect, without the inconvenience and
partake of the nature of a business enterprise undertaken by the United States government in its proprietary asperity of litigation and always with justice to both parties.
capacity. Such services are not extended to the American servicemen for free as a perquisite of membership in the
Armed Forces of the United States. Neither does it appear that they are exclusively offered to these servicemen; on
WHEREFORE, after considering all the above premises, the Court hereby renders judgment as follows:
the contrary, it is well known that they are available to the general public as well, including the tourists in Baguio City,
many of whom make it a point to visit John Hay for this reason. All persons availing themselves of this facility pay for
the privilege like all other customers as in ordinary restaurants. Although the prices are concededly reasonable and 1. In G.R. No. 76607, the petition is DISMISSED and the respondent judge is directed to
relatively low, such services are undoubtedly operated for profit, as a commercial and not a governmental activity. proceed with the hearing and decision of Civil Case No. 4772. The temporary restraining order
dated December 11, 1986, is LIFTED.
The consequence of this finding is that the petitioners cannot invoke the doctrine of state immunity to justify the
dismissal of the damage suit against them by Genove. Such defense will not prosper even if it be established that 2. In G.R. No. 79470, the petition is GRANTED and Civil Case No. 829-R(298) is DISMISSED.
they were acting as agents of the United States when they investigated and later dismissed Genove. For that matter,
not even the United States government itself can claim such immunity. The reason is that by entering into the
employment contract with Genove in the discharge of its proprietary functions, it impliedly divested itself of its 3. In G.R. No. 80018, the petition is GRANTED and Civil Case No. 115-C-87 is DISMISSED.
The temporary restraining order dated October 14, 1987, is made permanent.
sovereign immunity from suit.

But these considerations notwithstanding, we hold that the complaint against the petitioners in the court below must 4. In G.R. No. 80258, the petition is DISMISSED and the respondent court is directed to proceed
with the hearing and decision of Civil Case No. 4996. The temporary restraining order dated
still be dismissed. While suable, the petitioners are nevertheless not liable. It is obvious that the claim for damages
cannot be allowed on the strength of the evidence before us, which we have carefully examined. October 27, 1987, is LIFTED.

The dismissal of the private respondent was decided upon only after a thorough investigation where it was All without any pronouncement as to costs.
established beyond doubt that he had polluted the soup stock with urine. The investigation, in fact, did not stop there.
Despite the definitive finding of Genove's guilt, the case was still referred to the board of arbitrators provided for in SO ORDERED.
the collective bargaining agreement. This board unanimously affirmed the findings of the investigators and
recommended Genove's dismissal. There was nothing arbitrary about the proceedings. The petitioners acted quite
properly in terminating the private respondent's employment for his unbelievably nauseating act. It is surprising that G.R. No. 110187 September 4, 1996
he should still have the temerity to file his complaint for damages after committing his utterly disgusting offense.
JOSE G. EBRO III, petitioner,
Concerning G.R. No. 76607, we also find that the barbershops subject of the concessions granted by the United vs.
States government are commercial enterprises operated by private person's. They are not agencies of the United NATIONAL LABOR RELATIONS COMMISSION, INTERNATIONAL CATHOLIC MIGRATION COMMISSION, JON
States Armed Forces nor are their facilities demandable as a matter of right by the American servicemen. These DARRAH, ALEX DY-REYES, CARRIE WILSON, and MARIVIC SOLIVEN, respondents.
establishments provide for the grooming needs of their customers and offer not only the basic haircut and shave (as
required in most military organizations) but such other amenities as shampoo, massage, manicure and other similar MENDOZA, J.:
indulgences. And all for a fee. Interestingly, one of the concessionaires, private respondent Valencia, was even sent
abroad to improve his tonsorial business, presumably for the benefit of his customers. No less significantly, if not
more so, all the barbershop concessionaires are under the terms of their contracts, required to remit to the United This is a petition for certiorari to set aside the order dated October 13, 1992 and the resolution dated March 3, 1993
States government fixed commissions in consideration of the exclusive concessions granted to them in their of the National Labor Relations Commission (NLRC). 1
respective areas.
The antecedent facts are as follows:
This being the case, the petitioners cannot plead any immunity from the complaint filed by the private respondents in
the court below. The contracts in question being decidedly commercial, the conclusion reached in the United States Private respondent International Catholic Migration Commission (ICMC) is a non-profit agency engaged in
of America v. Ruiz case cannot be applied here. international humanitarian and voluntary work. It is duly registered with the United National Economic and Social
Council (ECOSOC) and enjoys Consultative Status, Category II. It was one of the agencies accredited by the
Philippine Government to operate the refugee processing center at Sabang, Morong, Bataan.
On June 24, 1985, private respondent ICMC employed petitioner Jose G. Ebro III to teach "English as a Second
Language and Cultural Orientation Training Program" at the refugee processing center. The employment contract
provided in pertinent part:
Salary: Your monthly salary for the first 6 months probationary period is P3,155.00 inclusive of
cost of living allowance. Upon being made regular after successful completion of the six (6)
months probationary period your monthly salary will be adjusted to P3,445.00 inclusive of cost of
living allowance
xxx xxx xxx
Termination of Employment: Employment may be terminated by ICMC in any of the following
situations:
a A cessation or reduction in program operations, by Department of State order,
b. Unsuccessful completion of probationary period, at any time during that period,
c For due cause, in cases of violation of provisions detailed in ICMC Personnel Policies and
administrative regulations,
d. For just and authorized causes expressly provided for or authorized by law,
e. For reasons of inadequate or deficient professional performance based on relevant guidelines
and procedures relating to the position,
f. In cases where, as a member of the PRPC community, ICMC is directed to take action.
If either party wishes to terminate employment, a notice of two (2) weeks should be given in
writing to the party.
After six months, ICMC notified petitioner that effective December 21, 1985, the latter's services were terminated for
his failure to meet the requirements of "1. classroom performance . . . up to the standards set in the Guide for
Instruction; 2. regular attendance in the mandated teacher training, and in the schedule team meetings, one-on-one
conferences with the supervisor, etc.; and 3. compliance with ICMC and PRPC policies and procedures."
On February 4, 1986, petitioner filed a complaint for illegal dismissal, unfair labor practice, underpayment of wages,
accrued leave pay, 14th month pay, damages, attorney's fees., and expenses of litigation. The complaint was filed
against private respondents ICMC and its Project Director Jon Darrah, Personnel Officer Alex Dy-Reyes, Program
Officer of the Cultural Orientation Program Carrie Wilson, and Supervisor of the Cultural Orientation Program Marivic
Soliven. Petitioner alleged that there was no objective evaluation of his performance to warrant his dismissal and that
he should have been considered a regular employee from the start because ICMC failed to acquaint him with the
standards under which he must qualify as such. He prayed for reinstatement with backwages; P3,155.00 for
probationary and P3,445.00 for regular salary adjustments; value of lodging or dormitory privileges; cost of insurance
coverage for group life, medical, death, dismemberment and disability benefits; moral, and exemplary, and nominal
damages plus interest on the above claims with attorney's fees.
Answering the complaint, ICMC claimed that petitioner failed to quality for regular employment because he showed
no interest in improving his professional performance both in and out of the classroom after he had been periodically
evaluated (observation summary from August 20 to October 2, 1985 and evaluation summary of December 14,
1985); that petitioner was paid his salary up to December 31, 1985, two weeks pay in lieu of notice, and 14th month
pay pro-rata; and that his accrued leave balance already been converted to cash.
After the parties had formally offered their evidence, private respondents submitted their memorandum on July 31,
1989 in which, among other things, they invoked ICMC's diplomatic immunity on the basis of the Memorandum of
Agreement signed on July 15, 1988 between the Philippines government and ICMC.
The Labor Arbiter held that petitioner's legal immunity under the Memorandum could not be given retroactive effect
since "[that would] deprive complainant's property right without due process and impair the obligation of contract of
employment." In addition, he expressed doubt about petitioner's legal immunity on the ground that it was provided for
by agreement and not through an act of Congress. Accordingly, the Labor Arbiter ordered ICMC to reinstate
petitioner as regular teacher without loss of seniority rights and to pay him one year backwages, other benefits, and
ten percent attorney's fees for a total sum of P70,944.85.
Both parties appealed to the NLRC. On August 13, 1990, petitioner moved to dismiss private respondent's appeal
because of the latter's failure to post a cash/surety bond. In its order of October 13, 1992, however, the NLRC
ordered the case dismissed on the ground that, under the Memorandum of Agreement between the Philippine
government and ICMC, the latter was immune from suit.
Petitioner moved for reconsideration, arguing among other things, that the Memorandum of Agreement could not be
given retroactive effect and that in any case ICMC had waived its immunity by consenting to be sued.
However, petitioner's motion was denied by the NLRC in its resolution dated March 4, 1993. 2 Hence this petitioner
presenting the following issues:
a) Whether private respondents have perfected their appeal and whether public respondent
may, on appeal, entertain or review private respondents' claim of immunity;
b) Whether a mere Memorandum of Agreement entered into by the Secretary of Foreign Affairs
with respondent International Catholic Migration Commission, which is not a law, can divest the
Labor Arbiter and the National Labor Relations Commission of their jurisdiction over the subject
matter and over the persons of respondents in the pending case;
c) Whether the Memorandum of Agreement may be given retroactive effect;
d) Whether the dismissal of the based on the claim of immunity will deprive petitioner of his
property without due process of law;
e) Whether the dismissal of the case based on the claim of immunity will result in the impairment
of the obligations assumed by respondent International Catholic Migration Commission under its
contract of employment with petitioner;
f) Assuming for the sake of argument that the Memorandum of Agreement has validly conferred
immunity on private respondent's whether they may be considered as having waived such
immunity;
g) Upon the same consideration, whether private respondents may be considered estopped from
claiming immunity.
The basic issue in this case is whether the Memorandum of Agreement executed on July 15, 1988 ICMC immunity
from suit. The Court holds it did. Consequently, both the Labor Arbiter and the NLRC had no jurisdiction over the
case.
First. Petitioner's contention that the Memorandum of Agreement is not an act of Congress which is needed to
"repeal or supersede" the provision of the Labor Code on the jurisdiction of the NLRC and of the Labor Arbiter is
untenable. The grant of immunity to ICMC is in virtue of the Convention on the Privileges and Immunities of
Specialized Agencies of the United Nations, adopted by the UN General Assembly on November 21, 1947, and
concurred in by the Philippine Senate on May 17, 1949. This Convention has the force and effect of law, considering
that under the Constitution, the Philippines adopts the generally accepted principles of international law as part of the
law of the land. 3 The Memorandum of Agreement in question merely carries out the Philippine government's
obligation under the Convention. In International Catholic Migration Commission v. Calleja, 4 this Court explained the
grant of immunity to ICMC in this wise:
the Memorandum, they, as officers of ICMC, can claim immunity under the same in order to prevent enforcement of
an adverse judgment, since a writ of execution is "a legal process" within the meaning of Article III, §4. 9
Third. Another question is whether ICMC can invoke its immunity because it only did so in its memorandum before
the Labor Arbiter. It is contended that ICMC waived its immunity in any event. Art III §4 of the Convention on the
Privileges and Immunities of the Specialized Agencies of the United Nations requires, however, that the waiver of the
privilege must be express. There was no such waiver of immunity in this case. Nor can ICMC be estopped from
claiming diplomatic immunity since estoppel does not operate to confer jurisdiction to a tribunal that has none over a
cause of action. 10
Fourth. Finally, neither can it be said that recognition of ICMC's immunity from suit deprives petitioner of due
process. As pointed out in International Catholic Commission v. Calleja, 11 petitioner is not exactly without remedy for
whatever violation of rights it may have suffered for the following reason:

The grant of immunity from local jurisdiction to ICMC . . . is clearly necessitated by their
Section 31 of the Convention on the Privileges and Immunities of the Specialized Agencies of
international character and respective purposes. The objective is to avoid the danger of partiality
the United Nations provides that "each specialized agency shall make provision for appropriate
and interference by the host country in their internal workings. The exercise of jurisdiction by the
modes of settlement of: (a) disputes arising out of contracts or other disputes of private
Department of Labor in these instances would defeat the very purpose of immunity, which is to
character to which the specialized agency is a party." Moreover, pursuant to Article IV of the
shield the affairs of international organizations, in accordance with international practice, from
Memorandum of Agreement between ICMC and the Philippine Government, whenever there is
political pressure or control by the host country to the prejudice of member State of the
any abuse of privilege by ICMC, the Government is free to withdraw the privileges and
organization, and to ensure the unhampered performance of their functions.
immunities accorded. Thus:

Second. Petitioner argues that in any case ICMC's immunity can not apply because this case was filed below before
Article IV. Cooperation with Government Authorities. —1. The Commission shall cooperate at all
the signing of the Memorandum on July 15, 1988. Petitioner cites in support the statement of this Court in the
times with the appropriate authorities of the Government to ensure the observance of Philippine
aforesaid case of International Catholic Migration Commission v. Calleja, 5 distinguishing that case from an earlier
laws, rules and regulations, facilitate the proper administration of justice and prevent the
case 6 also involving ICMC, wherein the NLRC, as well as the Court, took cognizance of a complaint against ICMC
occurrences of any abuse of the privileges and immunities granted is officials and alien
for payment of salary for the unexpired portion of a six-month probationary. The Court held: 7
employees in Article III of this Agreement of the Commission.

[N]ot only did the facts of said controversy [ICMC v. NLRC, 169 SCRA 606 (1989)] occur
2. In the event that the Government determines that there has been an abuse of the privileges
between 1983-1985, or before the grant to ICMC on 15 July 1988 of the status of a specialized
and immunities granted under this Agreement, consultations shall be held between the
agency with corresponding immunities, but also because ICMC in that case did not invoke its
Government and the Commission to determine whether any such abuse has occurred and, if so,
immunity and, therefore, may be deemed to have waived it, assuming that during that period
the Government shall withdraw the privileges and immunities granted the Commission and its
(1983-1985) it was tacitly recognized as enjoying such immunity.
officials.

Here, according to petitioner, his employment and subsequent dismissal by ICMC took place in 1985, prior
WHEREFORE, the petitioner is DISMISSED for lack of merit.
to the execution of the Memorandum of Agreement on July 15, 1988 and, therefore, like in the 1989 ICMC
case, the Memorandum should not be made to apply to him.
SO ORDERED.
This Court did not really reject ICMC's invocation of immunity for causes of action accruing prior to the execution of
the Memorandum. It left open the possibility that ICMC may have been tacitly enjoying diplomatic immunity G.R. No. 86773 February 14, 1992
beforehand. It is important to note that in the 1989 case ICMC did not invoke its immunity notwithstanding the fact
that the Memorandum took effect while the case was pending before the Court. 8
SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER-AQUACULTURE DEPARTMENT (SEAFDEC-AQD),
DR. FLOR LACANILAO (CHIEF), RUFIL CUEVAS (HEAD, ADMINISTRATIVE DIV.), BEN DELOS REYES
Moreover, in the 1990 ICMC case, ICMC's immunity was in fact upheld despite the fact that at the case arose, the (FINANCE OFFICER), petitioners,
Memorandum recognizing ICMC's status as a specialized agency had not yet been signed. In that case, the petition vs.
for certification election among its rank and file employees was filed on July 14, 1986 and the order directing a NATIONAL LABOR RELATIONS COMMISSION and JUVENAL LAZAGA, respondents.
certification election was made when ICMC's request for recognition as a specialized agency was still pending in the
Department of Foreign Affairs. Yet this Court held that the subsequent execution of the Memorandum was a bar to
the granting of the petition for certification election. NOCON, J.:

The scope of immunity of the ICMC contained in the Convention on the Privileges and Immunities of the Specialized This is a petition for certiorari to annul and set aside the July 26, 1988 decision of the National Labor Relations
Agencies of the United Nations is instructive. Art. III, §4 of the Convention provides for immunity from "every form of Commission sustaining the labor arbiter, in holding herein petitioners Southeast Asian Fisheries Development
legal process." Thus, even if private respondents had been served summons and subpoenas prior to the execution of Center-Aquaculture Department (SEAFDEC-AQD), Dr. Flor Lacanilao, Rufil Cuevas and Ben de los Reyes liable to
pay private respondent Juvenal Lazaga the amount of P126,458.89 plus interest thereon computed from May 16,
1986 until full payment thereof is made, as separation pay and other post-employment benefits, and the resolution
denying the petitioners' motion for reconsideration of said decision dated January 9, 1989.
The antecedent facts of the case are as follows:
SEAFDEC-AQD is a department of an international organization, the Southeast Asian Fisheries Development
Center, organized through an agreement entered into in Bangkok, Thailand on December 28, 1967 by the
governments of Malaysia, Singapore, Thailand, Vietnam, Indonesia and the Philippines with Japan as the sponsoring
country (Article 1, Agreement Establishing the SEAFDEC).
On April 20, 1975, private respondent Juvenal Lazaga was employed as a Research Associate an a probationary
basis by the SEAFDEC-AQD and was appointed Senior External Affairs Officer on January 5, 1983 with a monthly
basic salary of P8,000.00 and a monthly allowance of P4,000.00. Thereafter, he was appointed to the position of
Professional III and designated as Head of External Affairs Office with the same pay and benefits.
On May 8, 1986, petitioner Lacanilao in his capacity as Chief of SEAFDEC-AQD sent a notice of termination to
private respondent informing him that due to the financial constraints being experienced by the department, his
services shall be terminated at the close of office hours on May 15, 1986 and that he is entitled to separation benefits
equivalent to one (1) month of his basic salary for every year of service plus other benefits (Rollo, p. 153).
Upon petitioner SEAFDEC-AQD's failure to pay private respondent his separation pay, the latter filed on March 18,
1987 a complaint against petitioners for non-payment of separation benefits plus moral damages and attorney's fees
with the Arbitration Branch of the NLRC (Annex "C" of Petition for Certiorari).
Petitioners in their answer with counterclaim alleged that the NLRC has no jurisdiction over the case inasmuch as the
SEAFDEC-AQD is an international organization and that private respondent must first secure clearances from the
proper departments for property or money accountability before any claim for separation pay will be paid, and which
clearances had not yet been obtained by the private respondent.
A formal hearing was conducted whereby private respondent alleged that the non-issuance of the clearances by the
petitioners was politically motivated and in bad faith. On the other hand, petitioners alleged that private respondent
has property accountability and an outstanding obligation to SEAFDEC-AQD in the amount of P27,532.11.
Furthermore, private respondent is not entitled to accrued sick leave benefits amounting to P44,000.00 due to his
failure to avail of the same during his employment with the SEAFDEC-AQD (Annex "D", Id.).
On January 12, 1988, the labor arbiter rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondents:
1. To pay complainant P126,458.89, plus legal interest thereon computed from May 16, 1986
until full payment thereof is made, as separation pay and other post-employment benefits;
2. To pay complainant actual damages in the amount of P50,000, plus 10% attorney's fees.
All other claims are hereby dismissed.
SO ORDERED. (Rollo, p. 51, Annex "E")
On July 26, 1988, said decision was affirmed by the Fifth Division of the NLRC except as to the award of P50,000.00
as actual damages and attorney's fees for being baseless. (Annex "A", p. 28, id.)
On September 3, 1988, petitioners filed a Motion for Reconsideration (Annex "G", id.) which was denied on January
9, 1989. Thereafter, petitioners instituted this petition for certiorari alleging that the NLRC has no jurisdiction to hear
and decide respondent Lazaga's complaint since SEAFDEC-AQD is immune from suit owing to its international
character and the complaint is in effect a suit against the State which cannot be maintained without its consent.
The petition is impressed with merit.
Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department (SEAFDEC-AQD) is an
international agency beyond the jurisdiction of public respondent NLRC.
It was established by the Governments of Burma, Kingdom of Cambodia, Republic of Indonesia, Japan, Kingdom of
Laos, Malaysia. Republic of the Philippines, Republic of Singapore, Kingdom of Thailand and Republic of Vietnam
(Annex "H", Petition).
The Republic of the Philippines became a signatory to the Agreement establishing SEAFDEC on January 16,1968.
Its purpose is as follows:
The purpose of the Center is to contribute to the promotion of the fisheries development in
Southeast Asia by mutual co-operation among the member governments of the Center,
hereinafter called the "Members", and through collaboration with international organizations and
governments external to the Center. (Agreement Establishing the SEAFDEC, Art. 1; Annex "H"
Petition) (p.310, Rollo)
SEAFDEC-AQD was organized during the Sixth Council Meeting of SEAFDEC on July 3-7, 1973 in Kuala Lumpur,
Malaysia as one of the principal departments of SEAFDEC (Annex "I", id.) to be established in Iloilo for the promotion
of research in aquaculture. Paragraph 1, Article 6 of the Agreement establishing SEAFDEC mandates:
1. The Council shall be the supreme organ of the Center and all powers of the Center shall be
vested in the Council.
Being an intergovernmental organization, SEAFDEC including its Departments (AQD), enjoys functional
independence and freedom from control of the state in whose territory its office is located.
As Senator Jovito R. Salonga and Former Chief Justice Pedro L. Yap stated in their book, Public International Law
(p. 83, 1956 ed.):
Permanent international commissions and administrative bodies have been created by the
agreement of a considerable number of States for a variety of international purposes, economic
or social and mainly non-political. Among the notable instances are the International Labor
Organization, the International Institute of Agriculture, the International Danube Commission. In
so far as they are autonomous and beyond the control of any one State, they have a distinct
juridical personality independent of the municipal law of the State where they are situated. As
such, according to one leading authority "they must be deemed to possess a species of
international personality of their own." (Salonga and Yap, Public International Law, 83 [1956
ed.])
Pursuant to its being a signatory to the Agreement, the Republic of the Philippines agreed to be represented by one
Director in the governing SEAFDEC Council (Agreement Establishing SEAFDEC, Art. 5, Par. 1, Annex "H", ibid.) and
that its national laws and regulations shall apply only insofar as its contribution to SEAFDEC of "an agreed amount of
money, movable and immovable property and services necessary for the establishment and operation of the Center"
are concerned (Art. 11, ibid.). It expressly waived the application of the Philippine laws on the disbursement of funds
of petitioner SEAFDEC-AQD (Section 2, P.D. No. 292).
The then Minister of Justice likewise opined that Philippine Courts have no jurisdiction over SEAFDEC-AQD in SO ORDERED.
Opinion No. 139, Series of 1984 —

4. One of the basic immunities of an international organization is immunity from local

jurisdiction, i.e.,that it is immune from the legal writs and processes issued by the tribunals of the
country where it is found. (See Jenks, Id., pp. 37-44) The obvious reason for this is that the
subjection of such an organization to the authority of the local courts would afford a convenient
medium thru which the host government may interfere in there operations or even influence or
control its policies and decisions of the organization; besides, such subjection to local jurisdiction
would impair the capacity of such body to discharge its responsibilities impartially on behalf of its
member-states. In the case at bar, for instance, the entertainment by the National Labor
Relations Commission of Mr. Madamba's reinstatement cases would amount to interference by
the Philippine Government in the management decisions of the SEARCA governing board; even
worse, it could compromise the desired impartiality of the organization since it will have to suit its
actuations to the requirements of Philippine law, which may not necessarily coincide with the
interests of the other member-states. It is precisely to forestall these possibilities that in cases
where the extent of the immunity is specified in the enabling instruments of international
organizations, jurisdictional immunity from the host country is invariably among the first
accorded. (SeeJenks, Id.; See also Bowett, The Law of International Institutions, pp. 284-1285).

Respondent Lazaga's invocation of estoppel with respect to the issue of jurisdiction is unavailing because estoppel
does not apply to confer jurisdiction to a tribunal that has none over a cause of action. Jurisdiction is conferred by
law. Where there is none, no agreement of the parties can provide one. Settled is the rule that the decision of a
tribunal not vested with appropriate jurisdiction is null and void. Thus, in Calimlim vs. Ramirez, this Court held:

A rule, that had been settled by unquestioned acceptance and upheld in decisions so numerous
to cite is that the jurisdiction of a court over the subject matter of the action is a matter of law and
may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court
may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified
by recent pronouncements which it stemmed principally from the ruling in the cited case
of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to
situations which were obviously not contemplated therein. The exceptional circumstances
involved in Sibonghanoy which justified the departure from the accepted concept of non-
waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been
repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but
rather the general rule, virtually overthrowing altogether the time-honored principle that the issue
of jurisdiction is not lost by waiver or by estoppel. (Calimlim vs. Ramirez, G.R. No. L-34362, 118
SCRA 399; [1982])

Respondent NLRC'S citation of the ruling of this Court in Lacanilao v. De Leon (147 SCRA 286 [1987]) to justify its
assumption of jurisdiction over SEAFDEC is misplaced. On the contrary, the Court in said case explained why it took
cognizance of the case. Said the Court:

We would note, finally, that the present petition relates to a controversy between two claimants
to the same position; this is not a controversy between the SEAFDEC on the one hand, and an
officer or employee, or a person claiming to be an officer or employee, of the SEAFDEC, on the
other hand. There is before us no question involving immunity from the jurisdiction of the Court,
there being no plea for such immunity whether by or on behalf of SEAFDEC, or by an official of
SEAFDEC with the consent of SEAFDEC (Id., at 300; emphasis supplied).

WHEREFORE, finding SEAFDEC-AQD to be an international agency beyond the jurisdiction of the courts or local
agency of the Philippine government, the questioned decision and resolution of the NLRC dated July 26, 1988 and
January 9, 1989, respectively, are hereby REVERSED and SET ASIDE for having been rendered without jurisdiction.
No costs.